J 


UNIVERSITY  OF 
ILLINOIS  LIBRARY 
AT  URBANA  CHAMPAIGN 

v-l  ‘ / VO 


The  person  charging  this  material  is  re- 
sponsible for  its  return  to  the  library  from 
which  it  was  withdrawn  on  or  before  the 
Latest  Date  stamped  below. 

Theft,  mutilation,  and  underlining  of  books  are  reasons 
for  disciplinary  action  and  may  result  in  dismissal  from 
the  University. 

To  renew  call  Telephone  Center,  333-8400 


UNIVERSITY  OF  ILLINOIS  LIBRARY  AT  URBANA-CHAMPAIGN 


PRINCIPLES  or  POLITICAL  ECONOMY 


I 

4’ 


PEINCIPLES 


OF 


POLITICAL  ECONOMY 

WITH 

SOME  OP  THEIE  APPLICATIONS 

TO 

SOCIAL  PHILOSOPHY 


JOHN  STUAET  MILL 


EDITED  WITH  AN  INTRODUCTION  BY 

Sir  W.  J.  ASHLEY,  M.A.,  M.Oom.,  Fh.D 

VICE-PBINCIPAL  AND 

PBOPESSOR  OF  COMMERCE  IN  THE  DNIVErSITT  OF  BIRMINOHAM 
SOMETIME  FELLOW  OF  LINCOLN  COLLEGE,  OXFORD 


NEW  IMPRESSION 


LONGMANS,  GEEEN  AND  CO. 

39  PATERNOSTEE  ROW,  LONDON,  E,0.  4 
NEW  YORK,  TORONTO 
BOMBAY,  CALCUTTA  AND  MADRAS 

1923 


All  rights  reservoi 


BTBLIOGBAPHICAL  NOTE 

2Vols.  8vo 

Is^  Edition  1848,  %nd  Edition  1849 
3r<?  Edition  1852,  Ath  Edition  1857 
6th  Edition  1862.  All  published  by  Parkek  & Co. 

Published  by  Longmans,  Green,  & Co. 

6th  Edition  Ajoril  1865,  7th  Edition  October  1871 
Qth  Edition  March  1878,  ^th  Edition  October  1885 

PeopijE’s  Edition,  cr.  8vo 
First  printed  May  1865  ; Beprinted  October  1865 
January  1866,  October  1866,  May  1866 
August  1869,  November  1871,  March  1872 
April  1873,  February  1875,  April  1876 
March  1878,  March  1880,  September  1881 
February  1883,  January  1885,  August  1886 
September  1888,  July  1891 

Silver  Library 
First  issued  January  1892 
Beprinted  October  1894,  August  1896,  April  1898 
January  1900,  January  1902,  April  1904,  June  1909 

New  Edition,  cr.  8vo.  Edited  by  W.  J.  Ashley 
November  1909 ; Beprinted  January  1915. 
September  1917.  January  1920.  May  1921. 
June  1923. 


Made  in  Great  Britain 


3'60 

M 


INTRODUCTION 


The  best  Introduction  to  the  Principles  of  Political  Economy  of 
John  Stuart  Mill  is  Mill’s  own  account  of  his  economic  studies.  They 
began  at  the  age  of  thirteen ; when  he  was  approaching  the  end  of 
that  unique  educational  process,  enforced  by  the  stern  will  of  his 
father,  which  he  has  described  in  his  Autobiography  for  the  amaze- 
ment and  pity  of  subsequent  generations. 

“ It  was  in  1819  that  he  took  me  through  a complete  course 
of  political  economy.  His  loved  and  intimate  friend,  Ricardo, 
had  shortly  before  published  the  book  which  formed  so  great 
an  epoch  in  political  economy  ; a book  which  would  never  have 
been  published  or  written,  but  for  the  entreaty  and  strong 
encouragement  of  my  father.  ...  No  didactic  treatise  em- 
bodying its  doctrines,  in  a manner  fit  for  learners,  had  yet 
appeared.  My  father,  therefore,  commenced  instructing  me  in 
the  science  by  a sort  of  lectures,  which  he  delivered  to  me  in  oui 
walks.  He  expounded  each  day  a portion  of  the  subject,  and 
I gave  him  next  day  a written  account  of  it,  which  he  made  me 
rewrite  over  and  over  again  until  it  was  clear,  precise,  and 
tolerably  complete.  In  this  manner  I went  through  the  whole 
extent  of  the  science  ; and  the  written  outline  of  it  which  resulted 
from  my  daily  compte  rendu  served  him  afterwards  as  notes  from 
which  to  write  his  Elements  of  Political  Economy.  After  this 
I read  Ricardo,  giving  an  account  daily  of  what  I read,  and 
discussing  . . . the  collateral  points  which  offered  themselves 
in  our  progress. 

“On  Money,  as  the  most  intricate  part  of  the  subject,  he 
made  me  read  in  the  same  manner  Ricardo’s  admirable  pamphlets, 
written  during  . . . the  Bullion  controversy  ; to  these  succeeded 
Adam  Smith  ; and  ...  it  was  one  of  my  father’s  main  objects 
to  make  me  apply  to  Smith’s  more  superficial  view  of  political 
economy  the  superior  lights  of  Ricardo,  and  detect  what  was 


INTRODUCTION 


vi 

fallacious  in  Smith’s  arguments,  or  erroneous  in  any  of  his 
conclusions.  Such  a mode  of  instruction  was  excellently  calculated 
to  form  a thinker ; but  it  required  to  be  worked  by  a thinker,  as 
close  and  vigorous  as  my  father.  The  path  was  a thorny  one, 
even  to  him,  and  I am  sure  it  was  so  to  me,  notwithstanding 
the  strong  interest  I took  in  the  subject.  He  was  often,  and 
much  beyond  reason,  provoked  by  my  failures  in  cases  where 
success  could  not  have  been  expected;  but  in  the  main  his 
method  was  right,  and  it  succeeded.”  ^ 

After  a year  in  France,  during  which  he  “ passed  some  time  in 
the  house  of  M.  Say,  the  eminent  political  economist,  who  was  a 
friend  and  correspondent  ” of  the  elder  Mill,^  he  went  a second 
time  over  the  same  ground  under  the  same  guidance. 

“ When  I returned  (1821),  my  father  was  just  finishing  for 
the  press  his  Elements  of  Political  Economy ^ and  he  made  me 
perform  an  exercise  on  the  manuscript,  which  Mr.  Bentham 
practised  on  all  his  own  writings,  making  what  he  called  ‘ margi- 
nal contents  ’ ; a short  abstract  of  every  paragraph,  to  enable 
the  writer  more  easily  to  judge  of,  and  improve,  the  order  of 
the  ideas,  and  the  general  character  of  the  exposition.”  * 

This  was  soon  after  reaching  the  age  of  fifteen.  Four  years 
later,  in  1825,  he  made  a systematic  survey  of  the  field  for  the  third 
time.  Though  he  was  still  only  nineteen,  he  was  now  fully  embarked 
upon  his  career  as  an  economist,  and  was  contributing  articles  on 
currency  and  commercial  pohcy  to  the  Westminster  Review,  Yet 
when,  in  that  year,  John  Mill  and  a number  of  his  youthful  friends 
entered  upon  “the  joint  study  of  several  of  the  branches  of  science” 
which  they  “ wished  to  be  masters  of,”  it  was  once  more  the  work 
of  the  elder  Mill  which  served  as  the  basis. 

“We  assembled  to  the  number  of  a dozen  or  more.  Mr. 
Grote  lent  a room  of  his  house  in  Threadneedle  Street.  . . . 
We  met  two  mornings  in  every  week,  from  half-past  eight  till 
ten,  at  which  hour  most  of  us  were  called  ofi  to  our  daily  occupa- 
tions. Our  first  sub j ect  was  Pohtical  Economy.  W e chose  some 
systematic  treatise  as  our  text-book  ; my  father’s  Elements  being 
our  first  choice.  One  of  us  read  a chapter,  or  some  smaller 
portion  of  the  book.  The  discussion  was  then  opened,  and 
anyone  who  had  an  objection,  or  other  remark  to  make,  made 


‘ Autobiography^  p.  27  (Pop.  ed.  p.  16). 

* Ibid.  p.  60  (Pop.  ed.  p.  34). 

• Ibid.  p.  62  (Pop,  ed.  p.  36). 


INTRODUCTION 


vii 


it.  Our  rule  was  to  discuss  thoroughly  every  point  raised  . . . 
until  all  who  took  part  were  satisfied  with  the  conclusion  they 
had  individually  arrived  at ; and  to  follow  up  every  topic  . . . 
which  the  chapter  or  the  conversation  suggested,  never  leaving 
it  until  we  had  untied  every  knot.”  ^ 

The  figure  of  James  Mill  has  been  singularly  obscured  by  the 
more  attractive  personality  of  his  son.  It  may  possibly  be  open  to 
discussion  how  far  James  Mill  was  a trustworthy  interpreter  of 
Ricardo.  But  what  cannot  be  doubted  is  the  extent  and  penetrating 
character  of  his  influence.  The  evidence  of  his  son  may  certainly 
be  relied  upon  : 

“ My  father’s  writings  and  conversation  drew  round  him  a 
number  of  young  men  who  had  already  imbibed,  or  who  imbibed 
from  him,  a greater  or  smaller  portion  of  his  very  decided  political 
and  philosophical  opinions.  The  notion  that  Bentham  was  sur- 
rounded by  a band  of  disciples  who  received  their  opinions 
from  his  lips,  is  a fable.  . . . The  influence  which  Bentham 
exercised  was  by  his  writings.  Through  them  he  has  produced, 
and  is  producing,  effects  on  the  condition  of  mankind,  wider 
and  deeper  than  any  which  can  be  attributed  to  my  father. 
He  is  a much  greater  name  in  history.  But  my  father  exercised 
a far  greater  personal  ascendency.  He  was  sought  for  the 
vigour  and  instructiveness  of  his  conversation,  and  did  use  it 
largely  as  an  instrument  for  the  diffusion  of  his  opinions.  . . . 

“ It  was  my  father’s  opinions  which  gave  the  distinguishing 
character  to  the  Benthamic  or  utilitarian  propagandism  of  that 
time.  They  fell  singly,  scattered  from  him,  in  many  directions, 
but  they  flowed  from  him  in  a continued  stream  principally  in 
three  channels.  One  was  through  me,  the  only  mind  directly 
formed  by  his  instructions,  and  through  whom  considerable 
influence  was  exercised  over  various  young  men,  who  became, 
in  their  turn,  propagandists.  A second  was  through  some  of 
the  Cambridge  contemporaries  of  Charles  Austin  . . . some  of 
the  more  considerable  of  whom  afterwards  sought  my  father’s 
acquaintance.  . . . The  third  channel  was  that  of  a younger 
generation  of  Cambridge  undergraduates,  contemporary  . . . 
with  Eyton  Tooke,  who  were  . . . introduced  by  him  tq 
my  father.  . . . 

“ Though  none  of  us,  probably,  agreed  in  every  respect  with 


1 Ibid.  p.  119  (Pop.  ed.  p.  68). 


INTRODUCTION 


viii 

my  father,  his  opinions,  as  I said  before,  were  the  principal 
element  which  gave  its  colour  and  character  to  the  little  group 
of  young  men  who  were  the  first  propagators  of  what  was  after- 
wards called  ‘ Philosophic  Radicalism.’  Their  mode  of  thinking 
was  characterized  by  ...  a combination  of  Bentham’s  point 
of  view  with  that  of  the  modem  political  economy,  and  with 
the  Hartleian  metaphysics.  Malthus’s  population  principle 
was  quite  as  much  a banner,  and  point  of  union  among  us, 
as  any  opinion  specially  belonging  to  Bentham.  This  great 
doctrine  ...  we  took  up  with  ardent  zeal,  ...  as  indicating 
the  sole  means  of  realizing  the  improvability  of  human  affairs 
by  securing  full  employment  at  high  wages  to  the  whole 
labouring  population  through  a v^oluntary  restriction  of  the 
increase  of  their  numbers.”  ^ 

What  was  true  of  James  Mill’s  personal  influence  on  the  entire 
circle  of  young  Philosophic  Radicals  and  over  the  whole  range  of 
their  beliefs,  was  peculiarly  true  of  his  influence  on  the  economic 
opinions  of  his  son.  The  impress  was  deep  and  indelible.  For 
good  or  for  ill, — and  it  is  not  the  purpose  of  this  Introduction 
to  interpose  between  the  reader  and  the  author  and  to  assign 
either  praise  or  blame — John  Mill’s  economics  remained  those 
of  his  father  down  to  the  end  of  his  life.  His  economics,  that 
is  to  say,  in  the  sense  of  what  he  himself  afterwards  described  as 
“ the  theojratic  principles,”  ^ or  again  as  the  “ abstract  and  purely 
scientific  ” ® element  in  his  writings : the  whole,  in  fact,  of  the  doctrine 
of  Distribution  and  Exchange  in  its  application  to  competitive 
conditions.  After  reading  through  the  first  three  Books  of  the  son’s 
Principles  of  1848,  one  has  but  to  turn  to  the  father’s  Elements 
of  1821  to  realize  that,  though  on  outlying  portions  of  the  field 
(like  the  subject  of  Currency)  John  Mill  had  benefited  by  the 
discussions  that  had  been  going  on  during  the  interval,  the  main 
conclusions,  as  well  as  the  methods  of  reasoning,  are  the  same 
in  the  two  treatises.  How  much  of  “ the-deposit  ”.  ofjiaatrine, — 
if  we  may  borrow  a theological  term, — came  originally  from 
Ricardo,  how  much  from  Malthus,  from  Adam  Smith,  from  the 
French  Physiocrats  of  the  eighteenth  century,  and  from  the  general 
movement  of  philosophical  and  political  thought,  is  a subject  on 
which  much  has  been  written,  but  on  which  we  cannot  now  enter. 

1 Autobiography,  p.  101  (Pop.  ed.  p.  68). 

2 Ibid.  p.  242  (Pop.  ed.  p.  139), 

3 Ibid.  p.  247  (Pop.  ed.  p.  142). 


INTRODUCTION 


IX 


It  is  sufficient  for  our  purpose  to  make  this  one  point  clear : that 
it  was  through  James  Mill,  and,  as  shaped  by  James  Mill,  that  it 
chiefly  reached  his  son. 

Yet  John  Mill  certainly  thought,  when  he  was  writing  his  book 
in  1848,  and  still  more  evidently  when  he  wrote  his  Autobiography 
in  1861,  that  there  was  a wide  difference  between  himself  and  those 
whom  he  calls,  in  language  curiously  anticipating  that  of  our  own  day, 
“the  political  economists  of  the  old  school,”!  or  “ the  common  run 
of  pohtical  economists.”  2 And  accordingly  it  is  essential  to  observe 
that  this  difference  consisted,  not  in  any  abandonment  of  the 
“ abstract  science,”  but  in  the  placing  of  it  in  a new  setting  In 
substance  he  kept  it  intact ; but  he  sought  to  surround  it,  so  to 
speak,  with  a new  environment. 

To  make  this  clear,  we  must  return  to  Mill’s  mental  history. 
Though  eminently  retentive  of  early  impressions,  he  was  also,  in  a 
very  real  sense,  singularly  open-minded ; and  the  work  of  his  hfe 
cannot  be  better  described  than  in  a happy  phrase  of  his  own 
coinage  : it  was  a constant  effort  to  “ build  the  bridges  and  clear  the 
paths  ” which  should  connect  new  truths  with  his  “ general  system  of 
thought,”  3 i.e.  with  his  Benthamite  and  Ricardian  starting  point.  Of 
the  influences,  later  than  that  of  his  father,  which  coloured  his 
thoughts,  three  must  be  singled  out  for  notice.  They  may  briefly 
be  summed  up — though  each  name  represents  much  besides — as 
those  of  Coleridge,  of  Comte,  and  of  his  wife. 

In  Coleridge  and  in  the  Coleridgians — such  as  Maurice  and 
Sterling,  whose  acquaintance  he  made  in  1828 — he  recognised  the 
Enghsh  exponents  of  “the  European  reaction  against  the  philo- 
sophy of  the  eighteenth  century,”^  and  its  Benthamite  outcome. 
That  reaction,  he  came  to  beheve,  was  in  large  measure  justifiable ; 
and  in  two  celebrated  articles  in  the  London  and  Westminster 
Review  in  1838  and  1840  ^ he  sought  to  expound  Benthamism 
and  Coleridgism  as  complementary  bodies  of  truth.  He  did  not, 
indeed,  extend  this  appreciation  to  Coleridge’s  economic  utterances, 
and  compounded  for  the  respect  he  paid  to  his  pohtical  philosophy 
by  the  vivacity  with  which  he  condemned  his  incursions  into 
the  more  sacred  field  : 

Political  Economy.  Book  iv.  chap.  vi.  § 2. 

2 Autobiography,  p.  246  (Pop.  ed.  p.  141). 

® Ibid.  p.  243  (Pop.  ed.  p.  139). 

^ Ibid.  p.  128  (Pop.  ed.  p.  73). 

* Reprinted  in  Dissertations  and  Discussions.  Series  I. 


INTRODUCTION 


“ In  political  economy  he  writes  like  an  arrant  driveller,  and 
it  would  have  been  well  for  his  reputation  had  he  never  meddled 
with  the  subject.  But  this  department  of  knowledge  can  now 
take  care  of  itself.”  i 

What  Coleridge  helped  him  to  realise  was,  firstly,  the  historical 
point  of  view  in  its  relation  to  politics,  and  secondly,  and  as  a 
corollary,  the  inadequacy  of  laissez  faire. 

The  Germano-Coleridgian  school  produced  ...  a philo- 
sophy of  society  in  the  only  form  in  which  it  is  yet  possible,  that 
of  a philosophy  of  history.”  2 
And  again  : 

“ That  series  of  great  writers  and  thinkers,  from  Herder  tc 
Michelet,  by  whom  history  . . . has  been  made  a science  of 
causes  and  effects,  ...  by  making  the  events  of  the  past  have 
a meaning  and  an  intelligible  place  in  the  gradual  evolution  of 
humanity,  have  afforded  the  only  means  of  predicting  and 
guiding  the  future.”  ® 

Similarly,  after  pointing  out  that  Coleridge  was 

“ at  issue  with  the  let  alone  doctrine,  or  the  theory  that  govern- 
ments can  do  no  better  than  to  do  nothing,” 
he  remarks  that  it  was 

“ a doctrine  generated  by  the  manifest  selfishness  and  incom- 
petence of  modern  European  governments,  but  of  which,  as  a 
general  theory,  we  may  now  be  permitted  to  say  that  one-half 
of  it  is  true  and  the  other  half  false.”  ^ 

It  is  not  wonderful  that  the  Bentham  and  Coleridge  articles 
should  make  a temporary  alienation  between  Mill  and  his  old 
associates  and  plant  in  their  minds  a painful  misgiving  as  to  his 
adhering  to  their  principles,”  as  we  learn  from  Professor  Bain,  who 
became  an  intimate  friend  of  Mill  shortly  afterwards.^  As  early 
as  1837  Mrs.  Grote  had  been  **  quite  persuaded  that  the  [London 
and  Westminster]  Review  would  cease  to  be  an  engine  of  propagating 
sound  and  sane  doctrines  on  Ethics  and  Politics  under  J.  M.”  ® 
But  it  is  a httle  surprising,  perhaps,  that  by  1841  Mill  was 
ready  to  describe  himself  in  the  privacy  of  correspondence  as 
having  definitely  withdrawn  from  the  Benthamite  school  “ in 

* Dissertations  and  Discussions^  I.  p.  452. 

2 Ihid.  p.  425.  ® Ihid.  p.  426.  * Ibid.  p.  453. 

^ Alexander  Bain,  John  Stuart  Mill,  A Criticism  : with  'personal  recollections, 
p.  56.  ® Ibid.  p.  57  n. 


INTRODUCTION 


zi 


which  I was  brought  up  and  in  which  I might  almost  say  I was 
born.”  1 

The  letter  was  that  in  which  Mill  introduced  himself  to  Comte^ 
the  first  of  a remarkable  series  which  has  only  recently  seen  the 
light.  By  the  time  he  wrote  it,  the  influence  of  Coleridge  had  been 
powerfully  supplemented  by  that  of  the  French  philosopher.  In- 
deed, with  that  tendency  to  run  into  extremes  which  was  seldom 
quite  absent  from  him.  Mill  even  declared,  in  addressing  Comte, 
that  it  was  the  impression  produced  as  far  back  as  1828  by  the 
reading  of  a very  early  work  by  Comte  which  had  **  more  than  any 
other  cause  determined  his  definite  withdrawal  from  the  Benthamite 
school.”  In  his  eager  enthusiasm,  he  probably  ante-dated  Comte’s 
influence.  It  seems  to  have  been  the  first  two  volumes  of  the 
Positive  Philoso'phy  (of  which  the  second  appeared  in  1837)  that 
first  interested  Mill  at  all  deeply  in  Comte’s  views ; though,  as 
we  shall  notice  later,  he  had  long  been  familiar  with  ideas  akin  to 
them  in  the  writings  of  the  St.  Simonians. 

However  this  may  have  been,  it  is  abundantly  clear  that  during 
the  years  1811-3,  when  he  was  engaged  in  completing  his 
great  treatise  on  LogiCy  Mill  was  fascinated  by  Comte’s  general 
system,  as  set  forth  in  the  Positive  Philosophy.  In  October,  1841, 
he  wrote  to  Bain  that  he  thought  Comte’s  book,  in  spite  of 
some  mistakes,”  was  ” very  near  the  grandest  work  of  this  age.”  2 
In  November,  in  the  letter  to  Comte  already  quoted,  he  took  the 
initiative  and  wrote  to  the  French  philosopher  to  express  his  sym- 
pathy and  adhesion.”  “ I have  read  and  re-read  your  Cours 
with  a veritable  intellectual  passion,”  he  told  him. 

“ I had  indeed  already  entered  into  a line  of  thought  some- 
what similar  to  your  own ; but  there  were  many  things  of  the 
first  importance  which  I had  still  to  learn  from  you  and  I hope 
to  show  you,  by  and  by,  that  I have  really  learnt  them. 
There  are  some  questions  of  a secondary  order  on  which  my 
opinions  are  not  in  accord  with  yours ; some  day  perhaps  this 
difference  will  disappear;  I am  not  flattering  myself  when  I 
believe  that  I have  no  ill-founded  opinion  so  deeply  rooted  as 
to  resist  a thorough  discussion,” 

such  as  he  hoped  to  engage  Comte  in.  It  was  for  this  reason 

* L.  Levy-Bruhl,  Lettres  Inidites  de  John  Stuart  Mill  d Auguste  Comte 
(Paris,  1899),  p.  2.  Writing  to  Comte,  Mill  naturally  employs  Comtean  phrase- 
ology, and  speaks  of  “ ma  sortie  definitive  de  la  section  benthamiste  de  I’ecole 
revolutionnaire.”  a Bain,  J.  8.  Mill,  p.  63. 


xii 


INTRODUCTION 


that  he  ventured  to  put  himself  into  communication  with  “ that 
one  of  the  great  minds  of  our  time  which  I regard  with  most  esteem 
and  admiration,”  and  believed  that  their  correspondence  might  be 
“ of  immense  value  ” for  him.  And  in  the  first  edition  of  his 
Logic^  which  appeared  in  1843,  he  did  not  scruple  to  speak  of 
Comte  as  “ the  greatest  living  authority  on  scientific  methods  in 
general.”  i Into  the  causes  of  this  enthusiasm  it  is  unnecessary 
to  enter.  Mill  was  tired  of  Benthamism : a masterly  attempt  to 
construct  a philosophy  of  Science  and  of  Humanity,  which  paid 
attention  at  the  same  time  to  historical  evolution  and  to  the  achieve- 
ments of  modern  physical  and  biological  science  (a  side  on  which 
the  Benthamite  school  had  always  been  weak),  and  yet  professed 
to  be  “ positive,”  i.e.  neither  theological  nor  metaphysical — such 
an  attempt  had,  for  the  time,  an  overmastering  charm  for  him.  The 
effect  of  his  reading  of  Comte  on  his  conception  of  the  logic  of 
the  physical  and  biological  sciences  falls  outside  our  present  range. 
What  we  have  now  to  notice  are  Comte’s  views  with  regard  to 
political  economy.  They  cannot  but  have  shaken,  at  any  rate  for 
a time.  Mill’s  confidence  that  what  he  had  learnt  from  his  father 
could  “ take  care  of  itself.” 

Comte’s  ultimate  object  was,  of  course,  the  creation  of  “ the 
Social  Science  ” or  “ Sociology.”  To-day  there  are  almost  as  many 
different  conceptions  of  the  scope  of  “ sociology  ” as  there  are 
eminent  sociologists  ; so  that  it  is  perhaps  worth  while  to  add  that 
Comte’s  ideal  was  a body  of  doctrine  which  should  cover  the  life  of 
human  society  in  all  its  aspects.  This  science  could  be  created,  he 
held,  only  by  the  **  positive  ” method — by  the  employment  of  the  Art 
of  Observation,  in  its  three  modes,  Direct  Observation  or  Obser- 
vation proper.  Experiment,  and  Comparison.^  Each  of  these  modes 
of  Observation  would  necessarily  assume  a character  appropriate  to 
the  field  of  enquiry.  As  to  Observation  proper  : while  the  meta- 
physical school  of  the  eighteenth  century  had  grossly  exaggerated 
its  difficulties,  on  the  other  hand  there  was  no  utihty  in  mere 
collections  of  disconnected  facts.  Some  sort  of  provisional  hypo- 
thesis or  theory  or  anticipation  was  necessary,  if  only  to  give 
direction  to  our  enquiries.  As  to  Experiment : direct  Experiment, 
as  in  the  physical  sciences,  was  evidently  impracticable,  but  its 
place  could  be  taken  by  a consideration  of  “ pathological  ” states 
of  society  such  as  might  fairly  be  called  “ indirect  ” Experiment. 

' Cf.  Bain,  p.  72. 

* Cours  de  Philosophie  Positive^  vol.  iv.  (1839),  pp.  412  «eg. 


INTRODUCTION 


xiU 


And  as  to  (^mparison  : there  was  a form  of  this  procedure,  viz.  the 
comparison  ol**  the  different  consecutive  conditions  of  humanity,’* — 
“ the  historical  method  ” in  the  true  sense  of  the  term, — so  fruitful  in 
sociological  enquiry  as  to  constitute  the  distinguishing  characteristic 
of  this  particular  branch  of  science. 

To  this  social  science  of  his  vision  Comte  applied  the  distinction 
he  had  already  applied  to  the  prehminary  sciences,  between  the 
static  and  the  dynamic.^  The  difference  between  “ the  fundamental 
study  of  the  condition  of  existence  of  society  ” and  “ the  study  of 
the  laws  of  its  continuous  movement  ” was  so  clear,  in  his  judgment, 
that  he  could  foresee  the  ultimate  division  of  Sociology  into  Social 
Statics  and  Social  Dynamics.  But  to  attach,  in  the  formative  stage 
ol  the  science,  any  very  great  importance  to  this  convenient 
distribution  of  the  subject  matter  would,  he  thought,  be  positively 
dangerous,  since  it  would  tend  to  obscure  “ the  indispensable  and 
permanent  combination  of  the  two  points  of  view.” 

Comte’s  attitude  towards  pohtical  economy,  as  it  was  then  taught 
was  the  natural  result  of  his  views  as  to  the  proper  method  of  creating 
a science  of  society.®  As  part  of  the  general  movement  of  revolu- 
tionary thought,  it  had  had  a “ provisional  ” function,  and  had 
rendered  a transitory  service  in  discrediting  the  industrial  pohcy  of 
the  ancien  regime  after  that  policy  had  become  a mere  hindrance  to 
progress.  It  had  prepared  the  way  for  a sound  historical  analysis 
by  calhng  attention  to  the  importance  of  the  economic  side  of  life. 
Its  practical  utihty,  however,  was  by  this  time  a thing  of  the  past : 
and  it  was  now  an  actual  obstacle  to  social  advance.  Like  the  rest  of 
the  revolutionary  philosophy,  it  now  tended  to  prolong  and  systema- 
tise social  anarchy.  It  led  people  to  regard  the  absence  of  all 
regulating  intervention  in  economic  affairs  on  the  part  of  society  as 
a universal  dogma ; and  it  met  all  the  difficulties  arising  out  of 
modern  industrial  changes,  such  as  “ the  famous  and  immense 
economic  question  of  the  effect  of  machinery,”  with  “ the  sterile 
aphorism  of  absolute  industrial  liberty.”  And  these  practical  con- 
sequences were  but,  in  Comte’s  judgment,  the  consequences  of  its 
underlying  scientific  defects.  From  this  sweeping  condemnation 
Comte  excepts  Adam  Smith,  from  whose  example,  according  to  him, 
the  creators  of  the  contemporary  political  economy  had  completely 
departed.  But  of  the  contemporary  pohtical  economy  he  declares 
that  it  was  fundamentally  metaphysical : its  creators  had  no  real 


* Ihid.  pp.  318  8cq. 


* Ihid.  pp.  264-79. 


xiv 


INTRODUOriON 


understanding  of  the  necessity  and  character  of  scientific  observation. 
Its  “inanity”  was  proved  by  the  absence  in  economic  literature  of 
the  real  tests  of  all  truly  scientific  conceptions,  viz.  continuity 
and  fecundity.  Its  sterile  disputes  on  the  meaning  of  terms  such 
as  value^  and  utility^  and  ^production  were  like  the  worst  debates  of 
medieval  schoolmen.  And  the  very  isolation  of  economics  from 
other  fields  of  social  enquiry  which  economists  had  sought  to  justify 
was  its  decisive  condemnation. 

“ By  the  nature  of  the  subject,  in  social  studies  the  various 
general  aspects  are.  quite  necessarily,  mutually  inter-connected 
and  inseparable  in  reason,  so  that  the  one  aspect  can  only  be 
adequately  explained  by  the  consideration  of  the  others.  It  is 
certain  that  the  economic  and  industrial  analysis  of  society  can- 
not be  positively  accomplished,  if  one  leaves  out  all  intellectual, 
moral  and  political  analysis:  and  therefore  this  irrational 
separation  furnishes  an  evident  indication  of  the  essentially 
metaphysical  nature  of  the  doctrines  based  upon  it.” 

Now  Mill  was  immensely  attracted,  and  for  the  time  possessed, 
by  Comte’s  general  conception  of  the  Social  Science  or  Sociology; 
and  in  the  concluding  chapters  of  his  Logic  he  took  this  over 
bodily,  together  with  Comte’s  distinction  between  Social  Statics  and 
Social  Dynamics.^  Just  as  Comte  rejected  the  “ metaphysical  ” 
political  philosophy  of  France,  so  Mill  made  clear  his  opinion  of  the 
inadequacy  of  “ the  interest-philosophy  of  the  Bentham  school  ” 
in  its  application  to  “ the  general  theory  of  government.”  That 
philosophy,  as  he  explained,  was  “ founded  on  one  comprehensive 
premiss  : namely,  that  men’s  actions  are  always  determined  by 
their  interests.”  But  as  this  premiss  was  not  true,  what  were  really 
“ the  mere  polemics  of  the  day,”  and  useful  enough  in  that  capacity, 
were  quite  erroneously  “ presented  as  the  scientific  treatment  of  a 
great  question.”  And  quite  in  the  spirit  of  Comte  he  added  : 

“ These  philosophers  would  have  applied  and  did  apply  their 
principles  with  innumerable  allowances.  But  it  is  not  allowances 
that  are  wanted.  There  is  little  chance  of  making  due  amends 
in  the  superstructure  of  a theory  for  the  want  of  sufficient  breadth 
in  its  foundations.  It  is  unphilosophical  to  construct  a science  out 
of  a few  of  the  agencies  by  which  the  phenomena  are  determined, 
and  leave  the  rest  to  the  routine  of  practice  or  the  sagacity  of 
conjecture.  We  ought  either  not  to  pretend  to  scientific  forms  or 


Mill’s  Logic,  book  vi.  chaps.  6, 10. 


INTRODUCTION 


rv 

we  ought  to  study  all  the  determining  agencies  equally,  and 
endeavour,  as  far  as  can  be  done,  to  include  all  of  them  within 
the  pale  of  the  science ; else  we  shall  infallibly  bestow  a dispro- 
portionate attention  upon  those  which  our  theory  takes  into 
account,  while  we  misestimate  the  rest  and  probably  underrate 
their  importance.”  i 

How,  then,  about  political  economy,  which  Comte  had  criticised 
in  precisely  the  same  spirit  ? Mill  was  not  at  all  disposed  to  throw 
overboard  the  Kicardian  economics  received  from  his  father.  In 
the  first  place,  he  maintained  that  a distinction  could  be  drawn 
between  the  “ general  Science  of  Society  ” or  “ general  Sociology  ” 
and  “ the  separate  compartments  of  the  science,  each  of  which  asserts 
its  conclusions  only  conditionally,  subject  to  the  paramount  control 
of  the  laws  of  the  general  science.”  The  ground  for  this  contention 
he  sets  forth  thus  : 

“ Notwithstanding  the  universal  consensus  of  the  social 
phenomena,  whereby  nothing  which  takes  place  in  any  part  of 
the  operations  of  society  is  without  its  share  of  influence  on  every 
other  part ; and  notwithstanding  the  paramount  ascendency 
which  the  general  state  of  civihsation  and  social  progress  in  any 
given  society  must  hence  exercise  over  the  partial  and  subordinate 
phenomena  ; it  is  not  the  les*s  true  that  different  species  of  social 
facts  are  in  the  main  dependent,  immediately  and  in  the  first 
resort,  on  different  kinds  of  causes  ; and  therefore  not  only  may 
with  advantage,  but  must,  be  studied  apart.  . . . 

“ There  is, /or  example,  one  large  class  of  social  phenomena  of 
which  the  immediately  determining  causes  are  principally  those 
which  act  through  the  desire  of  wealth ; and  in  which  the 
psychological  law  mainly  concerned  is  the  familiar  one  that  a 
greater  gain  is  preferred  to  the  smaller  ...  A science  may  be 
thus  constructed  which  has  received  the  name  of  Political 
Economy.”  ^ 

In  spite  of  the  “for  example”  with  which  political  economy 
is  introduced,  it  is  clear  that  the  generalisation  was  formulated 
for  the  sake  of  that  one  subject,  subject  to  a quahfication  to  be 
shortly  mentioned. 

“ I would  not  here  undertake  to  decide  what  other  h3rpo- 
thetical  or  abstract  sciences,  similar  to  Political  Economy,  may 
admit  of  being  carved  out  of  the  general  body  of  the  social  science; 


* Ihid.  ii.  p.  472  (ed,  3). 


Ibid,  ii.  pp.  480-1. 


xvi 


INTRODUCTION 


what  other  portions  of  the  social  phenomena  are  in  a sufficiently 
close  and  complete  dependence,  in  the  first  resort,  on  a particular 
class  of  causes,  to  make  it  convenient  to  create  a preliminary 
science  of  those  causes ; postponing  the  consideration  of  the 
causes  which  act  through  them  or  in  concurrence  with  them 
to  a later  period  of  the  enquiry.”  i 

But  Mill  was  not  content  with  this  “ departmental  ” view,  taken 
by  itself  : he  proceeded  to  build  two  further  “ bridges  ” between  his 
new  and  his  old  opinions.  In  an  essay,  written  for  the  most  part  in 
1830,  and  published  in  the  London  and  Westminster  Review  in  1836,2 
Mill  had  laid  down  with  the  utmost  stringency  that  the  only  method 
appropriate  to  political  economy,  i.e.  to  the  Ricardian  economics, 
was  the  a priori  or  deductive  one.  Between  this  and  the  method  of 
Observation  recommended  by  Comte  it  might  have  been  thought 
that  there  was  a sufficiently  wide  gulf.  But  Mill  now  proceeded  to 
describe  “ the  historical  method,” — whereby  “ general  ” Sociology 
was  to  be  built  up  according  to  Comte  and  himself  ahke, — in  such 
terms  as  permitted  him  to  designate  even  that  a “Deductive Method,” 
though  indeed  an  “ Inverse  Deductive  Method.”  Thus  the  evident 
contrast  in  method  was  softened  down  into  the  difference  simply 
between  “ direct  ” and  “ inverse  ” deduction.^ 

The  other  bridge  was  to  be  a new  science,  or  couple  of  sciences, 
still  to  be  created.  Mill  explained  at  length  in  his  Logic  that 
there  was  need  of  what  he  denominated  “ Ethology  ” or  a Science 
of  Character.^  Built  upon  this,  there  ought  to  be  a Political 
Ethology,  or  “ a theory  of  the  causes  which  determine  the  type 
of  character  belonging  to  a people  or  to  an  age.”  ^ The  bearing 
of  Political  Ethology  on  Political  Economy  is  thus  summarily 
iodicated : 

“ The  most  imperfect  part  of  those  branches  of  social  enquiry 
which  have  been  cultivated  as  separate  sciences  is  the  theory 
of  the  manner  in  which  their  conclusions  are  affected  by  ethological 
considerations.  The  omission  is  no  defect  in  them  as  abstract 
or  hypothetical  sciences,  but  it  vitiates  them  in  their  practical 
apphcation  as  branches  of  a comprehensive  social  science.  In 
political  economy,  for  instance^  empirical  laws  of  human  nature 
are  tacitly  assumed  by  English  thinkers,  which  are  calculated 
only  for  Great  Britain  and  the  United  States.  Among  other 

* Mill’s  Logic,  ii.  p.  486. 

* Reprinted  in  Essays  on  some  Unsettled  Questions  of  Political  Economy  ( 1 844), 

* Logic,  ii.  pp.  476-7.  ^ Ibid.  ii.  p.  441.  ® Ibid.  ii.  j).  486. 


INTRODUCTION 


xvii 

things  an  intensity  of  competition  is  constantly  supposed, 
which,  as  a general  mercantile  fact,  exists  in  no  country  in  the 
world  except  those  two.  An  English  political  economist  . . . has 
seldom  learned  that  it  is  possible  that  men,  in  conducting  the 
business  of  selling  their  goods  over  the  counter,  should  care 
more  about  their  ease  or  their  vanity  than  about  their  pecuniary 
gain.”  1 

In  spite  once  more  of  the  introductory  “ for  instance,”  it  is  clear 
that  it  is  only  political  economy  that  Mill  has  in  his  mind  ; and  it 
is  primarily  to  remedy  its  “ imperfections  ” that  Political  Ethology 
is  to  be  created.  Political  Ethology,  like  Ethology  itself.  Mill 
conceived  of  as  directly  deductive  in  its  character. 

It  is  no  part  of  my  task  to  criticise  either  Mill  or  Comte  : all  I 
am  seeking  to  do  is  to  make  clear  the  intellectual  relations  between 
them.  And  whether,  in  particular,  a Science  of  National  Character 
is  possible,  and,  if  possible,  on  what  sort  of  lines  it  may  be  con- 
structed, I “ would  not  here  undertake  to  decide.”  I go  on  now 
to  the  purely  biographical  facts, — which  need  the  more  emphasis 
because  they  have  dropt  altogether  out  of  the  Autobiography , — 
that  Mill  took  this  project  of  creating  an  Ethology  very  seriously  ; 
that  “ with  parental  fondness  he  cherished  this  subject  for  a con- 
siderable time  ” ; 2 and  that  he  dropt  it  because  he  could  not  make 
anything  of  it.^ 

It  was  in  this  mood  of  recoil  that  he  began  to  think  of  composing 
“ a special  treatise  on  political  economy,  analogous  to  that  of 
Adam  Smith.”  Writing  to  Comte  in  April,  1844,  he  remarked  that 
for  him  “ this  would  only  be  the  work  of  a few  months.”  * Some 
particulars  as  to  the  actual  period  of  composition  are  furnished  by 
the  Autobiography.^ 

“ The  Political  Economy  was  far  more  rapidly  executed 
than  the  LogiCy  or  indeed  than  anything  of  importance  which 
I had  previously  written.  It  was  commenced  in  the  autumn  of 
1845,  and  was  ready  for  the  press  before  the  end  of  1847.  In 
this  period  of  httle  more  than  two  years  there  was  an  interval 
of  six  months  during  which  the  work  was  laid  aside,  while 
I was  writing  articles  in  the  Morning  Chronicle  . . . urging 
the  formation  of  peasant  properties  on  the  waste  lands  of 

^ Ibid.  ii.  p.  487.  2 Bain,  pp.  78-9. 

^ Besides  Bain’s  account,  Mill’s  letters  to  Comte,  printed  by  I^vy-Bruhl, 
pp.  260,  285,  are  of  interest. 

* Levy-Bruhl,  p.  308. 


5 P.  235  (Pop.  ed.  p.  135). 


«viii 


INTRODUCTION 


Ireland.  This  was  during  the  period  of  the  Famine,  the  winter 
of  1846-47.” 

After  what  we  have  seen  of  his  mental  history,  it  is  easy  to 
anticipate  that  IVIill  would  no  longer  be  satisfied  with  the  kind  of 
treatment  that  economics  had  received  at  the  hands  of  his  father, 
or  in  subsequent  years  of  McCulloch  or  Senior.  The  “ principles  ” 
of  abstract  pohtical  economy,  as  he  had  inherited  them,  he  enter- 
tained no  sort  of  doubt  about.  As  has  been  well  said,  within  that 
field  “ Mill  speaks  as  one  expounding  an  established  system.”  i 
As  late  as  1844  he  had  reprinted  in  the  thin  volume  entitled 
Some  Unsettled  Questions  of  Political  Economy  his  old  essay 
on  Method,  and  had  expressed  his  complete  satisfaction,  within 
its  range,  with  the  science  as  it  was  to  be  found  “ in  the 
writings  of  its  best  teachers.”  2 But  he  was  bound  to  put  this 
science  into  some  sort  of  relation  with  that  general  Social  Science 
or  Philosophy,  of  which  he  had  gained,  or  solidified,  his  notion  from 
the  reading  of  Comte.  Accordingly,  he  gave  to  his  book  the  title : 
“ Principles  of  Political  Economy,  with  some  of  their  Applications 
to  Social  Philosophy”  And  he  himself  spoke  of  the  work  in  later 
years  in  the  following  terms  : 

“ It  was,  from  the  first,  continually  cited  and  referred  to  as 
an  authority,  because  it  was  not  a book  merely  of  abstract 
science,  but  also  of  application,  and  treated  Pohtical  Economy 
not  as  a thing  by  itself,  but  as  a fragment  of  a greater  whole ; 
a branch  of  Social  Philosophy,  so  interhnked  with  all  the  other 
branches,  that  its  conclusions,  even  in  its  own  pecuhar  province, 
are  only  true  conditionally,  subject  to  interference  and  counter- 
action from  causes  not  directed  within  its  scope  : while  to  the 
character  of  a practical  guide  it  has  no  pretension,  apart  from 
other  classes  of  considerations.”  ^ 

It  must  be  left  to  the  reader  to  judge  how  far  this  “ apphcation  ” 
was  successful, — how  far,  indeed,  the  nature  of  the  abstract  science 
lent  itself  to  apphcation.  But  the  character  of  the  undertaking 
will  be  rendered  clearer  by  noticing  certain  of  its  characteristics. 
Ethology,  as  we  have  seen,  had  receded  from  Mill’s  mind.  But 
the  thoughts  which  had  given  rise  to  the  project  have  left  their 
traces  in  the  chapter  on  “ Competition  and  Custom.”  * Hera 

* Leslie  Stephen,  The  English  Utilitarians^  ii.  161. 

s Unsettled  Questions,  p.  149. 

^ Autobiography,  p.  236  (Pop.  ed.  p.  135)< 

* Book  ii.  chap.  4. 


INTRODUCTION 


xiz 

Custom  is  placed  side  by  side  with  Competition  as  the  other  agency 
determining  the  division  of  produce  under  the  rule  of  private 
property.  It  is  pointed  out  not  only  that  Competition  is  a com- 
paratively modern  phenomenon,  so  that,  until  recently,  rents,  for 
instance,  were  ruled  by  custom,  but  also  that  “ even  in  the 
present  state  of  intense  competition  ” its  influence  is  not  so  absolute 
as  is  often  supposed  : there  are  very  often  two  prices  in  the  same 
market.  He  asserts  that 

“ political  economists  generally,  and  English  political  econo- 
mists above  others,  are  accustomed  to  lay  almost  exclusive 
stress  upon  the  first  of  these  agencies ; to  exaggerate  the  effect 
of  competition,  and  take  into  Httle  account  the  other  and  con- 
flicting principle.  They  are  apt  to  express  themselves  as  if 
they  thought  that  competition  actually  does,  in  all  cases,  what- 
ever it  can  be  shown  to  be  the  tendency  of  competition  to  do.” 
The  language  in  which  he  goes  on  to  formulate  an  explanation  and 
relative  justification  of  their  practice  is  of  the  utmost  significance. 

“ This  is  partly  intelhgible,  if  we  consider  tliat  only  through 
the  principle  of  competition  has  political  economy  any  pretension 
to  the  character  of  a science.  So  far  as  rents,  profits,  wages, 
prices,  are  determined  by  competition,  laws  may  be  assigned 
for  them.  Assume  competition  to  be  their  exclusive  regulator, 
and  principles  of  broad  generality  and  scientific  precision  may 
be  laid  down,  according  to  which  they  will  be  regulated.  The 
pohtical  economist  justly  deems  this  his  proper  business  : and 
as  an  abstract  or  hypothetical  science,  pohtical  economy  cannot 
be  required  to  do  anything  more.” 

But,  as  the  ascription  to  Competition  of  an  unhmited  sway  is,  as  a 
matter  of  fact,  “ a great  misconception  of  the  actual  cause  of  human 
affairs.” 

“to  escape  error,  we  ought,  in  applying  the  conclusions  of 
political  economy  to  the  actual  affairs  of  fife,  to  consider  not 
only  what  will  happen  supposing  the  maximum  of  competition, 
but  how  far  the  result  will  be  affected  if  competition  falls  short 
of  the  maximum.” 

After  this  it  might  perhaps  be  expected  that  Mill  would  himself 
embark  on  a quantitative  estimate  of  the  extent  of  the  divergence 
of  the  “ laws  ” of  “ the  science  ” from  the  facts  of  hfe.  But  certainly 
no  such  attempt  is  made  within  the  covers  of  his  treatise — and  he 
makes  it  clear  that  the  application  of  his  warning  is  to  be  left  to 
the  reader  : 


XX 


INTRODUCTION 


“ These  observations  must  be  received  as  a general  correction, 
to  be  applied  whenever  relevant,  whether  expressly  mentioned 
or  not,  to  the  conclusions  contained  in  the  subsequent  portions 
of  this  treatise.  Our  reasonings  must,  in  general,  proceed  as 
if  the  known  and  natural  effects  of  competition  were  actually 
produced  by  it.” 

To  discuss  the  conception  of  “ science  ” and  its  relation  to 
“law”  which  underlies  such  passages;  to  compare  it  with  that 
implied  by  Mill  elsewhere  ; or  to  enter  into  the  question  whether  a 
systematic  ascertainment  and  grouping  of  actual  facts,  guided  by 
the  ordinary  rules  of  evidence,  might  not  deserve  to  be  called 
“ scientific,”  even  if  it  did  not  result  in  “ law  ” — would  take  us 
too  far  afield.  By  confining,  as  he  did,  the  term  “ science  ” to  the 
abstract  argument,  and  by  leaving  the  determination  of  its  relation 
to  actual  conditions  to  what  he  himself  in  another  connexion  calls 
“ the  sagacity  of  conjecture,”  Mill  undoubtedly  exercised  a pro- 
found infiuence  on  the  subsequent  character  of  economic  writing 
in  England. 

Another  result,  in  the  Political  Economy,  of  the  preceding 
phase  of  Mill’s  social  speculation,  is  to  be  found  in  the  distinction 
between  Statics  and  Dynamics  which  he  now  introduces . into 
economics  itself.^  In  the  Logic,  as  we  have  noticed,  this 
distinction  was  applied,  following  Comte,  only  to  the  general 
Sociology  which  was  to  be  created  by  “ the  historical  method.” 
But  the  general  Sociology  being  indefinitely  postponed,  because 
the  Ethology  which  in  Mill’s  judgment  was  its  necessary  foun- 
dation was  not  forthcoming,  it  seemed  proper  to  employ  the 
distinction  in  the  “ preliminary  ” science,  and  to  add  in  the 
Political  Economy  itself  a “ theory  of  motion  ” to  the  “ theory  of 
equilibrium.”  Thus  employed,  however,  the  distinction  becomes 
something  very  different  from  what  Comte  had  intended.  Almost 
the  whole  of  Mill’s  Book  IV  on  the  Progress  of  Society  consists  of  a 
highly  theoretical  and  abstract  argument  as  to  the  effect  on  Prices, 
Rents,  Profits,  and  Wages,  within  a competitive  society  of  the  present 
type,  of  the  progress  of  population,  capital,  and  the  arts  of  production, 
in  various  combinations.  Much  of  the  substance  of  these  arguments 
was  derived  from  Ricardo  or  his  school ; and  the  whole  discussion, 
even  when  Mill  takes  an  independent  line  of  his  own,  moves  within 
the  Ricardian  atmosphere.  This  statement  of  fact  does  not  neces- 
sarily imply  condemnation.  It  is  made  only  to  clear  Mill’s  use  of 
1 Book  iv.  chap.  1. 


INTRODUCTION 


xxi 


the  terms  “ static  ” and  “ dynamic  ” in  his  Political  Economy  from 
the  ambiguity  which  his  own  previous  use  of  the  term  in  relation 
to  general  Sociology  might  cause  to  cling  to  it.  And  we  must 
except  the  last  chapter  of  the  Book,  dealing  with  “the  Probable 
Futurity  of  the  Working  Classes,”  which  is  a prophecy  of  the 
ultimate  victory  of  Co-operation,  and  has  little  or  no  connexion 
with  what  goes  before. 

And  now  we  come  finally  to  what  Mill  himself  regarded  as  the 
distinguishing  characteristic  of  his  work  ; and  with  it  we  reach  the 
third  of  the  influences  that  affected  the  movement  of  his  mind  after 
his  early  education.  I refer,  of  course,  to  the  distinction  which 
Mill  drew  between  the  laws  of  the  Production  and  those  of  the 
Distribution  of  wealth.^  With  the  formal  statement  in  the 
Princij)les  may  be  compared  the  passage  in  the  Autohiogra'phy 
where  Mill  gives  an  account  of  the  influence  of  Mrs.  Taylor 
(who  became  his  wife  in  April,  1851)  : 

“ The  purely  scientific  part  of  the  Political  Economy  I did 
not  learn  from  her  ; but  it  was  chiefly  her  influence  that  gave  to 
the  book  that  general  tone  by  which  it  is  distinguished  from  all 
previous  expositions  of  political  economy  that  had  any  pre- 
tension to  being  scientific.  . . . This  tone  consisted  chiefly  in 
making  the  proper  distinction  between  the  laws  of  the  Produc- 
tion of  wealth — which  are  real  laws  of  nature,  dependent  on 
the  properties  of  objects — and  the  modes  of  its  Distribution, 
which,  subject  to  certain  conditions,  depend  on  human  will. 
The  common  run  of  political  economists  confuse  these  together, 
under  the  designation  of  economic  laws,  which  they  deem 
incapable  of  being  defeated  or  modified  by  human  effort ; 
ascribing  the  same  necessity  to  things  dependent  on  the 
unchangeable  conditions  of  our  earthly  existence,  and  to  those 
which,  being  but  the  necessary  consequences  of  particular 
social  arrangements,  are  merely  co-extensive  with  these  : given 
certain  institutions  and  customs,  wages,  profits,  and  rent 
will  be  determined  by  certain  causes  ; but  this  class  of  political 
economists  drop  the  indispensable  presupposition,  and  argue 
that  these  causes  must,  by  an  inherent  necessity,  against  which 
no  human  means  can  avail,  determine  the  shares  which  fall,  in 
the  division  of  the  produce,  to  labourers,  capitalists,  and  landlords. 

* See  the  concluding  paragraphs  in  the  Preliminary  Remarks,  and  booK  ii, 
chap.  i.  § 1. 

2 P.  246  (Pop.  ed.  p.  141). 


xxii 


INTRODUCTION 


The  Principles  of  Political  Economy  yielded  to  none  of  its 
predecessors  in  aiming  at  the  scientific  appreciation  of  the  action 
of  these  causes,  under  the  conditions  which  they  presuppose  ; but 
it  set  the  example  of  not  treating  those  conditions  as  final.  The 
economic  generalizations  which  depend  not  on  necessities  of 
nature  but  on  those  combined  with  the  existing  arrangements  of 
society,  it  deals  with  only  as  provisional,  and  as  liable  to  be  much 
altered  by  the  progress  of  social  improvement.  I had  indeed 
partially  learnt  this  view  of  things  from  the  thoughts  awakened 
in  me  by  the  speculations  of  the  St.  Simonians  ; but  it  was  made 
a living  principle  pervading  and  animating  the  book  by  my  wife’s 
promptings.” 

It  would  be  interesting,  had  I space,  to  try  to  distinguish  the 
various  currents  of  thought  which  converged  at  this  time  upon 
Mill  and  his  wife.  They  were  both  people  of  warm  hearts  and 
generous  sympathies  ; and  the  one  most  important  fact  about  Mill’s 
Principles,  besides  its  being  the  work  of  the  son  of  his  father, 
is  that  it  was  published  in  the  great  year  1848.  Mill’s  personal 
friendship  with  Carlyle  and  Maurice  in  England,  his  keen  interest 
for  years  in  St.  Simonism  and  all  the  other  early  phases  of  French 
“ socialism,”  sufficiently  disposed  him,  if  he  wore  the  old  political 
economy  at  all,  to  wear  it  “ with  a difference.”  I do  not  propose  to 
add  one  more  to  the  numerous  arguments  as  to  the  validity  of  the 
distinction  between  the  laws  of  Production  and  the  modes  of 
Distribution.  But  I should  like  to  comment  on  one  word  which 
was  constantly  in  Mill’s  mouth  in  this  connexion — and  that  is  the 
word  “ provisional  ” ; a word  which,  according  to  his  own  account, 
he  had  picked  up  from  Austin.^  He  used  it  twice  in  the  letter  to 
Comte  announcing  his  intention  to  write  an  economic  treatise : 

“ I know  your  opinion  of  the  political  economy  of  the 
day : I have  a better  opinion  of  it  than  you  have ; but,  if  I 
write  anything  on  the  subject,  it  will  be  never  losing  out  of  sight 
the  purely  provisional  character  of  all  its  concrete  conclusions ; 
and  I shall  take  special  pains  to  separate  the  general  laws  of 
Production,  which  are  necessarily  common  to  all  industrial 
societies,  from  the  principles  of  the  Distribution  and  Exchange 
of  wealth,  which  necessarily  presuppose  a particular  state  of 
society,  without  implying  that  this  state  should,  or  even  can, 
indefinitely  continue.  ...  I believe  that  such  a treatise  might 
have,  especially  in  England,  great  provisional  utility,  and  that 
^ Autobiography,  p.  234  (Pop.  ed.  p.  134). 


INTRODUCTION 


zxiii 


it  will  greatly  help  the  positive  spirit  to  make  its  way  into 
political  discussions.”  i 

Then  followed  a curious  interchange  of  letters.  Comte  replied 
politely  that  he  was  glad  to  learn  of  Mill’s  project,  and  that  he  did 
not  doubt  that  it  would  be  very  useful,  by  contributing  to  the 
spread  of  the  positive  spirit. 

“Although  an  economic  analysis,  properly  so  called,  ought  not, 
in  my  opinion,  to  be  finally  conceived  of  or  undertaken  apart 
from  the  general  body  of  sociological  analysis,  both  static  and 
dynamic,  yet  I have  never  refused  to  recognise  the  provisional 
efficacy  of  this  kind  of  present-day  metaphysics.”  2 
Mill  wrote  in  return  that  he  was  pleased  to  get  Comte’s  approba- 
tion, since  he  was  afraid  Comte  might  have  thought  his  project 
“ essentially  anti-scientific  ” ; 

“ and  so  it  would  really  be  if  I did  not  take  the  greatest 
possible  care  to  establish  the  purely  provisional  character  of 
any  doctrine  on  industrial  phenomena  which  leaves  out  of  sight 
the  general  movement  of  humanity.”  ^ 

Comte  once  more  replied  that  he  thought  Mill’s  project  a happy 
one. 

“ When  regarded  as  having  the  purely  preliminary  purpose 
and  provisional  office  that  are  assigned  to  it  by  a general 
historical  view,  political  economy  loses  its  principal  dangers 
and  may  become  very  useful.”  ^ 

It  is  sufficiently  apparent  that  the  correspondents  are  at  cross 
purposes.  By  “ provisional  ” Comte  means  until  a 'positive  Sociology 
can  he  created  ; Mill  means  so  long  as  the  present  system  of  private 
property  lasts.  Until  the  present  social  system'  should  be  funda- 
mentally changed.  Mill  clearly  regarded  the  Ricardian  economics  as 
so  far  applicable  to  existing  conditions  as  to  call  for  no  substantial 
revision  in  method  or  conclusions.  And  by  this  attitude, — by 
deferring  any  breach  with  Ricardian  political  economy  to  a time 
comparable  in  the  minds  of  men  less  ardent  than  himself  to  the  Greek 
Kalends, — he  certainly  strengthened  its  hold  over  many  of  his 
readers. 

Since  Mill’s  time  there  has  been  a vast  amount  of  economic 

* April  3,  1844.  Translated  from  the  French  text  in  Levy-Bruhl,  p.  309. 

* May  1,  1844.  Ibid.  p.  314.  The  original  French  should  be  consulted. 
It  is  impossible  in  a free  rendering  to  give  all  the  nuances  of  the  original. 

3 June  6,  1844.  Ibid.  p.  322.  ^ July  22, 1844.  Ibid.  p.  338. 

, h 


VCXIV 


INTRODUCTION 


writing.  The  German  Historical  School  has  come  into  existence, 
and  has  reached  a high  point  of  achievement  in  the  treatise  of 
Gustav  Schmoller.  On  the  other  hand,  other  bodies  of  theory 
have  made  their  appearance,  quite  as  abstract  as  the  Ricardian 
which  they  reject : and  here  the  names  of  Jevonsand  Monger  stand 
out  above  the  rest.  An  equally  abstract  Sociahst  doctrine,  the 
creation  largely  of  Marx,  has  meantime  waxed  and  waned.  But 
Mill’s  Princifles  will  long  continue  to  be  read  and  will  deserve 
to  be  read.  It  represents  an  interesting  phase  in  the  intellectual 
history  of  the  nineteenth  century.  But  its  merit  is  more  than 
historical.  It  is  still  one  of  the  most  stimulating  books  that  can 
be  put  into  the  hands  of  students,  if  they  are  cautioned  at  the  outset 
against  regarding  it  as  necessarily  final  in  all  its  parts.  On  some 
topics  there  is  still,  in  my  opinion,  nothing  better  in  the  Enghsh 
language ; on  others  Mill’s  treatment  is  still  the  best  point  of  de- 
parture for  further  enquiry.  Whatever  its  faults,  few  or  many,  it 
is  a great  treatise,  conceived  and  executed  on  a lofty  plane,  and 
breathing  a noble  spirit.  Mill — especially  when  we  penetrate  beneath 
the  magisterial  fiow  of  his  final  text,  as  we  are  now  enabled  to  do  by 
the  record  in  this  edition  of  his  varying  moods — is  a very  human 
personality.  The  reader  of  to-day  is  not  likely  to  come  to  him  in  too 
receptive  a spirit ; and  for  a long  time  there  will  be  much  that  even 
those  who  most  differ  from  him  will  still  be  able  to  learn  from  his 
pages. 


It  remains  now  to  describe  the  character  of  the  present  edition. 
The  text  is  that  of  the  seventh  edition  (1871),  the  last  revised 
by  Mill;  and  it  is  hoped  that  the  occasional  but  misleading 
misprints  which  had  crept  into  it  have  now  all  been  corrected.  It 
has  not  seemed  desirable  to  add  anything  in  the  way  of  editorial 
comment.  But  in  the  one  case  where  Mill  himself  publicly  abandoned 
an  important  doctrine  of  his  Principles, — that  of  the  Wages  Fund 
— it  has  seemed  proper  to  give  an  excerpt  from  his  later  writings  in 
the  Appendix.  And  the  same  plan  has  been  pursued  with  regard 
to  Mill’s  latest  views  on  Sociahsm.  I have  also  appended  a series 
of  references  to  the  chief  writers  who  have  dealt  with  the  main 
topics  of  Mill’s  treatise,  especially  those  of  a controversial  nature, 
since  his  time.  That  I have  altogether  escaped  the  influence  of 
personal  bias  in  this  selection  I can  hardly  hope.  If  the  references 
under  any  head  should  seem  scanty  or  one-sided,  it  should  be  borne 


INTRODUCTION 


XXV 


in  mind  that  they  are  intended  to  include  only  those  outstanding 
works  whose  value  is  generally  recognised  by  all  serious  economists, 
and  that  the  choice  is  limited  in  the  main  to  the  books  that  are  easily 
accessible  to  the  English-reading  public. 

The  characteristic  feature,  however,  of  this  edition  is  the  in- 
dication in  the  notes  of  all  the  significant  changes  or  additions  made 
by  Mill  in  the  course  of  the  six  editions  revised  by  himself.  The 
dates  of  these  editions,  after  the  first  in  1848,  were  1849,  1852, 
1857,  1862,  1865,  and  1871.  In  every  one  of  these  Mill  made  note- 
worthy alterations.  Eewriting,  or  the  addition  of  whole  sections 
or  paragraphs,  takes  place  chiefly  in  the  earlier  editions  ; but  even 
in  the  last,  that  of  1871,  the  “ few  verbal  corrections  ” of  which 
Mill  speaks  in  his  Preface  were  sufiicient,  in  more  passages  than  one, 
to  give  a different  complexion  to  the  argument.  My  attention  was 
called  to  this  interesting  feature  in  the  history  of  the  Principles 
by  Miss  M.  A.  Ellis’  article  in  the  Economic  Journal  for  June, 
1906  ; and  it  seemed  to  me  that  the  interest  of  students  would  be 
aroused  by  a record  of  the  variations.  Accordingly  I have  com- 
pared the  first  and  the  seventh  edition  page  by  page  and  paragraph 
by  paragraph;  and  where  any  striking  divergence  has  shown  itself, 
I have  looked  up  the  earlier  editions  and  ascertained  the  date  of  its 
first  appearance.  This  has  proved  an  unexpectedly  toilsome  business, 
even 'with  the  assistance  of  the  notes  that  Miss  Ellis  has  been  good 
enough  to  put  at  my  disposal ; and  I cannot  feel  quite  sure  that 
nothing  has  escaped  my  eye  that  ought  to  be  noted.  Mere  changes 
of  language  for  the  sake  of  improving  the  style  I have  disregarded, 
though  I have  erred  rather  in  the  direction  of  including  than  of 
excluding  every  apparent  indication  of  change  of  opinion  or  even  of 
mood.  AU  editorial  notes  are  placed  within  square  brackets  ; and 
I have  added,  and  marked  in  the  same  way,  the  dates  of  all  Mill’s 
own  foot-notes  subsequent  to  the  first  edition.  As  Mill’s  revision 
of  the  text,  though  considerable,  was  rather  fragmentary,  his  time- 
references  are  occasionally  a little  bewildering  : a “ now  ” in  his 
text  may  mean  any  time  between  1848  and  1871.  In  every  case 
where  it  seemed  necessary  to  ascertain  and  to  remind  the  reader  of 
the  time  when  a particular  sentence  was  written,  I have  inserted 
the  date  in  the  text  in  square  brackets. 

Mill’s  punctuation  is  not  quite  so  preponderatingly  grammatical 
as  punctuation  has  since  become.  As  in  all  the  books  of  the 
middle  of  last  century,  it  is  also  largely  rhetorical.  The  printers  had 
already,  during  the  course  of  six  editions,  occasionally  used  their 


INTRODUCTION 


icxvi 

discretion  and  dropt  out  a misleading  comma.  I have  ventured  to 
carry  the  process  just  a little  further,  and  to  strike  out  a few  rhetorical 
commas  that  seemed  to  interfere  with  the  easy  understanding  of  the 
text.  The  Index  has  been  prepared  by  Miss  M.  A.  Ellis. 

I must  express  my  thanks  to  the  proprietors  of  the  Fortnightly 
Review  for  allowing  me  to  make  use  of  Mill’s  posthumous  articles; 
and  to  Mr.  Hugh  Elliot  for  permitting  me  to  refer  to  the  Letters 
of  Mill  which  he  is  now  editing. 


Edqbaston, 

September  y 1909, 


W.  J.  ASHLEY. 


PREFACE 

[1848] 


1’he  appearance  of  a treatise  like  the  present,  on  a subject  on  which 
so  many  works  of  merit  already  exist,  may  be  thought  to  require 
some  explanation. 

It  might,  perhaps,  be  sufficient  to  say,  that  no  existing  treatise 
on  Pohtical  Economy  contains  the  latest  improvements  which  have 
been  made  in  the  theory  of  the  subject.  Many  new  ideas,  and  new 
apphcations  of  ideas,  have  been  elicited  by  the  discussions  of  the 
last  few  years,  especially  those  on  Currency,  on  Foreign  Trade,  and 
on  the  important  topics  connected  more  or  less  intimately  with 
Colonization  : and  there  seems  reason  that  the  field  of  Pohtical 
Economy  should  be  re-surveyed  in  its  whole  extent,  if  only  for  the 
purpose  of  incorporating  the  results  of  these  speculations,  and 
bringing  them  into  harmony  with  the  principles  previously  laid 
down  by  the  best  thinkers  on  the  subject. 

To  supply,  however,  these  deficiencies  in  former  treatises  bearing 
a similar  title,  is  not  the  sole,  or  even  the  principal  object  which  the 
author  has  in  view.  The  design  of  the  book  is  different  from  that 
of  any  treatise  on  Pohtical  Economy  which  has  been  produced  in 
England  since  the  work  of  Adam  Smith. 

The  most  characteristic  quahty  of  that  work,  and  the  one  in 
which  it  most  differs  from  some  others  which  have  equalled  or  even 
surpassed  it  as  mere  expositions  of  the  general  principles  of  the 
subject,  is  that  it  invariably  associates  the  principles  with  their 
apphcations.  This  of  itself  imphes  a much  wider  range  of  ideas 
and  of  topics  than  are  included  in  Pohtical  Economy,  considered 
as  a branch  of  abstract  speculation.  For  practical  purposes, 
Pohtical  Economy  is  inseparably  intertwined  with  many  other 
branches  of  Social  Philosophy.  Except  on  matters  of  mere  detail, 
there  are  perhaps  no  practical  questions,  even  among  those  which 


xxviii 


PREFACE 


approach  nearest  to  the  character  of  purely  economical  questions, 
which  admit  of  being  decided  on  economical  premises  alone.  And 
it  is  because  Adam  Smith  never  loses  sight  of  this  truth  ; because, 
in  his  applications  of  Political  Economy,  he  perpetually  appeals  to 
other  and  often  far  larger  considerations  than  pure  Pohtical  Economy 
affords — that  he  gives  that  well-grounded  feeling  of  command  over 
the  principles  of  the  subject  for  purposes  of  practice,  owing  to  which 
the  Wealth  of  Nations ^ alone  among  treatises  on  Political  Economy 
has  not  only  been  popular  with  general  readers,  but  has  impressed 
itself  strongly  on  the  minds  of  men  of  the  world  and  of  legislators. 

It  appears  to  the  present  writer  that  a work  similar  in  its  object 
and  general  conception  to  that  of  Adam  Smith,  but  adapted  to  the 
more  extended  knowledge  and  improved  ideas  of  the  present  age, 
is  the  kind  of  contribution  which  Pohtical  Economy  at  present 
requires.  The  Wealth  of  Nations  is  in  many  parts  obsolete, 
and  in  all,  imperfect.  Political  Economy,  properly  so  called,  has 
grown  up  almost  from  infancy  since  the  time  of  Adam  Smith  ; and 
the  philosophy  of  society,  from  which  practically  that  eminent 
thinker  never  separated  his  more  pecuhar  theme,  though  still  in  a 
very  early  stage  of  its  progress,  has  advanced  many  steps  beyond 
the  point  at  which  he  left  it.  No  attempt,  however,  has  yet  been 
liiade  to  combine  his  practical  mode  of  treating  his  subject  with 
ihe  increased  knowledge  since  acquired  of  its  theory,  or  to  exhibit 
the  economical  phenomena  of  society  in  the  relation  in  which  they 
stand  to  the  best  social  ideas  of  the  present  time,  as  he  did,  with 
such  admirable  success,  in  reference  to  the  philosophy  of  his  century. 

Such  is  the  idea  which  the  writer  of  the  present  work  has  kept 
before  him.  To  succeed  even  partially  in  realizing  it,  would  be  a 
sufficiently  useful  achievement,  to  induce  him  to  incur  willingly  all 
the  chances  of  failure.  It  is  requisite,  however,  to  add,  that  although 
his  object  is  practical,  and,  as  far  as  the  nature  of  the  subject  admits, 
popular,  he  has  not  attempted  to  purchase  either  of  those  advantages 
by  the  sacrifice  of  strict  scientific  reasoning.  Though  he  desires 
that  his  treatise  should  be  more  than  a mere  exposition  of  the 
abstract  doctrines  of  Pohtical  Economy,  he  is  also  desirous  that 
such  an  exposition  should  be  found  in  it.^ 

' [The  original  Preface  remained  unchanged  throughout  the  subsequent 
editions.  But  each  of  the  later  editions  during  the  author’s  lifetime  contained 
an  addition  peculiar  to  itself,  either  a new  paragraph  subjoined  to  tho 
original  preface  or  a further  preface.  These  are  reprinted  in  the  present 
edition.] 


PREFACE 


[Addition  to  the  Preface  in  the  Second  Edition,  1849] 

The  additions  and  alterations  in  the  present  edition  are  generally 
of  little  moment ; but  the  increased  importance  which  the  Socialist 
controversy  has  assumed  since  this  work  was  written  has  made  it 
desirable  to  enlarge  the  chapter  which  treats  of  it ; the  more  so,  as 
the  objections  therein  stated  to  the  specific  schemes  propounded 
by  some  Socialists  have  been  erroneously  understood  as  a general 
condemnation  of  all  that  is  commonly  included  under  that  name. 
A full  appreciation  of  Socialism,  and  of  the  questions  which  it  raises, 
can  only  be  advantageously  attempted  in  a separate  work. 


Preface  to  the  Third  Edition  [July,  1852] 

The  present  edition  has  been  revised  throughout,  and  several 
chapters  either  materially  added  to  or  entirely  re-cast.  Among 
these  may  be  mentioned  that  on  the  “ Means  of  abolishing  Cottier 
Tenantry,”  the  suggestions  contained  in  which  had  reference 
exclusively  to  Ireland,  and  to  Ireland  in  a condition  which  has  been 
much  modified  by  subsequent  events.  An  addition  has  been  made 
to  the  theory  of  International  Values  laid  down  in  the  eighteenth 
chapter  of  the  Third  Book. 

The  chapter  on  Property  has  been  almost  entirely  re-written. 
I was  far  from  intending  that  the  statement  which  it  contained  of  the 
objections  to  the  best  known  Socialist  schemes  should  be  under- 
stood as  a condemnation  of  Sociahsm,  regarded  as  an  ultimate 
result  of  human  progress.  The  only  objection  to  which  any  great 
importance  will  be  found  to  be  attached  in  the  present  edition  is 
the  unprepared  state  of  mankind  in  general,  and  of  the  labouring 
classes  in  particular  ; their  extreme  unfitness  at  present  for  any 
order  of  things,  which  would  make  any  considerable  demand  on 
either  their  intellect  or  their  virtue.  It  appears  to  me  that  the 
great  end  of  social  improvement  should  be  to  fit  mankind  by  culti- 
vation for  a state  of  society  combining  the  greatest  personal  freedom 
with  that  just  distribution  of  the  fruits  of  labour  which  the  present 
laws  of  property  do  not  profess  to  aim  at.  Whether,  when  this 
state  of  mental  and  moral  cultivation  shall  be  attained,  individual 
property  in  some  form  (though  a form  very  remote  from  the  present) 
or  community  of  ownership  in  the  instruments  of  production  and 


XXX 


PREFACE 


a regulated  division  of  the  produce  will  afford  the  circumstances 
most  favourable  to  happiness,  and  best  calculated  to  bring  human 
nature  to  its  greatest  perfection,  is  a question  which  must  be  left, 
as  it  safely  may,  to  the  people  of  that  time  to  decide.  Those  of  the 
present  are  not  competent  to  decide  it. 

The  chapter  on  the  “ Futurity  of  the  Labouring  Classes  ” has 
been  enriched  with  the  results  of  the  experience  afforded,  since  this 
work  was  first  published,  by  the  co-operative  associations  in  France. 
That  important  experience  shows  that  the  time  is  ripe  for  a larger 
and  more  rapid  extension  of  association  among  labourers  than 
could  have  been  successfully  attempted  before  the  calumniated 
democratic  movements  in  Europe,  which,  though  for  the  present 
put  down  by  the  pressure  of  brute  force,  have  scattered  widely  the 
seeds  of  future  improvement.  I have  endeavoured  to  designate 
more  clearly  the  tendency  of  the  social  transformation,  of  which 
these  associations  are  the  initial  step  ; and  at  the  same  time  to 
disconnect  the  co-operative  cause  from  the  exaggerated  or  altogether 
mistaken  declamations  against  competition,  so  largely  indulged  in 
by  its  supporters. 

[Addition  to  the  Preface  in  the  Fourth  Edition,  1857] 

The  present  edition  (the  fourth)  has  been  revised  throughout, 
and  some  additional  explanations  inserted  where  they  appeared  to 
be  necessary.  The  chapters  to  which  most  has  been  added  are 
those  on  the  Influence  of  Credit  on  Prices,  and  on  the  Eegulation 
of  a Convertible  Paper  Currency. 

[Addition  to  the  Preface  in  the  Fifth  Edition,  1862] 

The  present  fifth  edition  has  been  revised  throughout,  and  the 
facts,  on  several  subjects,  brought  down  to  a later  date  than  in  the 
former  editions.  Additional  arguments  and  illustrations  have  been 
inserted  where  they  seemed  necessary,  but  not  in  general  at  any 
considerable  length. 

[Addition  to  the  Preface  in  the  Sixth  Edition,  1865] 

The  present,  like  all  previous  editions,  has  been  revised  through- 
out, and  additional  explanations,  or  answers  to  new  objections, 
have  been  inserted  where  they  seemed  necessary ; but  not,  ui 


PREFACE 


xxxi 

general,  to  any  considerable  length.  The  chapter  in  which  the 
greatest  addition  has  been  made  is  that  on  the  Rate  of  Interest ; 
and  for  most  of  the  new  matter  there  introduced,  as  well  as  for 
many  minor  improvements,  I am  indebted  to  the  suggestions  and 
criticisms  of  my  friend  Professor  Cairnes,  one  of  the  most  scientific 
of  living  political  economists. 

[Addition  to  the  Preface  in  “ The  People’s  Edition,”  1865] 

The  present  edition  is  an  exact  transcript  from  the  sixth,  except 
that  all  extracts  and  most  phrases  in  foreign  languages  have  been 
translated  into  English,  and  a very  small  number  of  quotations,  or 
parts  of  quotations,  which  appeared  superfluous,  have  been  struck 
out.^  A reprint  of  an  old  controversy  with  the  Quarterly  Review 
on  the  condition  of  landed  property  in  France,  which  had  been 
subjoined  as  an  Appendix,  has  been  dispensed  with.^ 


Preface  to  the  Seventh  Edition  [1871]  ♦ 

The  present  edition,  with  the  exception  of  a few  verbal  correc- 
tions,3  corresponds  exactly  with  the  last  Library  Edition  and  with 
the  People’s  Edition.  Since  the  publication  of  these,  there  has  been 
some  instructive  discussion  on  the  theory  of  Demand  and  Supply, 
and  on  the  influence  of  Strikes  and  Trades  Unions  on  wages,  by 
which  additional  light  has  been  thrown  on  these  subjects  ; but  the 
results,  in  the  author’s  opinion,  are  not  yet  ripe  for  incorporation 
in  a general  treatise  on  Pohtical  Economy.f  For  an  analogous 
reason,  all  notice  of  the  alteration  made  in  the  Land  Laws  of  Ireland 
by  the  recent  Act,  is  deferred  until  experience  shall  have  had  time  to 
pronounce  on  the  operation  of  that  well-meant  attempt  to  deal  with 
the  greatest  practical  evil  in  the  economic  institutions  of  that  country. 

’ [The  English  translations  in  the  People’s  edition  have  similarly  been 
substituted  for  the  originals  in  this,  Students’,  edition,  but  none  of  the  quotations 
have  been  omitted.] 

2 [This  example  has  been  followed  in  the  present,  Students’,  edition.] 

* The  last  in  the  author’s  lifetime;  [and  to  the  subsequent  eighth  and 
ninth  Library  editions]. 

* [See,  however,  pp.  934,  936.] 

t The  present  state  of  the  discussion  may  be  learnt  from  a review  (by 
the  author)  of  Mr.  Thornton’s  work  “ On  Labour,”  in  the  Fortnightly 
Review  of  May  and  June,  1869,  and  from  Mr.  Thornton’s  reply  to  that 
review  in  the  second  edition  of  his  very  instructive  book.  [See  Appendix  O. 
The  Wages  Fund  Doctrine.} 


CONTENTS 


PAGE 

Introduction  v 


BOOK  I 

PRODUCTION 

Chapter  I.  Of  the  Requisites  of  Production 

§ 1.  Requisites  of  production,  what 22 

2.  The  function  of  labour  defined 23 

3.  Does  nature  contribute  more  to  the  efficacy  of  labour  in 

some  occupations  than  in  others  ? 25 

4.  Some  natural  agents  limited,  others  practically  unlimited, 

in  quantity 26 

Chapter  II.  Of  Labour  as  an  Agent  of  Production 

§ 1.  Labour  employed  either  directly  about  the  thing  pro- 
duced, or  in  operations  preparatory  to  its  production  . 29 

2.  Labour  employed  in  producing  subsistence  for  subsequent 

labour 31 

3.  — in  producing  materials 33 

4.  — or  implements 34 

5.  — in  the  protection  of  labour 36 

6.  — in  the  transport  and  distribution  of  the  produce  . . 37 

7.  Labour  which  relates  to  human  beings 39 

8.  Labour  of  invention  and  discovery  40 

9.  Labour  agricultural,  manufacturing,  and  commercial  . 42 


xxxiv 


CONTENTS 


PAGE 

Chapter  III.  Of  Unproductive  Labour 

§ 1.  Labour  does  not  produce  objects,  but  utilities  ...  44 

2.  — which  are  of  three  kinds 45 

3.  Productive  labour  is  that  which  produces  utilities  fixed 

and  embodied  in  material  objects 47 

4.  All  other  labour,  however  useful,  is  classed  as  unpro- 

ductive   49 

5.  Productive  and  Unproductive  Consumption  ....  51 

6.  Labour  for  the  supply  of  Productive  Consumption,  and 

labour  for  the  supply  of  Unproductive  Consumption.  52 

Chapter  IV.  Of  Capital 

§ 1.  Capital  is  wealth  appropriated  to  reproductive  employ- 
ment   54 

2.  More  capital  devoted  to  production  than  actually  em- 

ployed in  it 56 

3.  Examination  of  some  cases  illustrative  of  the  idea  of 

Capital 59 

Chapter  V.  Fundamental  Propositions  respecting  Capital 

§ 1.  Industry  is  limited  by  Capital 63 

2.  — but  does  not  always  come  up  to  that  hmit.  ...  65 

3.  Increase  of  capital  gives  increased  employment  to  labour, 

without  assignable  bounds 66 

4.  Capital  is  the*  result  of  saving 68 

5.  All  capital  is  consumed 70 

6.  Capital  is  kept  up,  not  by  preservation,  but  by  per- 

petual reproduction 73 

7.  Why  countries  recover  rapidly  from  a state  of  devastation  74 

8.  Efiects  of  defraying  government  expenditure  by  loans  . 76 

9.  Demand  for  commodities  is  not  demand  for  labour  . . 79 

10.  Fallacy  respecting  Taxation 88 

Chapter  VI.  Of  Circulating  and  Fixed  Capital 

§ 1.  Fixed  and  Circulating  Capital,  what 91 

2.  Increase  of  fixed  capital  when  at  the  expense  of  circu- 

lating, might  be  detrimental  to  the  labourers  ...  93 

3.  — but  this  seldom  if  ever  occurs 97 


CONTENTS 


XXXV 


PXGB 

Chapter  VII.  On  what  depends  the  degree  of  Productiveness 
of  Productive  Agents 

§ 1.  Land,  labour,  and  capital,  are  of  different  productiveness 

at  different  times  and  places 101 

2.  Causes  of  superior  productiveness.  Natural  advan- 

tages   102 

3.  — greater  energy  of  labour 104 

4.  — superior  skill  and  knowledge 107 

5.  — superiority  of  intelligence  and  trustworthiness  in  the 

community  generally 108 

6.  — superior  security 113 

Chapter  VIII.  Of  Co-operation,  or  the  Combination  of  Labour 

§ 1.  Combination  of  Labour  a principal  cause  of  superior 

productiveness 116 

2.  Effects  of  separation  of  employments  analyzed  . . . 118 

3.  Combination  of  labour  between  town  and  country  . . 120 

4.  The  higher  degrees  of  the  division  of  labour  . . . .122 

6.  Analysis  of  its  advantages 124 

6.  Limitations  of  the  division  of  labour  . . . . . 130 

Chapter  IX.  Of  Production  on  a Large,  and  Production  on  a 
Small  Scale 

§ 1.  Advantages  of  the  large  system  of  production  in  manu- 
factures   132 

2.  Advantages  and  disadvantages  of  the  joint-stock 

principle 137 

3.  Conditions  necessary  for  the  large  system  of  produc- 

tion   i . . . . 142 

4.  Large  and  small  farming  compared 144 

Chapter  X.  Of  the  Law  of  the  Increase  of  Labour 

§ 1.  The  law  of  the  increase  of  production  depends  on  those 

of  three  elements,  Labour,  Capital,  and  Land  . . . 155 

2.  The  Law  of  Population 156 

3.  By  what  checks  the  increase  of  population  is  practically 

limited  . 158 


xxxvi 


CONTENTS 


/ PAGH 

Chapter  XI.  Of  the  Law  of  the  Increase  of  Capital 

§ 1.  Means  and  motives  to  saving,  on  what  dependent  . . 163 

2.  Causes  of  diversity  in  the  efiectiva.  strength  of  the  desire 

of  accumula-tipn 165 

3.  Examples  of  deficiency  in  the  strength  of  this  desire  . 167 

4.  Exemplification  of  its  excess 173 


Land 

§ 1.  The  limited  quantity  and  limited  productiveness  of  land, 

the  real  limits  to  production 176 

2.  The  law  of  production  from  the  soil,  a law  of  diminishing 

return  in  proportion  to  the  increased  application  of 
labour  and  capital 176 

3.  Antagonist  principle  to  the  law  of  diminishing  return  ; 

the  progress  of  improvements  in  production  . . , 181 

\/  Chapter  XIII.  Consequences  of  the  foregoing  Laws 

§ 1.  Remedies  when  the  limit  to  production  is  the  weakness 

of  the  principle  of  accumulation 189 

2.  Necessity  of  restraining  population  not  confined  to  a state 

of  inequality  of  property 190 

3.  — nor  superseded  by  free  trade  in  food 193 

4.  — nor  in  general  by  emigration  « 197 


BOOK  II 
DISTRIBUTION 
Chapter  I.  Of  Property 

1.  Introductory  remarks 199 

2.  Statement  of  the  question 201 

3.  Examination  of  Communism 204 

4.  — of  St.  Simonism  and  Fourierism  211 


CONTENTS 


xzxvli 


PAQB 

Chapter  II.  The  same  subject  continued 

§ 1.  The  institution  of  property  implies  freedom  of  acquisition 

by  contract 218 

2.  — the  validity  of  prescription 220 

3.  — the  power  of  bequest,  but  not  the  right  of  inheritance. 

Question  of  inheritance  examined 221 

4.  Should  the  right  of  bequest  be  limited,  and  how  ? . . 226 

5.  Grounds  of  property  in  land,  different  from  those  of  pro- 

perty in  moveables 229 

6.  — only  valid  on  certain  conditions,  which  are  not  always 

realized.  The  limitations  considered 231 

7.  Rights  of  property  in  abuses 235 

Chapter  III.  Of  the  Classes  among  whom  the  Produce  is 
distributed 

§ 1.  The  produce  sometimes  shared  among  three  classes  . . 238 

2,  — sometimes  belongs  undividedly  to  one  .....  238 

3.  — sometimes  divided  between  two  . 240 

Chapter  IV.  Of  Com'petition  and  Custom 

§ 1.  Competition  not  the  sole  regulator  of  the  division  of  the 

produce 242 

2.  Influence  of  custom  on  rents,  and  on  the  tenure  of  land  . 243 

3.  Influence  of  custom  on  prices  . 245 

Chapter  V.  Of  Slavery 

§ 1.  Slavery  considered  in  relation  to  the  slaves  . , . . 249 

2.  — in  relation  to  production 250 

3.  Emancipation  considered  in  relation  to  the  interest  of  the 

slave-owners 253 

Chapter  VI.  Of  Peasant  Proprietors 

§ 1.  Difference  between  English  and  Continental  opinions 

respecting  peasant  properties 256 

2.  E\idence  respecting  peasant  properties  in  Switzerland  . 258 

3.  — in  Norway 263 

4.  — in  Germany 266 


xxxviii 


CONTENTS 


PXOl 

§ 5.  Evidence  respecting  peasant  properties  in  Belgium  . 271 

6.  — in  the  Channel  Islands 276 

7.  —in  France 277 

Chapter  VII.  Continuation  of  the  same  subject 

§ 1.  Influence  of  peasant  properties  in  stimulating  industry  . 283 

2.  — in  training  intelligence 285 

3.  — in  promoting  forethought  and  self-control  ....  286 

4.  Their  effect  on  population 287 

5.  — on  the  subdivision  of  land  296 

Chapter  VIII.  Of  Metayers 

§ 1.  Nature  of  the  metayer  system,  and  its  varieties  . . . 302 

2.  Its  advantages  and  inconveniences 304 

3.  Evidence  concerning  its  effects  in  different  countries  . 306 

4.  Is  its  abolition  desirable  ? 315 

Chapter  IX.  Of  Cottiers 

§ 1.  Nature  and  operation  of  cottier  tenure 318 

2.  In  an  overpeopled  country  its  necessary  consequence  is 

nominal  rents 321 

3.  — which  are  inconsistent  with  industry,  frugahty,  or 

restraint  on  population 323 

4.  Ryot  tenancy  of  India  324 


Chapter  X.  Means  of  abolishing  Cottier  Tenancy 

§ 1.  Irish  cottiers  should  be  converted  into  peasant  proprietors  329 
2.  Present  state  of  this  question 337 

Chapter  XI.  Of  Wages 

§ 1.  Wages  depend  on  the  demand  and  supply  of  labour— in 

other  words,  on  population  and  capital 343 

2.  Examination  of  some  popular  opinions  respecting  wages  344 


CONTENTS 


zxxiz 


^ PZGB 

§ 3,  Certain  rare  circumstances  excepted;  high  wages  imply 

restraints  on  population . . 349 

^4.  — which  are  in  some  cases  legal 353 

5.  — in  others  the  effect  of  particular  customs  ....  355 

6.  Due  restriction  of  population  the  only  safeguard  of  a 

labouring  class 357 

Chapter  XII.  Of  Pofular  Remedies  for  Low  Wages 

§ 1.  A legal  or  customary  minimum  of  wages,  with  a guarantee 

of  employment 361 

2.  — would  require  as  a condition,  legal  measures  for  re- 

pression of  population 363 

3.  Allowances  in  aid  of  wages  .........  366 

4.  The  Allotment  System , . . . 368 

Chapter  XIII.  Remedies  for  Low  W ages  further  considered 

§ 1.  Pernicious  direction  of  public  opinion  on  the  subject  of 

population 373 

2.  Grounds  for  expecting  improvement 376 

3.  Twofold  means  of  elevating  the  habits  of  the  labouring 

people  : by  education 380 

4.  — and  by  large  measures  of  immediate  relief,  through 

foreign  and  home  colonization .381 

TV  Chapter  XIV.  Of  the  Differences  of  Wages  in  different 
Em'ployments 

§ 1.  Differences  of  wages  arising  from  different  degrees  of 

attractiveness  in  different  employments 385 

2.  Differences  arising  from  natural  monopolies  ....  390 

3.  Effect  on  wages  of  a class  of  subsidized  competitors  . . 394 

4.  — of  the  competition  of  persons  with  independent  means 

of  support 397 

5.  Wages  of  women,  why  lower  than  those  of  men  . . . 400 

6.  Differences  of  wages  arising  from  restrictive  laws,  and 

from  combinations 401 

7.  Cases  in  which  wages  are  fixed  by  custom 403 

Chapter  XV.  Of  Profits 

§ 1.  Profits  resolvable  into  three  parts ; interest,  insurance, 

and  wages  of  superintendence 405 


zl 


CONTENTS 


PAGE 

§ 3,  The  minimum  of  profits  ; and  the  variations  to  which  it  is 

liable 407 

3.  Differences  of  profits  arising  from  the  nature  oHhe  parti- 

cular employment 409 

4.  General  tendency  of  profits  to  an  equality  . . . . 410 

5.  Profits  do  not  depend  on  prices,  nor  on  purchase  and  sale  416 

6.  The  advances  of  the  capitalist  consist  ultimately  in  wages 

of  labour 417 

7.  The  rate  of  profit  depends  on  the  Cost  of  Labour  . . 418 

\/^HAPTBR  XVI.  (Of  Rent) 

§ 1.  Rent  the  effect  of  a natural  monopoly 422 

2.  No  land  can  pay  rent  except  land  of  such  quality  or  situ- 

ation as  exists  in  less  quantity  than  the  demand  . . 423 

3.  The  rent  of  land  consists  of  the  excess  of  its  return  above 

the  return  to  the  worst  land  in  cultivation  ....  425 

4.  — or  to  the  capital  employed  in  the  least  advantageous 

circumstances 426 

5.  Is  payment  for  capital  sunk  in  the  soil,  rent,  or  profit  ? , 429 

6.  Rent  does  not  enter  into  the  cost  of  production  of  agri- 

cultural produce  433 


BOOK  III 
EXCHANGE 
Chapter  I.  Of  Value 

§ 1.  Preliminary  remarks 435 

2.  Definitions  of  Value  in  Use,  Exchange  Value,  and  Price  436 

3.  What  is  meant  by  general  purchasing  power  . . . .437 

4.  Value  a relative  term.  A general  rise  or  fall  of  values  a 

contradiction  439 

5.  The  Laws  of  Value,  how  modified  in  their  application  to 

retail  transactions 440 


CONTENTS 


zli 


PAGB 

Chapteiv  II.  {pf  Demand  and  Supply,  in  their  relation  tOy) 
Value 

§ 1.  Two  conditions  of  Value  : Utility,  and  Difficulty  of  At- 
tainment   442 

2.  Three  kinds  of  Difficulty  of  Attainment 444 

3.  Commodities  which  are  absolutely  limited  in  quantity.  445 

4.  Law  of  their  value,  the  Equation  of  Demand  and  Supply  446 

5.  Miscellaneous  cases  falling  under  this  law  ....  448 

Chapter  III,  Cost  of  Production,  in  its  relation  to  Valued 

5 1.  Commodities  which  are  susceptible  of  indefinite  multi- 
plication without  increase  of  cost.  Law  of  their  Value, 

Cost  of  Production 451 

2.  — operating  through  potential,  but  not  actual  alterations 
of  supply  d 

Chapter  IV.  (jJltimate  Analysis  of  Cost  of  Productiony 

§ 1.  Principal  element  in  Cost  of  Production — Quantity  of 

Labour 457 

2.  Wages  not  an  element  in  Cost  of  Production  . . . 459 

3.  — except  in  so  far  as  they  vary  from  employment  to 

employment 460 

4.  Profits  an  element  in  Cost  of  Production,  in  so  far  as  they 

vary  from  employment  to  employment 461 

5.  — or  are  spread  over  unequal  lengths  of  time  . . . 463 

6.  Occasional  elements  in  Cost  of  Production : taxes,  and 

scarcity  value  of  materials 466 

Chapter  V.  Of  Rent,  in  its  relation  to  Value 

§ 1.  Commodities  which  are  susceptible  of  indefinite  multipli- 
cation, but  not  without  increase  of  cost.  Law  of  their 
Value,  Cost  of  Production  in  the  most  unfavourable 
existing  circumstances 469 

2.  Such  commodities,  when  produced  in  circumstances  more 

favourable,  yield  a rent  equal  to  the  difference  of  cost.  471 

3.  Rent  of  mines  and  fisheries,  and  ground-rent  of  build- 

ings   473 

4.  Cases  of  extra  profit  analogous  to  rent 476 


CONTENTS 


xJii 

P4GE 

Chapter  VI.  Summary  of  the  Theory  of  Value 


§ 1,  The  theory  of  Value  recapitulated  in  a series  of  proposi- 
tions   478 

2.  How  modified  by  the  case  of  labourers  cultivating  for 

subsistence 480 

3.  — by  the  case  of  slave  labour 482 

Chapter  VII.  Of  Money 

§ 1.  Purposes  of  a Circulating  Medium 483 

2.  Gold  and  Silver,  why  fitted  for  those  purposes  . . . 484 

3.  Money  a mere  contrivance  for  facilitating  exchanges, 

which  does  not  affect  the  laws  of  Value 487 


Chapter  VIII.  Of  the  Value  of  Money ^ as  dependent  on 
Demand  and  Supply 


§ 1.  Value  of  Money,  an  ambiguous  expression  ....  489 

2.  The  value  of  money  depends,  cmteris  paribus,  on  its 

quantity  490 

3.  — together  with  the  rapidity  of  circulation  ....  493 

4.  Explanations  and  limitations  of  this  principle  . . . 495 


Chapter  IX.  Of  the  Value  of  Money ^ as  dependent  on  Cost 
of  Production 

§ 1.  The  value  of  money,  in  a state  of  freedom,  conforms  to  the 


value  of  the  bullion  contained  in  it 499 

2.  — which  is  determined  by  the  cost  of  production  . . 501 

3.  This  law,  how  related  to  the  principle  laid  down  in  the 

preceding  chapter 503 

Chapter  X.  Of  a Double  Standard^  and  Subsidiary  Coins 

§ 1.  Objections  to  a double  standard . 607 

2.  The  use  of  the  two  metals  as  money,  how  obtained  with- 
out making  both  of  them  legal  tender 508 


^ Chapter  XI.  Of  Credit^  as  a Substitute  for  Money 

§ 1.  Credit  not  a creation  but  a transfer  of  the  means  of 

production  511 

J 


CONTENTS 


xliil 


PAOB 

§ 2.  In  what  manner  it  assists  production 512 

3.  Function  of  credit  in  economizing  the  use  of  money  . 514 

4.  Bills  of  exchange 515 

5.  Promissory  notes 519 

6.  Deposits  and  cheques 520 


O ^ Chapter  XII.  Influence  of  Credit  on  Prices 


§ 1.  The  influence  of  bank  notes,  bills,  and  cheques,  on  price, 

a part  of  the  influence  of  Credit 523 

2.  Credit  a purchasing  power  similar  to  money  ....  524 

3.  E fleets  of  great  extensions  and  contractions  of  credit. 

Phenomena  of  a commercial  crisis  analyzed  . . . 525 

4.  Bills  a more  powerful  instrument  for  acting  on  prices 

than  book  credits,  and  bank  notes  than  bills  . . . 529 

5.  — the  distinction  of  little  practical  importance  . . . 532 

6.  Cheques  an  instrument  for  acting  on  prices,  equally 

powerful  with  bank  notes 536 

7.  Are  bank  notes  money  ? 538 

8.  No  generic  distinction  between  bank  notes  and  other 

forms  of  credit 540 


^ Chapter  XIII.  Of  an  Inconvertible  Paper  Currency 

§ 1.  The  value  of  an  inconvertible  paper,  dependmgonm 
quantity,  is  a matter  of  arbitrary  regulation  . 

2.  If  regulated  by  the  price  of  bullion,  an  inconvertible 

currency  might  be  safe,  but  not  expedient  .... 

3.  Examination  of  the  doctrine  that  an  inconvertible  cur- 

rency is  safe  if  representing  actual  property 

4.  Examination  of  the  doctrine  that  an  increase  of  tb« 

currency  promotes  industry 

5.  Depreciation  of  currency  a tax  on  the  community,  and 

a fraud  on  creditors 551 

6.  f^amination  of  aome^pleas.for  committing  this  fraud 

‘‘  ' Chapter  XIV.  Of  Excess  of  Supply 


542 


544 


546 


550 


552 


§ 1.  Can  there  be  an  oversupply  of  commodities  generally  ? . 
2.  The  supply  of  commodities  in  general  cannot  exceed  the 
power  of  purchase 


556 


557 


CONTENTS 


xliv 

PAGl 

§ 3.  The  supply  of  commodities  in  general  never  does  exceed 

the  inclination  to  consume 558 

4.  Origin  and  explanation  of  the  notion  of  general  oversupply  560 

'Chapter  XV.  Of  a Measure  of  Value 

§ 1.  A measure  of  Exchange  Value,  in  what  sense  possible  . 564 

2.  A measure  of  Cost  of  Production 566 

Chapter  XVI.  Of  some  Peculiar  Cases  of  Value 

§ 1.  Values  of  commodities  which  have  a joint  cost  of  pro- 
duction   j 569 

2.  Values  of  the  different  kinds  of  agricultural  produce  . 571 

J Chapter  XVII.  Of  International  Trade 

§ 1.  Cost  of  production  not  the  regulator  of  international 

values 574 

2.  Interchange  of  commodities  between  distant  places, 

determined  by  differences  not  in  their  absolute,  but  in 
their  comparative  cost  of  production 576 

3.  The  direct  benefits  of  commerce  consist  in  increased 

efficiency  of  the  productive  powers  of  the  world  . . 578 

4.  — not  in  a vent  for  exports,  nor  in  the  gains  of  merchants  578 

5.  Indirect  benefits  of  commerce,  economical  and  moral ; 

still  greater  than  the  direct 581 

\jhapter  XVIII.  Of  International  Values 

§ 1.  The  values  of  imported  commodities  depend  on  the  terms 

of  international  interchange 583 

2.  — which  depend  on  the  Equation  of  International  De- 

mand   584 

3.  Influence  of  cost  of  carriage  on  international  values  . . 588 

4.  The  law  of  values  which  holds  between  two  countries  and 

two  commodities,  holds  of  any  greater  number  . . 590 

5.  Effect  of  improvements  in  production  on  international 

values 593 

6.  The  preceding  theory  not  complete 596 


COl^TENtS  xh 

PAOB 

§ 7.  International  vu/ues  depend  not  solely  on  the  quantities 
demanded,  but  also  on  the  means  of  production 
available  in  each  country  for  the  supply  of  foreign 
markets 597 

8.  The  practical  result  little  affected  by  this  additional 

element 601 

9.  The  cost  to  a country  of  its  imports,  on  what  circum- 

stances dependent 604 

4 jA  Chapter  XIX.  Of  Money,  considered  as  an  Imported 
^ Commodity 

§ 1.  Money  imported  in  two  modes  ; as  a commodity,  and  as 

a medium  of  exchange 607 

2.  As  a commodity,  it  obeys  the  same  laws  of  value  as  other 

imported  commodities 608 

3.  Its  value  does  not  depend  exclusively  on  its  cost  of  pro- 

duction at  the  mines  . . 610 

Q Chapter  XX.  Of  the  Foreign  Exchanges 

§ 1.  Purposes  for  which  money  passes  from  country  to  C50untry 

as  a medium  of  exchange 612 

2.  Mode  of  adjusting  international  payments  through  the 

exchanges 612 

3.  Distinction  between  variations  in  the  exchanges  which 

are  self-adjusting,  and  those  which  can  only  be  rectified 
through  prices 617 

[j  Chapter  XXI.  Of  the  Distribution  of  the  Precious  Metals 
through  the  Commercial  World 

§ 1.  The  substitution  of  money  for  barter  makes  no  difference 
in  exports  and  imports,  nor  in  the  law  of  international 
values 619 

2.  The  preceding  theorem  further  illustrated  ....  622 

3.  The  precious  metals,  as  money,  are  of  the  same  value,  and 

distribute  themselves  according  to  the  same  law,  with 
the  precious  metals  as  a commodity 626 

4.  International  payments  of  a non-commercial  char- 

acter   


627 


xlvi 


CONTENTS 


D Chapter  XXII. 


Influence  of  the  Currency  on  the  Exchanges 
and  on  Foreign  Trade 


PAGB 


§ 1.  Variations  in  tlie  exchange  whicli  originate  in  the  currency  629 

2.  Effect  of  a sudden  increase  of  a metallic  currency,  or  of 

the  sudden  creation  of  bank  notes  or  other  substitutes 
for  money 630 

3.  Effect  of  the  increase  of  an  inconvertible  paper  cur- 

rency. Real  and  nominal  exchange  .....  634 


O Chapter  XXIII.  Of  the  Rate  of  Interest 

§ 1.  The  rate  of  interest  depends  on  the  demand  and  supply 

of  loans 637 

2.  Circumstances  which  determine  the  permanent  demand 

and  supply  of  loans 638 

3.  Circumstances  which  determine  the  fluctuations  . . . 641 

4.  The  rate  of  interest,  how  far  and  in  what  sense  connected 

with  the  value  of  money 644 

5.  The  rate  of  interest  determines  the  price  of  land  and  of 

securities 649 


Chapter  XXIV.  Of  the  Regulation  of  a Convertible  Paper 
Currency 

§ 1.  Two  contrary  theories  respecting  the  influence  of  bank 


issues 651 

2.  Examination  of  each 653 

3.  Reasons  for  thinking  that  the  Currency  Act  of  1844  pro- 

duces a part  of  the  beneficial  effect  intended  by  it  . . 656 

4.  — but  produces  mischiefs  more  than  equivalent . . . 662 

5.  Should  the  issue  of  bank  notes  be  confined  to  a single 

establishment  ? 674 

6.  Should  the  holders  of  notes  be  protected  in  any  peculiar 

manner  against  failure  of  payment  ? 676 


Chapter  XXV.  Of  the  Competition  of  Different  Countries  in 
the  same  Market 


§ 1.  Causes  which  enable  one  country  to  undersell  another  . 678 

2.  Low  wages  one  of  those  causes 680 

3.  — when  peculiar  to  certain  branches  of  industry  . . 682 

4.  — but  not  when  common  to  all 684 

5.  Some  anomalous  cases  of  trading  communities  examined  685 


CONTENTS 


xlvii 


PAOB 

CHArTER  XXVI.  Of  Distribulion,  as  affected  hy  Exchange 
§ 1.  Exchange  and  Money  make  no  diSerence  in  the  law  of 


wages 688 

2.  — in  the  law  of  rent 690 

3.  — nor  in  the  law  of  profits , 691 


BOOK  IV 

INFLUENCE  OF  THE  PROGRESS  OF  SOCIETY  ON 
PRODUCTION  AND  DISTRIBUTION 

Chapter  I.  General  Characteristics  of  a Progressive  State  of 
Wealth 


§ I.  Introductory  remarks 695 

2.  Tendency  of  the  progress  of  society  towards  increased 
command  over  the  powers  of  nature ; increased  secu- 
rity ; and  increased  capacity  of  co-operation  . . . 696 


Chapter  II.  Influence  of  the  Progress  of  Industry  and 
Population  on  Values  and  Prices 

§ 1.  Tendency  to  a decline  of  the  value  and  cost  of  production 

of  all  commodities 700 

2.  — except  the  products  of  agriculture  and  mining,  which 

have  a tendency  to  rise 701 

3.  — that  tendency  from  time  to  time  counteracted  by 

improvements  in  production 703 

4.  Effect  of  the  progress  of  society  in  moderating  fluctua- 

tions of  value 704 

5.  Examination  of  the  influence  of  speculators,  and  in  par- 

ticular of  corn  dealers . 706 


Chapter  III.  Influence  of  the  Progress  of  Industry  and 
Population,  on  Rents,  Profits,  and  Wages 

§ 1.  First  case;  population  increasing,  capital  stationary  , 710 

2.  Second  case  ; capital  increasing,  population  stationary  . 713 


xlviii 


CONTENTS 


PAGB 


§ 3.  Third  case ; population  and  capital  increasing  equally, 

the  arts  of  production  stationary 714 

4.  Fourth  case ; the  arts  of  production  progressive,  capital 

and  population  stationary 715 

5.  Fifth  case  ; all  the  three  elements  progressive  . . . 720 

Xy/^HAPTER  IV.  Of  the  Tendency  of  Profits  to  a Minimum 

§ 1.  Doctrine  of  Adam  Smith  on  the  competition  of  capital  . 725 

2.  Doctrine  of  Mr.  Wakefield  respecting  the  field  of  employ- 

ment   727 

3.  What  determines  the  nainimum  rate  of  profit  ....  728 

4.  In  opulent  countries,  profits  habitually  near  to  the  mini- 

mum   731 

5.  — prevented  from  reaching  it  by  commercial  revulsions.  733 

6.  — by  improvements  in  production 735 

7.  — by  the  importation  of  cheap  necessaries  and  instru- 

ments   736 

8.  — by  the  emigration  of  capital 738 


\J  Chapter  V.  Consequences  of  the  Tendency  of  Profits  to  a 
Minimum 

§ 1.  Abstraction  of  capital  not  necessarily  a national  loss  . 740 

2.  In  opulent  countries,  the  extension  of  machinery  not 

detrimental  but  beneficial  to  labourers 742 

Chapter  VI.  Of  the  Stationary  State 
§ 1.  Stationary  state  of  wealth  and  population,  dreaded  and 


deprecated  by  writers 746 

2.  — but  not  in  itself  undesirable 748 


Y Chapter  VII.  / On  the  Probable  Futurity  of  the  Labouring 
^ Classes  ) 

§ 1.  The  theory  of  dependence  and  protection  no  longer  appli- 
cable to  the  condition  of  modern  society  ...  .752 

2.  The  future  well-being  of  the  labouring  classes  principally 

dependent  on  their  own  mental  cultivation  . . . .757 

3.  Probable  effects  of  improved  intelligence  in  causing  a 

better  adjustment  of  population — Would  be  promoted 
by  the  social  independence  of  women  . . . .759 


CONTENTS  xlis 

PAGE 

4.  Tendency  of  society  towards  the  disuse  of  the  relation  of 

hiring  and  service 760 

5.  Examples  of  the  association  of  labourers  with  capitalists  764 

6.  — of  the  association  of  labourers  among  themselves  . 772 

7.  Competition  not  pernicious,  but  useful  and  indispensable . 792 


BOOK  V 

ON  THE  INFLUENCE  OF  GOVERNMENT 
f'A-JCA.'/To  in 

Chapter  I.  Of  the  Functions  of  Government  in  General 

1.  Necessary  and  optional  functions  of  government  distin- 

guished   795 

2.  Multifarious  character  of  the  necessary  functions  of 

government 796 

3.  Division  of  the  subject 80(? 

Chapter  II.  Of  the  General  Principles  of  Taxation 

1.  Four  fundamental  rules  of  taxation 802 

2.  Grounds  of  the  principle  of  Equality  of  Taxation  . . 804 

3.  Should  the  same  percentage  be  levied  on  all  amounts  of 

income  ? 806 

4.  Should  the  same  percentage  be  levied  on  perpetual  and 

on  terminable  incomes  ? 810 

6.  The  increase  of  the  rent  of  land  from  natural  causes  a fit 

subject  of  peculiar  taxation 817 

6.  A land  tax,  in  some  cases,  not  taxation,  but  a rent-charge 

in  favour  of  the  public 820 

7.  Taxes  falling  on  capital,  not  necessarily  objectionable  . 821 

Chapter  III.  Of  Direct  Taxes 

1.  Direct  taxes  either  on  income  or  on  expenditure  . . . 823 

2.  Taxes  on  rent 823 

3.  — on  profits 824 

4.  — on  wages 827 


1 


CONTENTS 


PAGE 

§ 5.  An  Income  Tax 829 

6.  A House  Tax  832 

Chapter  IV.  Of  Taxes  on  Commodities 

§ I.  A tax  on  all  commodities  would  fall  on  profits  . . . 837 

2.  Taxes  on  particular  commodities  fall  on  the  consumer  . 838 

3.  Peculiar  efiects  of  taxes  on  necessaries 839 

4.  — how  modified  by  the  tendency  of  profits  to  a minimum  842 

5.  Effects  of  discriminating  duties 847 

6.  Effects  produced  on  international  exchange  by  duties  on 

exports  and  on  imports 850 

Chapter  V.  Of  some  other  Taxes 

§ I.  Taxes  on  contracts , 857 

2.  Taxes  on  communication  .........  860 

3.  Law  Taxes 861 

4.  Modes  of  taxation  for  local  purposes 862 

Chapter  VI.  Comparison  between  Direct  and  Indirect 
Taxation 

§ 1.  Arguments  for  and  against  direct  taxation  ....  864 

2.  What  forms  of  indirect  taxation  most  eligible  . . . 868 

3.  Practical  rules  for  indirect  taxation 870 

Chapter  VII.  Of  a 'National  Debt 

§ 1.  Is  it  desirable  to  defray  extraordinary  pubhc  expenses 

by  loans  ? 873 

2.  Not  desirable  to  redeem  a national  debt  by  a general 

contribution 876 

3.  In  what  cases  desirable  to  maintain  a surplus  revenue  for 

the  redemption  of  debt 878 

Chapter  VIII.  Of  the  Ordinary  Functions  of  Government^ 
considered  as  to  their  Economical  Effects 

§ I.  Effects  of  imperfect  security  of  person  and  property  . 881 

2.  Effects  of  over-taxation 883 


CONTENTS  D 

PAGE 

§ 3.  Effects  of  imperfection  in  the  system  of  the  laws,  and  in 

the  administration  of  justice 884 

Chapter  IX.  The  same  subject  continued 

§ 1.  Laws  of  Inheritance 889 

2.  Law  and  Custom  of  Primogeniture 891 

3.  Entails 894 

4.  Law  of  compulsory  equal  division  of  inheritances  . . 896 

5.  Laws  of  Partnership 897 

6.  Partnership  with  hmited  liability.  Chartered  Companies  899 

7.  Partnerships  in  commandite 903 

8.  Laws  relating  to  Insolvency 909 


Chapter  X.  Of  Interferences  of  Government  grounded  on 
Erroneous  Theories 

§ 1.  Doctrine  of  Protection  to  Native  Industry  . . , .916 

2.  Usury  Laws 926 

3.  Attempts  to  regulate  the  prices  of  commodities  . . .930 

4.  Monopohes 932 

5.  Laws  against  Combination  of  Workmen 933 

6.  Restraints  on  opinion  or  on  its  publication  ....  939 


Chapter  XI.  Of  the  Grounds  and  Limits  of  the  Laisser-faire 
or  Non-Interference  Principle 

§ 1.  Governmental  intervention  distinguished  into  authori- 
tative and  unauthoritative 941 

2.  Objections  to  government  intervention — the  compulsory 

character  of  the  intervention  itself,  or  of  the  levy  of 
funds  to  support  it 942 

3.  — increase  of  the  power  and  influence  of  government  . 944 

4.  — increase  of  the  occupations  and  responsibilities  of 

government 945 

5.  — superior  efficacy  of  private  agency,  owing  to  stronger 

interest  in  the  work 947 

6.  — importance  of  cultivating  habits  of  collective  action 

in  the  people 948 


lii 


CONTENTS 


PAGH 

§ 7.  Laisser-faire  the  general  rule 950 

8.  — but  liable  to  large  exceptions.  Cases  in  which  the 

consumer  is  an  incompetent  judge  of  the  commodity. 
Education 953 

9.  Case  of  persons  exercising  power  over  others.  Protec- 

tion of  children  and  young  persons ; of  the  lower 
animals.  Case  of  women  not  analogous  ....  956 

10.  Case  of  contracts  in  perpetuity 959 

11.  Cases  of  delegated  management  . 960 

12.  Cases  in  which  public  intervention  may  be  necessary  to 

give  effect  to  the  wishes  of  the  persons  interested. 
Examples  : hours  of  labour  ; disposal  of  colonial  lands  963 

13.  Case  of  acts  done  for  the  benefit  of  others  than  the 

persons  concerned.  Poor  Laws 966 

14.  — Colonization  969 

15.  — other  miscellaneous  examples 975 

16.  Government  intervention  may  be  necessary  in  default  of 

private  agency,  in  cases  where  private  agency  would  be 
more  suitable 977 


, BIBLIOGRAPHICAL  APPENDIX 

By  the  Editor 

A.  The  Mercantile  System 981 

B.  The  Definition  of  Wealth  . . 981 

C.  The  Types  of  Society 982 

D.  Productive,  and  Unproductive  Labour 982 

\/  E.  The  Definition  of  Capital 982 

■ F.  Fundamental  Propositions  on  Capital 983 

G.  Division  and  Combination  of  Labour 983 

ft.  Large  and  Small  Farming 983 

I.  Population 984 

J.  The  Law  of  Diminishing  Keturn 984 

K.  Mill’s  earlier  and  later  Writings  on  Socialism  . . . 984 

L.  The  later  History  of  Socialism 990 

M.  Indian  Tenures  991 

/N.  Irish  Agrarian  Development  991 

V 0.  The  Wages  Fund  Doctrine  991 

P.  The  Movement  of  Population 993 

Vi  Q.  Profits 994 


CONTENTS  liii 

PAGB 

Rent 995 

The  Theory  of  Value 995 

The  Value  of  Money  996 

U.  Bimetallism  . . . 996 

V'V.  International  Values 996 

W.  The  Regulation  of  Currency 996 

X.  Prices  in  the  Nineteenth  Century  .......  997 

Y.  Commercial  Cycles 999 

Z.  Rents  in  the  Nineteenth  Century  .....  999 

AA.  Wages  in  the  Nineteenth  Century 999 

BB.  The  Importation  of  Food 1000 

CC.  The  Tendency  of  Profits  to  a Minimum 1001 

DD.  The  subsequent  History  of  Co-operation 1001 

EE.  The  subsequent  History  of  Income  Tax 1001 

FF.  The  Taxation  of  Land 1001 

GG.  The  Incidence  of  Taxation  . . ‘ 1002 

HH.  Company  and  Partnership  Law 1002 

II.  Protection  1002 

JJ.  Usury  Laws 1004 

KK.  The  Factory  Acts  ...........  1004 

LL.  The  Poor  Law 1004 

MM.  The  Province  of  Government  ........  1004 


Indbz  . , 


. , 1005 


PRINCIPLES 

OF 

POLITICAL  ECONOMY 


PEELIMINARY  REMARKS 

In  every  department  of  human  affairs,  Practice  long  precedes 
Science  : systematic  enquiry  into  the  modes  of  action  of  the  powers 
of  nature  is  the  tardy  product  of  a long  course  of  efforts  to  use 
those  powers  for  practical  ends.  The  conception,  accordingly, 
of  Political  Economy  as  a branch  of  science  is  extremely  modern ; 
but  the  subject  with  which  its  enquiries  are  conversant  has  in  all 
ages  necessarily  constituted  one  of  the  chief  practical  interests  of 
mankind,  and,  in  some,  a most  unduly  engrossing  one. 

That  subject  is  Wealth.  Writers  on  Political  Economy  profess 
to  teach,  or  to  investigate,  the  nature  of  Wealth,  and  the  laws  of  its 
production  and  distribution : including,  directly  or  remotely,  the 
operation  of  all  the  causes  by  which  the  condition  of  mankind,  or  of 
any  society  of  human  beings,  in  respect  to  this  universal  object  of 
human  desire,  is  made  prosperous  or  the  reverse.  Not  that  any 
treatise  on  Political  Economy  can  discuss  or  even  enumerate  all 
these  causes ; but  it  undertakes  to  set  forth  as  much  as  is  known 
of  the  laws  and  principles  according  to  which  they  operate. 

Every  one  has  a notion,  sufficiently  correct  for  common  purposes, 
of  what  is  meant  by  wealth.  The  enquiries  which  relate  to  it  are 
in  no  danger  of  being  confounded  with  those  relating  to  any  other 
of  the  great  human  interests.  All  know  that  it  is  one  thing  to  be 
rich,  another  thing  to  be  enlightened,  brave,  or  humane ; that  the 
questions  how  a nation  is  made  wealthy,  and  how  it  is  made  free, 
or  virtuous,  or  eminent  in  literature,  in  the  fine  arts,  in  arms,  or  in 
polity,  are  totally  distinct  enquiries.  Those  things,  indeed,  are  aU 


PRELIMINARY  REMARKS 


indirectly  connected,  and  react  upon  one  another.  A people  has 
sometimes  become  free,  because  it  had  first  grown  wealthy ; or 
wealthy,  because  it  had  first  become  free.  The  creed  and  laws 
of  a people  act  powerfully  upon  their  economical  condition ; and 
this  again,  by  its  influence  on  their  mental  development  and  social 
relations,  reacts  upon  their  creed  and  laws.  But  though  the  sub- 
jects are  in  very  close  contact,  they  are  essentially  different,  and 
have  never  been  supposed  to  be  otherwise. 

It  is  no  part  of  the  design  of  this  treatise  to  aim  at  metaphysical 
nicety  of  definition,  where  the  ideas  suggested  by  a term  are  already 
as  determinate  as  practical  purposes  require.  But,  little  as  it 
might  be  expected  that  any  mischievous  confusion  of  ideas  could  take 
place  on  a subject  so  simple  as  the  question,  what  is  to  be  considered 
as  wealth,  it  is  matter  of  history,  that  such  confusion  of  ideas  has 
existed — that  theorists  and  practical  politicians  have  been  equally 
and  at  one  period  universally,  infected  by  it,  and  that  for  many 
generations  it  gave  a thoroughly  false  direction  to  the  policy 
of  Europe.  I refer  to  the  set  of  doctrines  designated,  since 
the  time  of  Adam  Smith,  by  the  appellation  of  the  Mercantile 
System. 

While  this  system  prevailed,  it  was  assumed,  either  expressly 
or  tacitly,  in  the  whole  policy  of  nations,  that  wealth  consisted 
solely  of  money ; or  of  the  precious  metals,  which,  when  not  already 
in  the  state  of  money,  are  capable  of  being  directly  converted  into 
it.  According  to  the  doctrines  then  prevalent,  whatever  tended 
to  heap  up  money  or  bullion  in  a country  added  to  its  wealth.  What- 
ever sent  the  precious  metals  out  of  a country  impoverished  it. 
If  a country  possessed  no  gold  or  silver  mines,  the  only  industry 
by  which  it  could  be  enriched  was  foreign  trade,  being  the  only  one 
which  could  bring  in  money.  Any  branch  of  trade  which  was 
supposed  to  send  out  more  money  than  it  brought  in,  however 
ample  and  valuable  might  be  the  returns  in  another  shape,  was 
looked  upon  as  a losing  trade.  Exportation  of  goods  was  favoured 
and  encouraged  (even  by  means  extremely  onerous  to  the  real 
resources  of  the  country),  because,  the  exported  goods  being  stipu- 
lated to  be  paid  for  in  money,  it  was  hoped  that  the  returns  would 
actually  be  made  in  gold  and  silver.  Importation  of  anything, 
other  than  the  precious  metals,  wsfes  regarded  as  a loss  to  the  nation 
of  the  whole  price  of  the  things  imported ; unless  they  were  brought 
in  to  be  re-exported  at  a profit,  or  unless,  being  the  materials  or 
instruments  of  some  industry  practised  in  the  country  itself,  they 


PRELIMINARY  REMARKS 


8 


gave  the  power  of  producing  exportable  articles  at  smaller  cost, 
and  thereby  effecting  a larger  exportation.  The  commerce  of  the 
world  was  looked  upon  as  a struggle  among  nations,  which  could 
draw  to  itself  the  largest  share  of  the  gold  and  silver  in  existence ; 
and  in  this  competition  no  nation  could  gain  anything,  except  by 
making  others  lose  as  much,  or,  at  the  least,  preventing  them  from 
gaining  it. 

It  often  happens  that  the  universal  belief  of  one  age  of  mankind— 
a belief  from  which  no  one  was,  nor,  without  an  extraordinary 
effort  of  genius  and  courage,  could  at  that  time  be  free — becomes 
to  a subsequent  age  so  palpable  an  absurdity,  that  the  only  difficulty 
then  is  to  imagine  how  such  a thing  can  ever  have  appeared  credible. 
It  has  so  happened  with  the  doctrine  that  money  is  synonymous 
with  wealth.  The  conceit  seems  too  preposterous  to  be  thought  of  as 
a serious  opinion.  It  looks  like  one  of  the  crude  fancies  of  childhood, 
instantly  corrected  by  a word  from  any  grown  person.  But  let  no 
one  feel  confident  that  he  would  have  escaped  the  delusion  if  he 
had  lived  at  the  time  when  it  prevailed.  All  the  associations  en- 
gendered by  common  life,  and  by  the  ordinary  course  of  business, 
concurred  in  promoting  it.  So  long  as  those  associations  were  the 
only  medium  through  which  the  subject  was  looked  at,  what  we 
now  think  so  gross  an  absurdity  seemed  a truism.  Once  questioned, 
indeed,  it  was  doomed  ; but  no  one  was  hkely  to  think  of  questioning 
it  whose  mind  had  not  become  familiar  with  certain  modes  of  stating 
and  of  contemplating  economical  phenomena,  which  have  only 
found  their  way  into  the  general  understanding  through  the  influence 
of  Adam  Smith  and  of  his  expositors. 

In  common  discourse,  wealth  is  always  expressed  in  money. 
If  you  ask  how  rich  a person  is,  you  are  answered  that  he  has  so 
many  thousand  pounds.  Ail  income  and  expenditure,  all  gains 
and  losses,  everything  by  which  one  becomes  richer  or  poorer,  are 
reckoned  as  the  coming  in  or  going  out  of  so  much  money.  It  is 
true  that  in  the  inventory  of  a person’s  fortune  are-  included,  not 
only  the  money  in  his  actual  possession,  or  due  to  him,  but  all  other 
articles  of  value.  These,  however,  enter,  not  in  their  own  character, 
but  in  virtue  of  the  sums  of  money  which  they  would  sell  for ; 
and  if  they  would  sell  for  less,  their  owner  is  reputed  less  rich,  though 
the  things  themselves  are  precisely  the  same.  It  is  true,  also,  that 
people  do  not  grow  rich  by  keeping  their  money  unused,  and  that 
they  must  be  willing  to  spend  in  order  to  gain.  Those  who  enrich 
themselves  by  commerce,  do  so  by  giving  money  for  goods  as  well 


4 


PRELIMINARY  REMARKS 


as  goods  for  money  ; and  the  first  is  as  necessary  a part  of  the  process 
as  the  last.  But  a person  who  buys  goods  for  purposes  of  gain, 
does  so  to  sell  them  again  for  money,  and  in  the  expectation  of 
receiving  more  money  than  he  laid  out : to  get  money,  therefore, 
seems  even  to  the  person  himself  the  ultimate  end  of  the  whole.  It 
often  happens  that  he  is  not  paid  in  money,  but  in  something  else  ; 
having  bought  goods  to  a value  equivalent,  which  are  set  off  against 
those  he  sold.  But  he  accepted  these  at  a money  valuation,  and  in 
the  belief  that  they  would  bring  in  more  money  eventually  than 
the  price  at  which  they  were  made  over  to  him.  A dealer  doing 
a large  amount  of  business,  and  turning  over  his  capital  rapidly, 
has  but  a small  portion  of  it  in  ready  money  at  any  one  time.  But 
he  only  feels  it  valuable  to  him  as  it  is  convertible  into  money : 
he  considers  no  transaction  closed  until  the  net  result  is  either 
paid  or  credited  in  money : when  he  retires  from  business  it  is 
into  money  that  he  converts  the  whole,  and  not  until  then  does  he 
deem  himself  to  have  realized  his  gains  : just  as  if  money  were  the 
only  wealth,  and  money’s  worth  were  only  the  means  of  attaining  it. 
If  it  be  now  asked  for  what  end  money  is  desirable,  unless  to  supply 
the  wants  or  pleasures  of  oneself  or  others,  the  champion  of  the 
system  would  not  be  at  all  embarrassed  by  the  question.  True,  he 
would  say,  these  are  the  uses  of  wealth,  and  very  laudable  uses  while 
confined  to  domestic  commodities,  because  in  that  case,  by  exactly 
the  amount  which  you  expend,  you  enrich  others  of  your  countrymen. 
Spend  your  wealth,  if  you  please,  in  whatever  indulgences  you  have 
a taste  for ; but  your  wealth  is  not  the  indulgences,  it  is  the  sum 
of  money,  or  thv  annual  money  income,  with  which  you  purchase 
them. 

While  there  were  so  many  things  to  render  the  assumption 
which  is  the  basis  of  the  mercantile  system  plausible,  there  is  also 
some  small  foundation  in  reason,  though  a very  insufficient  one 
for  the  distinction  which  that  system  so  emphatically  draws  between 
money  and  every  other  kind  of  valuable  possession.  We  really, 
and  justly,  look  upon  a person  as  possessing  the  advantages  of  wealth, 
not  in  proportion  to  the  useful  and  agreeable  things  of  which  he  is 
in  the  actual  enjoyment,  but  to  his  command  over  the  general  fund  of 
things  useful  and  agreeable ; the  power  he  possesses  of  providing 
for  any  exigency,  or  obtaining  any  object  of  desire.  Now,  money  is 
itself  that  power ; while  all  other  things,  in  a civilized  state,  seem 
to  confer  it  only  by  their  capacity  of  being  exchanged  for  money. 
To  possess  any  other  article  of  wealth,  is  to  possess  that  particulai 


PRELIMINARY  REMARKS 


6 


thing,  and  nothing  else  : if  you  wish  for  another  thing  instead  of  it, 
you  have  first  to  sell  it,  or  to  submit  to  the  inconvenience  and  delay 
(if  not  the  impossibility)  of  finding  some  one  who  has  what  you  want, 
and  is  willing  to  barter  it  for  what  you  have.  But  with  money 
you  are  at  once  able  to  buy  whatever  things  are  for  sale  : and  one 
whose  fortune  is  in  money,  or  in  things  rapidly  convertible  into  it, 
seems  both  to  himself  and  others  to  possess  not  any  one  thing, 
but  all  the  things  which  the  money  places  it  at  his  option  to  pur- 
chase. The  greatest  part  of  the  utility  of  wealth,  beyond  a very 
moderate  quantity,  is  not  the  indulgences  it  procures,  but  the 
reserved  power  which  its  possessor  holds  in  his  hands  of  attaining 
purposes  generally  ; and  this  power  no  other  kind  of  wealth  confers 
BO  immediately  or  so  certainly  as  money.  It  is  the  only  form  of 
wealth  which  is  not  merely  applicable  to  some  one  use,  but  can  be 
turned  at  once  to  any  use.  And  this  distinction  was  the  more  likely 
to  make  an  impression  upon  governments,  as  it  is  one  of  considerable 
importance  to  them.  A civilized  government  derives  comparatively 
little  advantage  from  taxes  unless  it  can  collect  them  in  money  : and 
if  it  has  large  or  sudden  payments  to  make,  especially  payments  in 
foreign  countries  for  wars  or  subsidies,  either  for  the  sake  of  con- 
quering or  of  not  being  conquered  (the  two  chief  objects  of  national 
policy  until  a late  period),  scarcely  any  medium  of  payment  except 
money  will  serve  the  purpose.  All  these  causes  conspire  to  make 
both  individuals  and  governments,  in  estimating  their  means, 
attach  almost  exclusive  importance  to  money,  either  in  esse  or 
in  fosse,  and  look  upon  all  other  things  (when  viewed  as  part  of  their 
resources)  scarcely  otherwise  than  as  the  remote  means  of  obtaining 
that  which  alone,  when  obtained,  affords  the  indefinite,  and  at  the 
same  time  instantaneous,  command  over  objects  of  desire,  which 
best  answers  to  the  idea  of  wealth. 

An  absurdity,  however,  does  not  cease  to  be  an  absurdity  when 
we  have  discovered  what  were  the  appearances  which  made  it 
plausible ; and  the  Mercantile  Theory  could  not  fail  to  be  seen  in 
its  true  character  when  men  began,  even  in  an  imperfect  manner, 
to  explore  into  the  foundations  of  things,  and  seek  their  premises 
from  elementary  facts,  and  not  from  the  forms  and  phrases  of  com- 
mon discourse.  So  soon  as  they  asked  themselves  what  is  really 
meant  by  money — what  it  is  in  its  essential  characters,  and  the 
precise  nature  of  the  functions  it  performs — they  reflected  that 
money,  like  other  things,  is  only  a desirable  possession  on  account 
of  its  uses ; and  that  these,  instead  of  being,  as  they  delusively 


6 


PRELIMINARY  REMARKS 


appear,  indefinite,  are  of  a strictly  defined  and  limited  description, 
namely,  to  facilitate  the  distribution  of  the  produce  of  industry 
according  to  the  convenience  of  those  among  whom  it  is  shared. 
Further  consideration  showed  that  the  uses  of  money  are  in  no 
respect  promoted  by  increasing  the  quantity  which  exists  and  circu- 
lates in  a country ; the  service  which  it  performs  being  as  well 
rendered  by  a small  as  by  a large  aggregate  amount.  Two  million 
quarters  of  corn  will  not  feed  so  many  persons  as  four  millions ; 
but  two  millions  of  pounds  sterling  will  carry  on  as  much  trafiic, 
will  buy  and  sell  as  many  commodities,  as  four  millions,  though  at 
lower  nominal  prices.  Money,  as  money,  satisfies  no  want ; its 
worth  to  any  one,  consists  in  its  being  a convenient  shape  in  which  to 
receive  his  incomings  of  all  sorts,  which  incomings  he  afterwards, 
at  the  times  which  suit  him  best,  converts  into  the  forms  in  which 
they  can  be  useful  to  him.  Great  as  the  difference  would  be  between 
a country  with  money,  and  a country  altogether  without  it,  it  would 
be  only  one  of  convenience ; a saving  of  time  and  trouble,  like 
grinding  by  water  power  instead  of  by  hand,  or  (to  use  Adam 
Smith’s  illustration)  like  the  benefit  derived  from  roads ; and  to 
mistake  money  for  wealth  is  the  same  sort  of  error  as  to  mistake 
the  highway  which  may  be  the  easiest  way  of  getting  to  your  house 
or  lands,  for  the  house  and  lands  themselves.^ 

Money,  being  the  instrument  of  an  important  public  and  private 
purpose,  is  rightly  regarded  as  wealth ; but  everything  else  which 
serves  any  human  purpose,  and  which  nature  does  not  afford  gratui- 
tously, is  wealth  also.  To  be  wealthy  is  to  have  a large  stock  of 
useful  articles,  or  the  means  of  purchasing  them.  Everything  forms 
therefore  a part  of  wealth,  which  has  a power  of  purchasing ; for 
which  anything  useful  or  agreeable  would  be  given  in  exchange. 
Things  for  which  nothing  could  ^e  obtained  in  exchange,  however 
useful  or  necessary  they  may  be,  are  not  wealth  in  the  sense  in  which 
the  term  is  used  in  Political  Economy.  Air,  for  example,  though 
the  most  absolute  of  necessaries,  bears  no  price  in  the  market, 
because  it  can  be  obtained  gratuitously  : to  accumulate  a stock  of 
it  would  yield  no  profit  or  advantage  to  any  one  ; and  the  laws  of  its 
production  and  distribution  are  the  subject  of  a very  different 
study  from  Political  Economy.  But  though  air  is  not  wealth, 
mankind  are  much  richer  by  obtaining  it  gratis,  since  the  time 


* [See  Appendix  A.  The  Mercantile  System.^ 


PRELIMINARY  REMARKS 


7 


and  labour  which  would  otherwise  be  required  for  supplying  the 
most  pressing  of  all  wants,  can  be  devoted  to  other  purposes. 
It  is  possible  to  imagine  circumstances  in  which  air  would  be  a 
part  of  wealth.  If  it  became  customary  to  sojourn  long  in  places 
where  the  air  does  not  naturally  penetrate,  as  in  diving-bells  sunk 
in  the  sea,  a supply  of  air  artificially  furnished  would,  like  water 
conveyed  into  houses,  bear  a price  : and  if  from  any  revolution  in 
nature  the  atmosphere  became  too  scanty  for  the  consumption,  oi 
could  be  monopolized,  air  might  acquire  a very  high  marketable 
value.  In  such  a case,  the  possession  of  it,  beyond  his  own  wants, 
would  be,  to  its  owner,  wealth  ; and  the  general  wealth  of  mankind 
might  at  first  sight  appear  to  be  increased,  by  what  would  be  so 
great  a calamity  to  them.  The  error  would  lie  in  not  considering, 
that  however  rich  the  possessor  of  air  might  become  at  the  expense 
of  the  rest  of-the  community,  all  persons  else  would  be  poorer  by  all 
that  they  were  compelled  to  pay  for  what  they  had  before  obtained 
without  payment. 

This  leads  to  an  important  distinction  in  the  meaning  of  the 
word  wealth,  as  applied  to  the  possessions  of  an  individual,  and  to 
those  of  a nation,  or  of  mankind.  In  the  wealth  of  mankind,  nothing 
is  included  which  does  not  of  itself  answer  some  purpose  of  utility 
or  pleasure.  To  an  individual  anything  is  wealth,  which,  though 
useless  in  itself,  enables  him  to  claim  from  others  a part  of  theii 
stock  of  things  useful  or  pleasant.  Take,  for  instance,  a mortgage 
of  a thousand  pounds  on  a landed  estate.  This  is  wealth  to  the 
person  to  whom  it  brings  in  a revenue,  and  who  could  perhaps  sell 
it  in  the  market  for  the  full  amount  of  the  debt.  But  it  is  not  wealth 
to  the  country ; if  the  engagement  were  annulled,  the  country 
would  be  neither  poorer  nor  richer.  The  mortgagee  would  have 
lost  a thousand  pounds,  and  the  owner  of  the  land  would  have  gained 
it.  Speaking  nationally,  the  mortgage  was  not  itself  wealth,  but 
merely  gave  A a claim  to  a portion  of  the  wealth  of  B.  It  was 
wealth  to  A,  and  wealth  which  he  could  transfer  to  a third  person  ; 
but  what  he  so  transferred  was  in  fact  a joint  ownership,  to  the 
extent  of  a thousand  pounds,  in  the  land  of  which  B was  nominally 
the  sole  proprietor.  The  position  of  fundholders,  or  owners  of  the 
public  debt  of  a country,  is  similar.  They  are  mortgagees  on  the 
general  wealth  of  the  country.  The  cancelling  of  the  debt  would  be 
no  destruction  of  wealth,  but  a transfer  of  it : a wrongful  abstrac- 
tion of  wealth  from  certain  members  of  the  community,  for  the 
profit  of  the  government,  or  of  the  tax-payers.  Funded  property 


8 


PRELIMINARY  REMARKS 


therefore  cannot  be  counted  as  part  of  the  national  wealth.  This 
is  not  always  borne  in  mind  by  the  dealers  in  statistical  calculations. 
For  example,  in  estimates  of  the  gross  income  of  the  country, 
founded  on  the  proceeds  of  the  income-tax,  incomes  derived  from 
the  funds  are  not  always  excluded : though  the  tax-payers  are  assessed 
on  their  whole  nominal  income,  without  being  permitted  to  deduct 
from  it  the  portion  levied  from  them  in  taxation  to  form  the  income 
of  the  fundholder.  In  this  calculation,  therefore,  one  portion  of  the 
general  income  of  the  country  is  counted  twice  over,  and  the  aggre- 
gate amount  made  to  appear  greater  than  it  is  by  almost  ^ thirty 
millions.  A country,  however,  may  include  in  its  wealth  all  stock 
held  by  its  citizens  in  the  funds  of  foreign  countries,  and  other  debts 
due  to  them  from  abroad.  But  even  this  is  only  wealth  to  them 
by  being  a part  ownership  in  wealth  held  by  others.  It  forms  no 
part  of  the  collective  wealth  of  the  human  race.  It  is  an  element 
in  the  distribution,  but  not  in  the  composition,  of  the  general 
wealth. 

2 Another  example  of  a possession  which  is  wealth  to  the  person 
holding  it,  but  not  wealth  to  the  nation,  or  to  mankind,  is  slaves. 
It  is  by  a strange  confusion  of  ideas  that  slave  property  (as  it  is 
termed)  is  counted,  at  so  much  per  head,  in  an  estimate  of  the  wealth, 
or  of  the  capital,  of  the  country  which  tolerates  the  existence  of 
such  property.  If  a human  being,  considered  as  an  object  possessing 
productive  powers,  is  part  of  the  national  wealth  when  his  powers 
are  owned  by  another  man,  he  cannot  be  less  a part  of  it  when  they 
are  owned  by  himself.  Whatever  he  is  worth  to  his  master  is  so 
much  property  abstracted  from  himself,  and  its  abstraction  cannot 
augment  the  possessions  of  the  two  together,  or  of  the  country 
to  which  they  both  belong.  In  propriety  of  classification,  however, 
the  people  of  a country  are  not  to  be  counted  in  its  wealth.  They 
are  that  for  the  sake  of  which  its  wealth  exists.  The  term  wealth 
is  wanted  to  denote  the  desirable  objects  which  they  possess,  not 
inclusive  of,  but  in  contradistinction  to,  their  own  persons.  They 
are  not  wealth  to  themselves,  though  they  are  means  of  acquir- 
ing it. 

It  has  been  proposed  to  define  wealth  as  signifying  “instru- 
ments : ” meaning  not  tools  and  machinery  alone,  but  the  whole 
accumulation  possessed  by  individuals  or  communities,  of  means 
for  the  attainment  of  their  ends.  Thus,  a field  is  an  instrument, 

> [1st  ed.  (1848)  « about  ” ; 6th  ed.  (1862) almost.”] 

* [Paragraph  added  in  6th  ed.  (1865).] 


PRELIMINARY  REMARKS 


9 


because  it  is  a means  to  the  attainment  of  corn.  Corn  is  an  instru- 
ment, being  a means  to  the  attainment  of  flour.  Flour  is  an  instru- 
ment, being  a means  to  the  attainment  of  bread.  Bread  is  an 
instrument,  as  a means  to  the  satisfaction  of  hunger  and  to  the 
support  of  life.  Here  we  at  last  arrive  at  things  which  are  not 
instruments,  being  desired  on  their  own  account,  and  not  as  mere 
means  to  something  beyond.  This  view  of  the  subject  is  philoso- 
phically correct ; or  rather,  this  mode  of  expression  may  be  usefully 
employed  along  with  others,  not  as  conveying  a different  view  of  the 
subject  from  the  common  one,  but  as  giving  more  distinctness  and 
reality  to  the  common  view.  It  departs,  however,  too  widely  from 
the  custom  of  language,  to  be  likely  to  obtain  general  acceptance, 
or  to  be  of  use  for  any  other  purpose  than  that  of  occasional  illus- 
tration. 

Wealth,  then,  may  be  defined,  all  useful  or  agreeable  things 
which  possess  exchangeable  value  ; or,  in  other  words,  all  useful  or 
agreeable  things  except  those  which  can  be  obtained,  in  the  quantity 
desired,  without  labour  or  sacrifice.  To  this  definition,  the  only 
objection  seems  to  be,  that  it  leaves  in  uncertainty  a question  which 
has  been  much  debated — whether  what  are  called  immaterial  pro- 
ducts are  to  be  considered  as  wealth  : whether,  for  example,  the 
skill  of  a workman,  or  any  other  natural  or  acquired  power  of  body 
or  mind,  shall  be  called  wealth,  or  not : a question,  not  of  very  great 
importance,  and  which,  so  far  as  requiring  discussion,  will  be  more 
conveniently  considered  in  another  place.*  ^ 

These  things  having  been  premised  respecting  wealth,  we  shall 
next  turn  our  attention  to  the  extraordinary  differences  in  respect 
to  it,  which  exist  between  nation  and  nation,  and  between  different 
ages  of  the  world ; differences  both  in  the  quantity  of  wealth,  and 
in  the  kind  of  it ; as  well  as  in  the  manner  in  which  the  wealth 
existing  in  the  community  is  shared  among  its  members. 

There  is,^  perhaps,  no  people  or  community,  now  existing,  which 
subsists  entirely  on  the  spontaneous  produce  of  vegetation.  But 
many  tribes  still  live  exclusively,  or  almost  exclusively,  on  wild 
animals,  the  produce  of  hunting  or  fishing.  Their  clothing  is  skins  ; 
their  habitations,  huts  rudely  formed  of  logs  or  boughs  of  trees,  and 
abandoned  at  an  hour’s  notice.  The  food  they  use  being  little  sus- 
ceptible of  storing  up,  they  have  no  accumulation  of  it,  and  are  often 

• Infra,  book  i.  chap.  iiL 

* [See  Appendix  B.  The  Definition  of  Wealth.] 


10 


PRELIMINARY  REMARKS 


exposed  to  great  privations.  The  wealth  of  such  a community 
consists  solely  of  the  skins  they  wear  ; a few  ornaments,  the  taste  for 
which  exists  among  most  savages ; some  rude  utensils  ; the  weapons 
with  which  they  kill  their  game,  or  fight  against  hostile  competitors 
for  the  means  of  subsistence ; canoes  for  crossing  rivers  and  lakes, 
or  fishing  in  the  sea ; and  perhaps  some  furs  or  other  productions 
of  the  wilderness,  collected  to  be  exchanged  with  civilized  people  for 
blankets,  brandy,  and  tobacco  ; of  which  foreign  produce  also  there 
may  be  some  unconsumed  portion  in  store.  To  this  scanty  inventory 
of  material  wealth,  ought  to  be  added  their  land ; an  instrument  of 
production  of  which  they  make  slender  use,  compared  with  more 
settled  communities,  but  which  is  still  the  source  of  their  subsistence, 
and  which  has  a marketable  value  if  there  be  any  agricultural  com- 
munity in  the  neighbourhood  requiring  more  land  than  it  possesses. 
This  is  the  state  of  greatest  poverty  in  which  any  entire  community 
of  human  beings  is  known  to  exist ; though  there  are  much  richer 
communities  in  which  portions  of  the  inhabitants  are  in  a condition, 
as  to  subsistence  and  comfort,  as  little  enviable  as  that  of  the  savage. 

The  first  great  advance  beyond  this  state  consists  in  the  domestica- 
tion of  the  more  useful  animals ; giving  rise  to  the  pastoral  or 
nomad  state,  in  which  mankind  do  not  live  on  the  produce  of  hunting, 
but  on  milk  and  its  products,  and  on  the  annual  increase  of  flocks 
and  herds.  This  condition  is  not  only  more  desirable  in  itself, 
but  more  conducive  to  further  progress : and  a much  more  con- 
siderable amount  of  wealth  is  accumulated  under  it.  So  long  as 
the  vast  natural  pastures  of  the  earth  are  not  yet  so  fully  occupied 
as  to  be  consumed  more  rapidly  than  they  are  spontaneously  re- 
produced, a large  and  constantly  increasing  stock  of  subsistence 
may  be  collected  and  preserved,  with  little  other  labour  than  that 
of  guarding  the  cattle  from  the  attacks  of  wild  beasts,  and  from  the 
force  or  wiles  of  predatory  men.  Large  flocks  and  herds,  therefore, 
are  in  time  possessed,  by  active  and  thrifty  individuals  through 
their  own  exertions,  and  by  the  heads  of  families  and  tribes  through 
the  exertions  of  those  who  are  connected  with  them  by  allegiance. 
There  thus  arises,  in  the  shepherd  state,  inequality  of  possessions ; 
a thing  which  scarcely  exists  in  the  savage  state,  where  no  one 
has  much  more  than  absolute  necessaries,  and  in  case  of  deficiency 
must  share  even  those  with  his  tribe.  In  the  nomad  state,  some  have 
an  abundance  of  cattle,  sufficient  for  the  food  of  a multitude,  while 
others  hav®  not  contrived  to  appropriate  and  retain  any  superfluity, 
or  perhaps  any  cattle  at  all.  But  subsistence  has  ceased  to  be  pre- 


PRELIMINARY  REMARKS  H 

carious,  since  the  more  successful  have  no  other  use  which  they  can 
make  of  their  surplus  than  to  feed  the  less  fortunate,  while  every 
increase  in  the  number  of  persons  connected  with  them  is  an  increase 
both  of  security  and  of  power : and  thus  they  are  enabled  to  divest 
themselves  of  all  labour  except  that  of  government  and  superin- 
tendence, and  acquire  dependents  to  fight  for  them  in  war  and  to 
serve  them  m peace.  One  of  the  features  of  this  state  of  society  is, 
that  a part  of  the  community,  and  in  some  degree  even  the  whole' 
of  It,  possess  leisure.  Only  a portion  of  time  is  required  for  pro- 
curing food,  and  the  remainder  is  not  engrossed  by  anxious  thought 
for  the  morrow,  or  necessary  repose  from  muscular  activity.  Such 
a life  IS  highly  favourable  to  the  growth  of  new  wants,  and  opens  a 
possibility  of  their  gratification.  A desire  arises  for  better  clothing, 
utensils,  and  implements,  than  the  savage  state  contents  itself  with  ; 
and  the  surplus  food  renders  it  practicable  to  devote  to  these  purposes 
the  exertions  of  a part  of  the  tribe.  In  all  or  most  nomad  com^ 
mumties  we  find  domestic  manufactures  of  a coarse,  and  in  some, 
of  a fine  kind.  There  is  ample  evidence  that  while  those  parts 
of  the  world  which  have  been  the  cradle  of  modern  civilization 
were  still  generally  in  the  nomad  state,  considerable  skill  had  been 
attained  in  spinning,  weaving,  and  dyeing  woollen  garments,  in  the 
preparation  of  leather,  and  in  what  appears  a still  more  difiicult 
invention,  that  of  working  in  metals.  Even  speculative  science 
took  Its  first  beginnings  from  the  leisure  characteristic  of  this  stage 
of  social  progress.  The  earliest  astronomical  observations  are 
attributed,  by  a tradition  which  has  much  appearance  of  truth 
to  the  shepherds  of  Chaldea.  * 

^ From  this  state  of  society  to  the  agricultural  the  transition 
18  not  indeed  easy  (for  no  great  change  in  the  habits  of  mankind 
IS  otherwise  than  difficult,  and  in  general  either  painful  or  very  slow) , 
but  It  lies  in  what  may  be  called  the  spontaneous  course  of  events’ 
The  growth  of  the  population  of  men  and  cattle  began  in  time  to  press 
upon  the  earth’s  capabilities  of  yielding  natural  pasture  : and  this 
cause  doubtless  produced  the  first  tiffing  of  the  ground,  just  as  at  a 
later  period  the  same  cause  made  the  superfluous  hordes  of  the 
nations  which  had  remained  nomad  precipitate  themselves  upon 
those  which  had  already  become  agricultural ; untd,  these  having 
become  sufficiently  powerful  to  repel  such  inroads,  the  invadinc» 
nations,  deprived  of  this  outlet,  were  obliged  also  to  become  agri^ 
cultural  communities. 

But  after  tliis  great  step  had  been  completed,  the  subsequent 


12 


PRELIMINARY  REMARKS 


progress  of  mankind  seems  by  no  means  to  have  been  so  rapid 
(certain  rare  combinations  of  circumstances  excepted)  as  might 
perhaps  have  been  anticipated.  The  quantity  of  human  food  which 
the  earth  is  capable  of  returning  even  to  the  most  wretched  system 
of  agriculture,  so  much  exceeds  what  could  be  obtained  in  the 
purely  pastoral  state,  that  a great  increase  of  population  is  invariably 
the  result.  But  this  additional  food  is  only  obtained  by  a great 
additional  amount  of  labour ; so  that  not  only  an  agricultural 
has  much  less  leisure  than  a pastoral  population,  but,  with  the 
imperfect  tools  and  unskilful  processes  which  are  for  a long  time 
employed  (and  which  over  the  greater  part  of  the  earth  have  not 
even  yet  been  abandoned),  agriculturists  do  not,  unless  in  unusually 
advantageous  circumstances  of  climate  and  soil,  produce  so  great 
a surplus  of  food,  beyond  their  necessary  consumption,  as  to  sup- 
port any  large  class  of  labourers  engaged  in  other  departments  of 
industry.  The  surplus,  too,  whether  small  or  great,  is  usually 
torn  from  the  producers,  either  by  the  government  to  which  they 
are  subject,  or  by  individuals,  who  by  superior  force,  or  by  availing 
themselves  of  religious  or  traditional  feelings  of  subordination, 
have  established  themselves  as  lords  of  the  soil. 

The  first  of  these  modes  of  appropriation,  by  the  government, 
is  characteristic  of  the  extensive  monarchies  which  from  a time 
beyond  historical  record  have  occupied  the  plains  of  Asia.  The  govern- 
ment, in  those  countries,  though  varying  in  its  qualities  according 
to  the  accidents  of  personal  character,  seldom  leaves  much  to  the 
cultivators  beyond  mere  necessaries,  and  often  strips  them  so  bare 
even  of  these,  that  it  finds  itself  obliged,  after  taking  all  they  have, 
to  lend  part  of  it  back  to  those  from  whom  it  has  been  taken,  in 
order  to  provide  them  with  seed,  and  enable  them  to  support  life 
until  another  harvest.  Under  the  regime  in  question,  though 
the  bulk  of  the  population  are  ill  provided  for,  the  government, 
by  collecting  small  contributions  from  great  numbers,  is  enabled, 
with  any  tolerable  management,  to  make  a show  of  riches  quite  out 
of  proportion  to  the  general  condition  of  the  society ; and  hence 
the  inveterate  impression,  of  which  Europeans  have  only  at  a late 
period  been  disabused,  concerning  the  great  opulence  of  Oriental 
nations.  In  this  wealth,  without  reckoning  the  large  portion  which 
adheres  to  the  hands  employed  in  collecting  it,  many  persons  of 
course  participate,  besides  the  immediate  household  of  the  sovereign. 
A large  part  is  distributed  among  the  various  functionaries  of 
government,  and  among  the  objects  of  the  sovereign’s  favour  or 


PRELIMINARY  REMARKS 


13 


caprice.  A part  is  occasionally  employed  in  works  of  public  utility. 
The  tanks,  wells,  and  canals  for  irrigation,  without  which  in  many 
tropical  climates  cultivation  could  hardly  be  carried  on ; the 
embankments  which  confine  the  rivers,  the  bazars  for  dealers,  and 
the  seraees  for  travellers,  none  of  which  could  have  been  made 
by  the  scanty  means  in  the  possession  of  those  using  them,  owe 
their  existence  to  the  liberality  and  enlightened  self-interest  of  the 
better  order  of  princes,  or  to  the  benevolence  or  ostentation  of  here 
and  there  a rich  individual,  whose  fortune,  if  traced  to  its  source, 
is  always  found  to  have  been  drawn  immediately  or  remotely  from 
the  public  revenue,  most  frequently  by  a direct  grant  of  a portion 
of  it  from  the  sovereign. 

The  ruler  of  a society  of  this  description,  after  providing  largely 
for  his  own  support,  and  that  of  all  persons  in  whom  he  feels  an 
interest,  and  after  maintaining  as  many  soldiers  as  he  thinks  needful 
for  his  security  or  his  state,  has  a disposable  residue,  which  he  is  glad 
to  exchange  for  articles  of  luxury  suitable  to  his  disposition : as 
have  also  the  class  of  persons  who  have  been  enriched  by  his  favour, 
or  by  handling  the  public  revenues.  A demand  thus  arises  for 
elaborate  and  costly  manufactured  articles,  adapted  to  a narrow 
but  a wealthy  market.  This  demand  is  often  supplied  almost 
exclusively  by  the  merchants  of  more  advanced  communities,  but 
often  also  raises  up  in  the  country  itself  a class  of  artificers,  by  whom 
certain  fabrics  are  carried  to  as  high  excellence  as  can  be  given  by 
patience,  quickness  of  perception  and  observation,  and  manual 
dexterity,  without  any  considerable  knowledge  of  the  properties 
of  objects  : such  as  some  of  the  cotton  fabrics  of  India.  These 
artificers  are  fed  by  the  surplus  food  which  has  been  taken  by  the 
government  and  its  agents  as  their  share  of  the  produce.  So  literally 
is  this  the  case,  that  in  some  countries  the  workman,  instead  of 
taking  his  work  home,  and  being  paid  for  it  after  it  is  finished,  proceeds 
with  his  tools  to  his  customer’s  house,  and  is  there  subsisted  until 
the  work  is  complete.  The  insecurity,  however,  of  all  possessions  in 
this  state  of  society,  induces  even  the  richest  purchasers  to  give  a 
preference  to  such  articles  as,  being  of  an  imperishable  nature,  and 
containing  great  value  in  small  bulk,  are  adapted  for  being  concealed 
or  carried  off.  Gold  and  jewels,  therefore,  constitute  a large  pro- 
portion of  the  wealth  of  these  nations,  and  many  a rich  Asiatic 
carries  nearly  his  whole  fortune  on  his  person,  or  on  those  of  the 
women  of  his  harem.  No  one,  except  the  monarch,  thinks  of  invest 
ing  his  w^ealth  in  a manner  not  susceptible  of  removal.  He  indeed, 


14 


PRELIMINARY  REMARKS 


if  he  feels  safe  on  his  throne,  and  reasonably  secure  of  transmitting  it 
to  his  descendants,  sometimes  indulges  a taste  for  durable  edifices, 
and  produces  the  Pyramids,  or  the  Taj  Mehal  and  the  Mausoleum 
at  Sekundra.  The  rude  manufactures  destined  for  the  wants 
of  the  cultivators  are  worked  up  by  village  artisans,  who  are  re- 
munerated by  land  given  to  them  rent-free  to  cultivate,  or  by  fees 
paid  to  them  in  kind  from  such  share  of  the  crop  as  is  left  to  the 
villagers  by  the  government.  This  state  of  society,  however,  is 
not  destitute  of  the  mercantile  class ; composed  of  two  divisions, 
grain  dealers  and  money  dealers.  The  grain  dealers  do  not  usually 
buy  grain  from  the  producers,  but  from  the  agents  of  government, 
who,  receiving  the  revenue  in  kind,  are  glad  to  devolve  upon  others 
the  business  of  conveying  it  to  the  places  where  the  prince,  his 
chief  civil  and  military  officers,  the  bulk  of  his  troops,  and  the 
artisans  who  supply  the  wants  of  these  various  persons,  are  assembled. 
The  money  dealers  lend  to  the  unfortunate  cultivators,  when  ruined 
by  bad  seasons  or  fiscal  exactions,  the  means  of  supporting  life 
and  continuing  their  cultivation,  and  are  repaid  with  enormous  in- 
terest at  the  next  harvest ; or,  on  a larger  scale,  they  lend  to  the 
government,  or  to  those  to  whom  it  has  granted  a portion  of  the 
revenue,  and  are  indemnified  by  assignments  on  the  revenue  col- 
lectors, or  by  having  certain  districts  put  into  their  possession,  that 
they  may  pay  themselves  from  the  revenues  ; to  enable  them  to  do 
which,  a great  portion  of  the  powers  of  government  are  usually 
made  over  simultaneously,  to  be  exercised  by  them  until  either  the 
districts  are  redeemed,  or  their  receipts  have  liquidated  the  debt. 
Thus,  the  commercial  operations  of  both  these  classes  of  dealers 
take  place  principally  upon  that  part  of  the  produce  of  the  country 
which  forms  the  revenue  of  the  government.  From  that  revenue 
their  capital  is  periodically  replaced  with  a profit,  and  that  is  also 
the  source  from  which  their  original  funds  have  almost  always  been 
derived.  Such,  in  its  general  features,  is  the  economical  condition 
of  most  of  the  countries  of  Asia,  as  it  has  been  from  beyond  the 
commencement  of  authentic  history,  and  is  still  [1848],  wherever 
not  disturbed  by  foreign  influences. 

In  the  agricultural  communities  of  ancient  Europe  whose  early 
condition  is  best  known  to  us,  the  course  of  things  was  different. 
These,  at  their  origin,  were  mostly  small  town-communities,  at  the 
first  plantation  of  which,  in  an  unoccupied  country,  or  in  one  from 
which  the  former  inhabitants  had  been  expelled,  the  land  which 
was  taken  possession  of  was  regularly  divided,  in  equal  or  in  graduated 


PRELIMINARY  REMARKS 


15 


allotments,  among  the  families  composing  the  community.  In 
some  cases,  instead  of  a town  there  was  a confederation  of  towns, 
occupied  by  people  of  the  same  reputed  race,  and  who  were  sup- 
posed to  have  settled  in  the  country  about  the  same  time.  Each 
family  produced  its  own  food  and  the  materials  of  its  clothing, 
which  were  worked  up  within  itself,  usually  by  the  women  of  the 
family,  into  the  coarse  fabrics  with  which  the  age  was  contented. 
Taxes  there  were  none,  as  there  were  either  no  paid  officers  of 
government,  or  if  there  were,  their  payment  had  been  provided 
for  by  a reserved  portion  of  land,  cultivated  by  slaves  on  account 
of  the  state ; and  the  army  consisted  of  the  body  of  citizens. 
The  whole  produce  of  the  soil,  therefore,  belonged,  without  de- 
duction, to  the  family  which  caltivated  it.  So  long  as  the  progress 
of  events  permitted  this  disposition  of  property  to  last,  the 
state  of  society  was,  for  the  majority  of  the  free  cultivators, 
probably  not  an  undesirable  one ; and  under  it,  in  some  cases, 
the  advance  of  mankind  in  intellectual  culture  was  extraordinarily 
rapid  and  brilliant.  This  more  especially  happened  where,  along 
with  advantageous  circumstances  of  race  and  climate,  and  no  doubt 
with  many  favourable  accidents  of  which  all  trace  is  now  lost,  was 
combined  the  advantage  of  a position  on  the  shores  of  a great  in- 
land sea,  the  other  coasts  of  which  were  already  occupied  by  settled 
communities.  The  knowledge  which  in  such  a position  was  ac- 
quired of  foreign  productions,  and  the  easy  access  of  foreign  ideas 
and  inventions,  made  the  chain  of  routine,  usually  so  strong  in  a 
rude  people,  hang  loosely  on  these  communities.  To  speak  only 
of  their  industrial  development ; they  early  acquired  variety  of 
wants  and  desires,  which  stimulated  them  to  extract  from  their 
own  soil  the  utmost  which  they  knew  how  to  make  it  yield  ; and 
when  their  soil  was  sterile,  or  after  they  had  reached  the  limit 
of  its  capacity,  they  often  became  traders,  and  bought  up  the  pro- 
ductions of  foreign  countries,  to  sell  them  in  ether  countries  with  a 
profit. 

The  duration,  however,  of  this  state  of  things  was  from  the  first 
precarious.  These  little  communities  lived  in  a state  of  almost  per- 
petual war.  For  this  there  were  many  causes.  In  the  ruder  and 
purely  agricultural  communities  a frequent  cause  was  the  mere 
pressure  of  their  increasing  population  upon  their  limited  land, 
aggravated  as  that  pressure  so  often  was  by  deficient  harvests,  in 
the  rude  state  of  their  agriculture,  and  depending  as  they  did  for 
food  upon  a very  small  extent  of  country.  On  these  occasions, 


/ 

16  PRELIMINARY  REMARKS  / 

the  community  often  emigrated  en  masse,  or  sent  forth  a silrarm  of 
its  youth,  to  seek,  sword  in  hand,  for  some  less  warlike  pe(iple,  who 
could  be  expelled  from  their  land,  or  detained  to  cultivate  it  as  slaves 
for  the  benefit  of  their  despoilers.  What  the  less  advanced  tribes 
did  from  necessity,  the  more  prosperous  did  from  ambition  and  the 
military  spirit:  and  after  a time  the  whole  of  these  city-commimities 
were  either  conquerors  or  conquered.  In  some  cases,  the  conquering 
state  contented  itself  with  imposing  a tribute  on  the  vanquished : 
who  being,  in  consideration  of  that  burden,  freed  from  the  expense 
and  trouble  of  their  own  military  and  naval  protection,  might 
enjoy  under  it  a considerable  share  of  economical  prosperity,  while 
the  ascendant  community  obtained  a surplus  of  wealth,  available 
for  purposes  of  collective  luxury  or  magnificence.  From  such  a 
surplus  the  Parthenon  and  the  Propylsea  were"  built,  the  sculptures 
of  Pheidias  paid  for,  and  the  festivals  celebrated,  for  which  iEschylus, 
Sophocles,  Euripides,  and  Aristophanes  composed  their  dramas. 
But  this  state  of  political  relations,  most  useful,  while  it  lasted,  to  the 
progress  and  ultimate  interest  of  mankind,  had  not  the  elements  of 
durability.  A small  conquering  community  which  does  not  incor- 
porate its  conquests,  always  ends  by  being  conquered.  Universal 
dominion,  therefore,  at  last  rested  with  the  people  who  practised 
this  art — with  the  Romans  ; who,  whatever  were  their  other  devices, 
always  either  began  or  ended  by  taking  a great  part  of  the  land  to 
enrich  their  own  leading  citizens,  and  by  adopting  into  the  governing 
body  the  principal  possessors  of  the  remainder.  It  is  unnecessary 
to  dwell  on  the  melancholy  economical  history  of  the  Roman  empire. 
When  inequality  of  wealth  once  commences,  in  a community  not 
constantly  engaged  in  repairing  by  industry  the  injuries  of  fortune, 
its  advances  are  gigantic ; the  great  masses  of  wealth  swallow  up 
the  smaller.  The  Roman  empire  ultimately  became  covered  with 
the  vast  landed  possessions  of  a comparatively  few  families,  for 
whose  luxury,  and  still  more  for  whose  ostentation,  the  most  costly 
products  were  raised,  while  the  cultivators  of  the  soil  were  slaves, 
or  small  tenants  in  a nearly  servile  condition.  From  this  time  the 
wealth  of  the  empire  progressively  declined.  In  the  beginning,  the 
public  revenues,  and  the  resources  of  rich  individuals,  sufficed 
at  least  to  cover  Italy  with  splendid  edifices,  public  and  private ; 
but  at  length  so  dwindled  under  the  enervating  influences  of  mis- 
government,  that  what  remained  was  not  even  sufficient  to  keep 
those  edifices  from  decay.  The  strength  and  riches  of  the  civilized 
world  became  inadequate  to  make  head  against  the  nomad  popula- 


PRELIMINARY  REMARKS 


17 


tion  wHch  skirted  its  northern  frontier ; they  overran  the  empire, 
and  a difierent  order  of  things  succeeded. 

In  the  new  frame  in  which  European  society  was  now  cast, 
the  population  of  each  country  may  be  considered  as  composed, 
in  unequal  proportions,  of  two  distinct  nations  or  races,  the  con- 
querors and  the  conquered : the  first  the  proprietors  of  the  land, 
the  latter  the  tillers  of  it.  These  tillers  were  allowed  to  occupy  the 
land  on  conditions  which,  being  the  product  of  force,  were  always 
onerous,  but  seldom  to  the  extent  of  absolute  slavery.  Already, 
in  the  later  times  of  the  Roman  empire,  predial  slavery  had  exten- 
sively transformed  itself  into  a kind  of  serfdom  : the  coloni  of  the 
Romans  were  rather  villeins  than  actual  slaves  ; and  the  incapacity 
and  distaste  of  the  barbarian  conquerors  for  personally  superintend- 
ing industrial  occupations,  left  no  alternative  but  to  allow  to  the 
cultivators,  as  an  incentive  to  exertion,  some  real  interest  in  the 
soil.  If,  for  example,  they  were  compelled  to  labour,  three  days 
in  the  week,  for  their  superior,  the  produce  of  the  remaining  days 
was  their  own.  If  they  were  required  to  supply  the  provisions 
of  various  sorts,  ordinarily  needed  for  the  consumption  of  the  castle, 
and  were  often  subject  to  requisitions  in  excess,  yet  after  supplying 
these  demands  they  were  suffered  to  dispose  at  their  will  of  whatever 
additional  produce  they  could  raise.  Under  this  systeni  during  the 
Middle  Ages  it  was  not  impossible,  no  more  than  in  modern  Russia 
(where,  up  to  the  recent  measure  of  emancipation,  the  same  system 
still  essentially  prevailed),^  for  serfs  to  acquire  property ; and  in 
fact,  their  accumulations  are  the  primitive  source  of  the  wealth  of 
modern  Europe. 

In  that  age  of  violence  and  disorder,  the  first  use  made  by  a serf 
of  any  small  provision  which  he  had  been  able  to  accumulate,  was  to 
buy  his  freedom  and  withdraw  himself  to  some  town  or  fortified 
village,  which  had  remained  undestroyed  from  the  time  of  the  Roman 
dominion  ; or,  without  buying  his  freedom,  to  abscond  thither.  In 
that  place  of  refuge,  surrounded  by  others  of  his  own  class,  he 
attempted  to  live,  secured  in  some  measure  from  the  outrages  and 
exactions  of  the  warrior  caste,  by  his  own  prowess  and  that  of  his 
fellows.  These  emancipated  serfs  mostly  became  artificers  ; and 
lived  by  exchanging  the  produce  of  their  industry  for  the  surplus 
food  and  material  which  the  soil  yielded  to  its  feudal  proprietors. 
This  gave  rise  to  a sort  of  European  counterpart  of  the  economical 


‘ [Parenthesis  added  in  6th  ed.  (1865).] 


18 


PRELIMINARY  REMARKS 


condition  of  Asiatic  countries  ; except  that,  in  Keu  of  a single  mon- 
arch and  a fluctuating  body  of  favourites  and  employes,  there  was 
a numerous  and  in  a considerable  degree  fixed  class  of  great  land- 
holders ; exhibiting  far  less  splendour,  because  individually  disposing 
of  a much  smaller  surplus  produce,  and  for  a long  time  expending 
the  chief  part  of  it  in  maintaining  the  body  of  retainers  whom  the 
warlike  habits  of  society,  and  the  little  protection  afiorded  by  govern- 
ment, rendered  indispensable  to  their  safety.  The  greater  stability, 
the  fixity  of  personal  position,  which  this  state  of  society  afforded, 
in  comparison  with  the  Asiatic  polity  to  which  it  economically 
corresponded,  was  one  main  reason  why  it  was  also  found  more 
favourable  to  improvement.  From  this  time  the  economical 
advancement  of  society  has  not  been  further  interrupted.  Security 
of  person  and  property  grew  slowly,  but  steadily ; the  arts  of  life 
made  constant  progress  ; plunder  ceased  to  be  the  principal  source 
of  accumulation  ; and  feudal  Europe  ripened  into  commercial  and 
manufacturing  Europe.  In  the  latter  part  of  the  Middle  Ages,  the 
towns  of  Italy  and  Flanders,  the  free  cities  of  Germany,  and  some 
towns  of  France  and  England,  contained  a large  and  energetic 
population  of  artisans,  and  many  rich  burghers,  whose  wealth 
had  been  acquired  by  manufacturing  industry,  or  by  trading  in 
the  produce  of  such  industry.  The  Commons  of  England,  the  Tiers- 
Etat  of  France,  the  bourgeoisie  of  the  Continent  generally,  are  the 
descendants  of  this  class.  As  these  were  a saving  class,  while  the 
posterity  of  the  feudal  aristocracy  were  a squandering  class,  the 
former  by  degrees  substituted  themselves  for  the  latter  as  the  owners 
of  a great  proportion  of  the  land.  This  natural  tendency  was 
in  some  cases  retarded  by  laws  contrived  for  the  purpose  of  detaining 
the  land  in  the  families  of  its  existing  possessors,  in  other  cases 
accelerated  by  political  revolutions.  Gradually,  though  more 
slowly,  the  immediate  cultivators  of  the  soil,  in  all  the  more  civilized 
countries,  ceased  to  be  in  a servile  or  semi-servile  state : though 
the  legal  position,  as  well  as  the  economical  condition  attained  by 
them,  vary  extremely  in  the  different  nations  of  Europe,  and  in  the 
great  communities  which  have  been  founded  beyond  the  Atlantic 
by  the  descendants  of  Europeans. 

The  world  now  contains  several  extensive  regions,  provided 
with  the  various  ingredients  of  wealth  in  a degree  of  abundance  of 
which  former  ages  had  not  even  the  idea.  Without  compulsory 
labour*,  an  enormous  mass  of  food  is  annually  extracted  from 
the  soil,  and  maintains,  besides  the  actual  producers,  an  equal, 


PRELIMINARY  REMARKS 


19 


sometimes  a greater,  number  of  labourers  occupied  in  producing 
conveniences  and  luxuries  of  innumerable  kinds,  or  in  transporting 
them  from  place  to  place ; also  a multitude  of  persons  employed  in 
directing  and  superintending  these  various  labours ; and  over  and 
above  all  these,  a class  more  numerous  than  in  the  most  luxurious 
ancient  societies,  of  persons  whose  occupations  are  of  a land  not 
directly  productive,  and  of  persons  who  have  no  occupation  at  all. 
The  food  thus  raised  supports  a far  larger  population  than  had  ever 
existed  (at  least  in  the  same  regions)  on  an  equal  space  of  ground  ; 
and  supports  them  with  certainty,  exempt  from  those  periodically 
recurring  famines  so  abundant  in  the  early  history  of  Europe,  and  in 
Oriental  countries  even  now  not  unfrequent.  Besides  this  great 
increase  in  the  quantity  of  food,  it  has  greatly  improved  in  quality 
and  variety ; while  conveniences  and  luxuries,  other  than  food, 
are  no  longer  limited  to  a small  and  opulent  class,  but  descend,  in 
great  abundance,  through  many  widening  strata  in  society.  The 
collective  resources  of  one  of  these  communities,  when  it  chooses 
to  put  them  forth  for  any  unexpected  purpose  ; its  ability  to  main- 
tain fleets  and  armies,  to  execute  public  works,  either  useful  or 
ornamental,  to  perform  national  acts  of  beneficence  like  the  ransom 
of  the  West  India  slaves ; to  found  colonies,  to  have  its  people 
taught,  to  do  anything  in  short  which  requires  expense,  and  to  do 
it  with  no  sacrifice  of  the  necessaries  or  even  the  substantial  comforts 
of  its  inhabitants,  are  such  as  the  world  never  saw  before. 

But  in  all  these  particulars,  characteristic  of  the  modern  indus- 
trial communities,  those  communities  differ  widely  from  one  another. 
Though  abounding  in  wealth  as  compared  with  former  ages,  they  do 
go  in  very  different  degrees.  Even  of  the  countries  which  are 
justly  accounted  the  richest,  some  have  made  a more  complete 
use  of  their  productive  resources,  and  have  obtained,  relatively 
to  their  territorial  extent,  a much  larger  produce,  than  others ; nor 
do  they  differ  only  in  amount  of  wealth,  but  also  in  the  rapidity 
of  its  increase.  The  diversities  in  the  distribution  of  wealth  are 
still  greater  than  in  the  production.  There  are  great  differences 
in  the  condition  of  the  poorest  class  in  different  countries ; and  in 
the  proportional  numbers  and  opulence  of  the  classes  which  are 
above  the  poorest.  The  very  nature  and  designation  of  the  classes 
who  originally  share  among  them  the  produce  of  the  soil,  vary  not  a 
little  in  different  places.  In  some,  the  landowners  are  a class  in 
themselves,  almost  entirely  separate  from  the  classes  engaged  in 
industry  : in  others,  the  proprietor  of  the  land  is  almost  universally 


20 


PRELIMINARY  REMARKS 


its  cultivator,  owning  the  plough,  and  often  himself  holding  it. 
Where  the  proprietor  himself  does  not  cultivate,  there  is  sometimes, 
between  him  and  the  labourer,  an  mtermediate  agency,  that  of  the 
farmer  who  advances  the  subsistence  of  the  labourers,  supplies  the 
instruments  of  production,  and  receives,  after  paying  a rent  to  the 
landowner,  all  the  produce  : in  other  cases,  the  landlord,  his  paid 
agents,  and  the  labourers,  are  the  only  sharers.  Manufactures, 
again,  are  sometimes  carried  on  by  scattered  individuals,  who  own 
or  hire  the  tools  or  machinery  they  require,  and  employ  httle  labour 
besides  that  of  their  own  family  ; in  other  cases,  by  large  numbers 
working  together  in  one  building,  with  expensive  and  complex 
machinery  owned  by  rich  manufacturers.  The  same  difference 
exists  in  the  operations  of  trade.  The  wholesale  operations  indeed 
are  everywhere  carried  on  by  large  capitals,  where  such  exist ; but 
the  retail  deahngs,  which  collectively  occupy  a very  great  amount  of 
capital,  are  sometimes  conducted  in  small  shops,  chiefly  by  the 
personal  exertions  of  the  dealers  themselves,  'with  their  families, 
and  perhaps  an  apprentice  or  two ; and  sometimes  in  large  estab- 
lishments, of  which  the  funds  are  supplied  by  a wealthy  individual 
or  association,  and  the  agency  is  that  of  numerous  salaried  shopmen 
or  shopwomen.  Besides  these  differences  in  the  economical  pheno- 
mena presented  by  different  parts  of  what  is  usually  called  the 
civilized  world,  all  those  earlier  states  which  we  previously  passed 
in  review  have  continued  in  some  part  or  other  of  the  world,  down  to 
our  own  time.  Hunting  communities  still  exist  in  America,  nomadic 
in  Arabia  and  the  steppes  of  Northern  Asia ; Oriental  society 
is  in  essentials  what  it  has  always  been  ; the  great  empire  of  Russia 
is^  even  now,  in  many  respects,  the  scarcely  modified  image  of  feudal 
Europe.  Every  one  of  the  great  types  of  human  society,  down  to 
that  of  the  Esquimaux  or  Patagonians,  is  still  extant.^ 

These  remarkable  differences  in  the  state  of  different  portions  of 
the  human  race,  with  regard  to  the  production  and  distribution  of 
wealth,  must,  hke  all  other  phenomena,  depend  on  causes.  And  it 
is  not  a sufficient  explanation  to  ascribe  them  exclusively  to  the 
degrees  of  knowledge  possessed  at  different  times  and  places,  of  the 
laws  of  nature  and  the  physical  arts  of  life.  Many  other  causes  co- 
operate ; and  that  very  progress  and  unequal  distribution  of  physical 

^ [So  since  2nd  ed.  (1849).  In  the  1st  ed.  (1848)  the  text  ran ; “ Russia  and 
Hungary  are,”  &c.] 

* [See  Appendix  C.  The  Types  of  Society.'] 


PRELIMINARY  REMARKS 


21 


knowledge  are  partly  the  effects,  as  well  as  partly  the  causes,  of  the 
state  of  the  production  and  distribution  of  wealth. 

In  so  far  as  the  economical  condition  of  nations  turns  upon  the 
state  of  physical  knowledge,  it  is  a subject  for  the  physical  sciences, 
and  the  arts  founded  on  them.  But  in  so  far  as  the  causes  are  moral 
or  psychological,  dependent  on  institutions  and  social  relations, 
or  on  the  principles  of  human  nature,  their  investigation  belongs 
not  to  physical,  but  to  moral  and  social  science,  and  is  the  object 
of  what  is  called  Political  Economy. 

The  production  of  wealth  ; the  extraction  of  the  instruments  of 
human  subsistence  and  enjoyment  from  the  materials  of  the  globe, 
is  evidently  not  an  arbitrary  thing.  It  has  its  necessary  conditions. 
Of  these,  some  are  physical,  depending  on  the  properties  of  matter, 
and  on  the  amount  of  knowledge  of  those  properties  possessed  at  the 
particular  place  and  time.  These  Political  Economy  does  not  inves- 
tigate, but  assumes  ; referring  for  the  grounds,  to  physical  science 
or  common  experience.  Combining  with  these  facts  of  outward 
nature  other  truths  relating  to  human  nature,  it  attempts  to  trace 
the  secondary  or  derivative  laws,  by  which  the  production  of  wealth 
is  determined  ; in  which  must  lie  the  explanation  of  the  diversities 
of  riches  and  poverty  in  the  present  and  past,  and  the  ground  of 
whatever  increase  in  wealth  is  reserved  for  the  future. 

Unlike  the  laws  of  Production,  those  of  Distribution  are  partly 
of  human  institution  : since  the  manner  in  which  wealth  is  distributed 
in  any  given  society,  depends  on  the  statutes  or  usages  therein 
obtaining.  But  though  governments  or  nations  have  the  power 
of  deciding  what  institutions  shall  exist,  they  cannot  arbitrarily 
determine  how  those  institutions  shall  work.  The  conditions  on 
which  the  power  they  possess  over  the  distribution  of  wealth  is 
dependent,  and  the  manner  in  which  the  distribution  is  effected 
by  the  various  modes  of  conduct  which  society  may  think  fit  to 
adopt,  are  as  much  a subject  for  scientific  enquiry  as  any  of  the 
physical  laws  of  nature. 

The  laws  of  Production  and  Distribution,  and  some  of  the  practical 
consequences  deducible  from  them,  are  the  subject  of  the  following 
treatise. 


BOOK  I 


PRODUCTION 


CHAPTER  I 

OF  THE  REQUISITES  OF  PRODUCTION 

§ 1.  The  requisites  of  production  are  two  : labour,  and  ap 
propriate  natural  objects. 

Labour  is  either  bodily  or  mental ; or,  to  express  the  distinction 
more  comprehensively,  either  muscular  or  nervous  ; and  it  is  neces- 
sary to  include  in  the  idea,  not  solely  the  exertion  itself,  but  all  feel- 
ings of  a disagreeable  kind,  aU  bodily  inconvenience  or  mental 
annoyance,  connected  with  the  employment  of  one’s  thoughts,  or 
muscles,  or  both,  in  a particular  occupation.  Of  the  other  requisite 
— appropriate  natural  objects — it  is  to  be  remarked,  that  some 
objects  exist  or  grow  up  spontaneously,  of  a kind  suited  to  the  supply 
of  human  wants.  There  are  caves  and  hollow  trees  capable  of 
affording  shelter ; fruit,  roots,  wild  honey,  and  other  natural  pro- 
ducts, on  which  human  life  can  be  supported ; but  even  here  a 
considerable  quantity  of  labour  is  generally  required,  not  for  the  pur- 
pose of  creating,  but  of  finding  and  appropriating  them.  In  all  but 
these  few  and  (except  in  the  very  commencement  of  human  society) 
unimportant  cases,  the  objects  supplied  by  nature  are  only  instru- 
mental to  human  wants,  after  having  undergone  some  degree  of 
transformation  by  human  exertion.  Even  the  wild  animals  of  the 
forest  and  of  the  sea,  from  which  the  hunting  and  fishing  tribes 
derive  their  sustenance — though  the  labour  of  which  they  are  the  sub- 
ject is  chiefly  that  required  for  appropriating  them — must  yet,  before 
they  are  used  as  food,  be  killed,  divided  into  fragments,  and  subjected 
in  almost  all  cases  to  some  culinary  process,  which  are  operations 


REQUISITES  OF  PRODUCTION 


23 


requiring  a certain  degree  of  human  labour.  The  amount  of  trans- 
formation which  natural  substances  undergo  before  being  brought 
into  the  shape  in  which  they  are  directly  applied  to  human  use 
varies  from  this  or  a still  less  degree  of  alteration  in  the  nature  and 
appearance  of  the  object,  to  a change  so  total  that  no  trace  is  per- 
ceptible of  the  original  shape  and  structure.  There  is  little  resem- 
blance between  a piece  of  a mineral  substance  found  in  the  earth,  and 
a plough,  an  axe,  or  a saw.  There  is  less  resemblance  between 
porcelain  and  the  decomposing  granite  of  which  it  is  made,  or 
between  sand  mixed  with  sea  weed,  and  glass.  The  difference 
is  greater  still  between  the  fleece  of  a sheep,  or  a handful  of  cotton 
seeds,  and  a web  of  muslin  or  broad  cloth ; and  the  sheep  and  seeds 
themselves  are  not  spontaneous  growths,  but  results  of  previous 
labour  and  care.  In  these  several  cases  the  ultimate  product  is  so 
extremely  dissimilar  to  the  substance  supplied  by  nature,  that  in 
the  custom  of  language  nature  is  represented  as  only  furnishing 
materials. 

Nature,  however,  does  more  than  supply  materials ; she  also 
supplies  powers.  The  matter  of  the  globe  is  not  an  inert  recipient 
of  forms  and  properties  impressed  by  human  hands ; it  has  active 
energies  by  which  it  co-operates  with,  and  may  even  be  used  as  a 
substitute  for,  labour.  In  the  early  ages  people  converted  their 
corn  into  flour  by  pounding  it  between  two  stones  ; they  next  hit 
on  a contrivance  which  enabled  them,  by  turning  a handle,  to  make 
one  of  the  stones  revolve  upon  the  other  ; and  this  process,  a little 
improved,  is  still  the  common  practice  of  the  East.  The  muscular 
exertion,  however,  which  it  required,  was  very  severe  and  exhausting, 
insomuch  that  it  was  often  selected  as  a punishment  for  slaves  who 
had  offended  their  masters.  When  the  time  came  at  which  the 
labour  and  sufferings  of  slaves  were  thought  worth  economizing,  the 
greater  part  of  this  bodily  exertion  was  rendered  unnecessary, 
by  contriving  that  the  upper  stone  should  be  made  to  revolve  upon 
the  lower,  not  by  human  strength,  but  by  the  force  of  the  wind  or  of 
falling  water.  In  this  case,  natural  agents,  the  wind  or  the  gravita- 
tion of  the  water,  are  made  to  do  a portion  of  the  work  previously 
done  by  labour. 

§ 2.  Cases  like  this,  in  which  a certain  amount  of  labour  has 
been  dispensed  with,  its  work  being  devolved  upon  some  natural 
agent,  are  apt  to  suggest  an  erroneous  notion  of  the  comparative 
functions  of  labour  and  natural  powers ; as  if  the  co-operation  of 


24 


BOOK  L CHAPTER  I.  § 2 


those  powers  with  human  industry  were  Kmited  to  the  cases  in  which 
they  are  made  to  perform  what  would  otherwise  be  done  by  labour  ; 
as  if,  in  the  case  of  things  made  (as  the  phrase  is)  by  hand,  nature 
only  furnished  passive  materials.  This  is  an  illusion.  The  powers 
of  nature  are  as  actively  operative  in  the  one  case  as  in  the  other. 
A workman  takes  a stalk  of  the  flax  or  hemp  plant,  splits  it  into 
separate  fibres,  twines  together  several  of  these  fibres  with  his 
fingers,  aided  by  a simple  instrument  called  a spindle ; having 
thus  formed  a thread,  he  lays  many  such  threads  side  by  side,  and 
places  other  similar  threads  directly  across  them,  so  that  each  passes 
alternately  over  and  under  those  which  are  at  right  angles  to  it ; 
this  part  of  the  process  being  facilitated  by  an  instrument  called 
a shuttle.  He  has  now  produced  a web  of  cloth,  either  linen  or 
Back-cloth,  according  to  the  material.  He  is  said  to  have  done 
this  by  hand,  no  natural  force  being  supposed  to  have  acted  ip 
concert  with  him.  But  by  what  force  is  each  step  of  this  operation 
rendered  possible,  and  the  web,  when  produced,  held  together  ? 
By  the  tenacity,  or  force  of  cohesion,  of  the  fibres : which  is  one 
of  the  forces  in  nature,  and  which  we  can  measure  exactly  against 
other  mechanical  forces,  and  ascertain  how  much  of  any  of  them  it 
suffices  to  neutralize  or  counterbalance. 

If  we  examine  any  other  case  of  what  is  called  the  action  of  man 
upon  nature,  we  shall  find  in  like  manner  that  the  powers  of  nature, 
or  in  other  words  the  properties  of  matter,  do  all  the  work,  when 
once  objects  are  put  into  the  right  position.  This  one  operation, 
of  putting  things  into  fit  places  for  being  acted  upon  by  their  own 
internal  forces,  and  by  those  residing  in  other  natural  objects,  is  all 
that  man  does,  or  can  do,  with  matter.  He  only  moves  one  thing  to 
or  from  another.  He  moves  a seed  into  the  ground ; and  the 
natural  forces  of  vegetation  produce  in  succession  a root,  a stem, 
leaves,  flowers,  and  fruit.  He  moves  an  axe  through  a tree,  and  it 
falls  by  the  natural  force  of  gravitation ; he  moves  a saw  through 
it,  in  a particular  manner,  and  the  physical  properties  by  which 
a softer  substance  gives  way  before  a harder,  make  it  separate  into 
planks,  which  he  arranges  in  certain  positions,  with  nails  driven 
through  them,  or  adhesive  matter  between  them,  and  produces  a 
table,  or  a house.  He  moves  a spark  to  fuel,  and  it  ignites,  and  by 
the  force  generated  in  combustion  it  cooks  the  food,  melts  or  softens 
the  iron,  converts  into  beer  or  sugar  the  malt  or  cane-juice,  which 
he  has  previously  moved  to  the  spot.  He  has  no  other  means 
of  acting  on  matter  than  by  moving  it.  Motion,  and  resistance  to 


REQUISITES  OF  PRODUCTION 


25 


motion,  are  the  only  things  which  his  muscles  are  constructed  for. 
By  muscular  contraction  he  can  create  a pressure  on  an  outward 
object,  which,  if  sufficiently  powerful,  will  set  it  in  motion,  or  if  it  be 
already  moving,  will  check  or  modify  or  altogether  arrest  its  motion, 
and  he  can  do  no  more.  But  this  is  enough  to  have  given  all 
the  command  which  mankind  have  acquired  over  natural  forces 
immeasurably  more  powerful  than  themselves  ; a command  which, 
great  as  it  is  already,  is  without  doubt  destined  to  become 
indefinitely  greater.  He  exerts  this  power  either  by  availing  himself 
of  natural  forces  in  existence,  or  by  arranging  objects  in  those 
mixtures  and  combinations  by  which  natural  forces  are  generated ; 
as  when  by  putting  a lighted  match  to  fuel,  and  water  into  a 
boiler  over  it,  he  generates  the  expansive  force  of  steam,  a power 
which  has  been  made  so  largely  available  for  the  attainment  of 
human  purposes.* 

Labour,  then,  in  the  physical  world,  is  always  and  solely  employed 
in  putting  objects  in  motion  ; the  properties  of  matter,  the  laws 
of  nature,  do  the  rest.  The  skill  and  ingenuity  of  human  beings  are 
chiefly  exercised  in  discovering  movements,  practicable  by  their 
powers,  and  capable  of  bringing  about  the  effects  which  they  desire. 
But,  while  movement  is  the  only  effect  which  man  can  immediately 
and  directly  produce  by  his  muscles,  it  is  not  necessary  that  he  should 
produce  directly  by  them  all  the  movements  which  he  requires.  The 
first  and  most  obvious  substitute  is  the  muscular  action  of  cattle : 
by  degrees  the  powers  of  inanimate  nature  are  made  to  aid  in  this 
too,  as  by  making  the  wind,  or  water,  things  already  in  motion, 
communicate  a part  of  their  motion  to  the  wheels,  which  before 
that  invention  were  made  to  revolve  by  muscular  force.  This 
service  is  extorted  from  the  powers  of  wind  and  water  by  a set  of 
actions,  consisting  fike  the  former  in  moving  certain  objects  into 
certain  positions  in  which  they  constitute  what  is  termed  a machine  ; 
but  the  muscular  action  necessary  for  this  is  not  constantly  renewed 
but  performed  once  for  all,  and  there  is  on  the  whole  a great  economy 
of  labour. 


§ 3.  Some  writers  have  raised  the  question,  whether  nature 
gives  more  assistance  to  labour  in  one  kind  of  industry  or  in  another  ; 
and  have  said  that  in  some  occupations  labour  does  most,  in  others 

* This  essential  and  primary  law  of  man’s  power  over  nature  w'as,  I believe, 
first  illustrated  and  made  prominent  as  a fundamental  principle  of  Political 
Economy,  in  the  first  chapter  of  Mr.  [James]  Mill’s  Elements. 


26 


BOOK  I.  CHAPTER  I.  § 4 


nature  most.  In  this,  however,  there  seems  much  confusion  of 
ideas.  The  part  which  nature  has  in  any  work  of  man,  is  indefinite 
and  incommensurable.  It  is  impossible  to  decide  that  in  any  one 
thing  nature  does  more  than  in  any  other.  One  cannot  even  say 
that  labour  does  less.  Less  labour  may  be  required ; but  if  that 
which  is  required  is  absolutely  indispensable,  the  result  is  just  as 
much  the  product  of  labour,  as  of  nature.  When  two  conditions 
are  equally  necessary  for  producing  the  effect  at  all,  it  is  unmeaning 
to  say  that  so  much  of  it  is  produced  by  one  and  so  much  by  the 
other  ; it  is  like  attempting  to  decide  which  half  of  a pair  of  scissors 
has  most  to  do  in  the  act  of  cutting ; or  which  of  the  factors,  five 
and  six,  contributes  most  to  the  production  of  thirty.  The  form 
which  this  conceit  usually  assumes,  is  that  of  supposing  that  nature 
lends  more  assistance  to  human  endeavours  in  agriculture  than  in 
manufactures.  This  notion,  held  by  the  French  Economistes,  and 
from  which  Adam  Smith  was  not  free,  arose  from  a misconception 
of  the  nature  of  rent.  The  rent  of  land  being  a price  paid  for  a 
natural  agency,  and  no  such  price  being  paid  in  manufactures,  these 
writers  imagined  that  since  a price  was  paid,  it  was  because  there 
was  a greater  amount  of  service  to  be  paid  for : whereas  a better 
consideration  of  the  subject  would  have  shown  that  the  reason 
why  the  use  of  land  bears  a price  is  simply  the  limitation  of  its 
quantity,  and  that  if  air,  heat,  electricity,  chemical  agencies,  and  the 
other  powers  of  nature  employed  by  manufacturers,  were  spar- 
ingly supplied,  and  could,  like  land,  be  engrossed  and  appropriated, 
a rent  could  be  exacted  for  them  also. 

§ 4.  This  leads  to  a distinction  which  we  shall  find  to  be  of 
primary  importance.  Of  natural  powers,  some  are  unhmited,  others 
limited  in  quantity.  By  an  unlimited  quantity  is  of  course  not  meant 
literally,  but  practically  unlimited : a quantity  beyond  the  use 
which  can  in  any,  or  at  least  in  present  circumstances,  be  made  of  it. 
Land  is,  in  some  newly  settled  countries,  practically  unlimited  in 
quantity  : there  is  more  than  can  be  used  by  the  existing  population 
of  the  country,  or  by  any  accession  likely  to  be  made  to  it  for  genera- 
tions to  come.  But  even  there,  land  favourably  situated  with 
regard  to  markets  or  means  of  carriage  is  generally  limited  in 
quantity  : there  is  not  so  much  of  it  as  persons  would  gladly  occupy 
and  cultivate,  or  otherwise  turn  to  use.  In  all  old  countries,  land 
capable  of  cultivation,  land  at  least  of  any  tolerable  fertihty,  must 
be  ranked  among  agents  limited  in  quantity.  Water,  for  ordinary 


REQUISITES  OF  PRODUCTION 


27 


purposes,  on  the  banks  of  rivers  or  lakes,  may  be  regarded  as  of 
unlimited  abundance ; but  if  required  for  irrigation,  it  may  even 
there  be  insufficient  to  supply  all  wants,  while  in  places  which  depend 
for  their  consumption  on  cisterns  or  tanks,  or  on  wells  which  are 
not  copious,  or  are  liable  to  fail,  water  takes  its  place  among  things 
the  quantity  of  which  is  most  strictly  limited.  Where  water  itself 
is  plentiful,  yet  water-power,  i.e.  a fall  of  water  applicable  by  its 
mechanical  force  to  the  service  of  industry,  may  be  exceedingly 
limited,  compared  with  the  use  which  would  be  made  of  it  if  it  were 
more  abundant.  Coal,  metallic  ores,  and  other  useful  substances 
found  in  the  earth,  are  still  more  limited  than  land.  They  are  not 
only  strictly  local  but  exhaustible ; though,  at  a given  place  and 
time,  they  may  exist  in  much  greater  abundance  than  would  be 
applied  to  present  use  even  if  they  could  be  obtained  gratis.  Fish- 
eries, in  the  sea,  are  in  most  cases  a gift  of  nature  practically  unlimited 
in  amount ; but  the  Arctic  whale  fisheries  have  long  been  insufficient 
for  the  demand  which  exists  even  at  the  very  considerable  price 
necessary  to  defray  the  cost  of  appropriation : and  the  immense 
extension  which  the  Southern  fisheries  have  in  consequence  assumed, 
is  tending  to  exhaust  them  likewise.  Kiver  fisheries  are  a natural 
resource  of  a very  limited  character,  and  would  be  rapidly  exhausted, 
if  allowed  to  be  used  by  every  one  without  restraint.  Air,  even 
that  state  of  it  which  we  term  wind,  may,  in  most  situations,  be 
obtained  in  a quantity  sufficient  for  every  possible  use ; and  so 
likewise,  on  the  sea  coast  or  on  large  rivers,  may  water  carriage : 
though  the  wharfage  or  harbour-room  applicable  to  the  service 
of  that  mode  of  transport  is  in  many  situations  far  short  of  what 
would  be  used  if  easily  attainable. 

It  will  be  seen  hereafter  how  much  of  the  economy  of  society 
depends  on  the  limited  quantity  in  which  some  of  the  most  important 
natural  agents  exist,  and  more  particularly  land.  For  the  present 
I shall  only  remark,  that  so  long  as  the  quantity  of  a natural  agent 
is  practically  unlimited,  it  cannot,  unless  susceptible  of  artificial 
monopoly,  bear  any  value  in  the  market,  since  no  one  will  give  any- 
thing for  what  can  be  obtained  gratis.  But  as  soon  as  a limitation 
becomes  practically  operative ; as  soon  as  there  is  not  so  much  of 
the  thing  to  be  had,  as  would  be  appropriated  and  used  if  it  could 
be  obtained  for  asking ; the  ownership  or  use  of  the  natural  agent 
acquires  an  exchangeable  value.  When  more  water  power  is  wanted 
in  a particular  district,  than  there  are  falls  of  water  to  supply  it, 
persons  will  give  an  equivalent  for  the  use  of  a fall  of  water.  When 


28 


BOOK  L CHAPTER  I.  § 4 


there  is  more  land  wanted  for  cultivation  than  a place  possesses,  or 
than  it  possesses  of  a certain  quality  and  certain  advantages  of 
situation,  land  of  that  quality  and  situation  may  be  sold  for  a price, 
or  let  for  an  annual  rent.  This  subject  will  hereafter  be  discussed  at 
length ; but  it  is  often  useful  to  anticipate,  by  a brief  suggestion, 
principles  and  deductions  which  we  have  not  yet  reached  the  place  for 
exhibiting  and  illustrating  fully. 


CHAPTER  II 


OF  LABOUR  AS  AN  AGENT  OF  PRODUCTION 

§ 1.  The  labour  which  terminates  in  the  production  of  an 
article  fitted  for  some  human  use  is  either  employed  directly 
about  the  thing,  or  in  previous  operations  destined  to  facilitate, 
perhaps  essential  to  the  possibility  of,  the  subsequent  ones.  In 
making  bread,  for  example,  the  labour  employed  about  the  thing 
itself  is  that  of  the  baker ; but  the  labour  of  the  miller,  though 
employed  directly  in  the  production  not  of  bread  but  of  flour,  is 
equally  part  of  the  aggregate  sum  of  labour  by  which  the  bread 
is  produced ; as  is  also  the  labour  of  the  sower  and  of  the  reaper. 
Some  may  think  that  all  these  persons  ought  to  be  considered  as 
employing  their  labour  directly  about  the  thing;  the  corn,  the 
flour,  and  the  bread  being  one  substance  in  three  different  states. 
Without  disputing  about  this  question  of  mere  language,  there 
is  still  the  ploughman,  who  prepared  the  ground  for  the  seed,  and 
whose  labour  never  came  in  contact  with  the  substance  in  any  of 
its  states ; and  the  plough-maker,  whose  share  in  the  result  was 
still  more  remote.  All  these  persons  ultimately  derive  the  remunera- 
tion of  their  labour  from  the  bread,  or  its  price  : the  plough-maker 
as  much  as  the  rest ; for  since  ploughs  are  of  no  use  except  for 
tilling  the  soil,  no  one  would  make  or  use  ploughs  for  any  other 
reason  than  because  the  increased  returns,  thereby  obtained  from 
the  ground,  afforded  a source  from  which  an  adequate  equivalent 
could  be  assigned  for  the  labour  of  the  plough-maker.  If  the 
produce  is  to  be  used  or  consumed  in  the  form  of  bread,  it  is  from  the 
bread  that  this  equivalent  must  come.  The  bread  must  suffice 
to  remunerate  all  these  labourers,  and  several  others ; such  as 
the  carpenters  and  bricklayers  who  erected  the  farm-buildings; 
the  hedgers  and  ditchers  who  made  the  fences  necessary  for  the 
protection  of  the  crop ; the  miners  and  smelters  who  extracted 
or  prepared  the  iron  of  which  the  plough  and  other  implements 


30 


BOOK  I.  CHAPTER  n.  § 1 


were  made.  These,  however,  and  the  plough-maker,  do  not  depend 
for  their  remuneration  upon  the  bread  made  from  the  produce  of 
a single  harvest,  but  upon  that  made  from  the  produc''  of  all  the 
harvests  which  are  successively  gathered  until  the  plough,  or  the 
buildings  and  fences,  are  worn  out.  We  must  add  yet  another 
kind  of  labour;  that  of  transporting  the  produce  from  the  place 
of  its  production  to  the  place  of  its  destined  use : the  labour  of 
carrying  the  com  to  market,  and  from  market  to  the  miller’s,  the 
flour  from  the  miller’s  to  the  baker’s,  and  the  bread  from  the 
baker’s  to  the  place  of  its  final  consumption.  This  labour  is 
sometimes  very  considerable  : flour  is  [1848]  transported  to  England 
from  beyond  the  Atlantic,  com  from  the  heart  of  Russia ; and  in 
addition  to  the  labourers  immediately  employed,  the  waggoners 
and  sailors,  there  are  also  costly  instruments,  such  as  ships,  in  the 
constmction  of  which  much  labour  has  been  expended  : that  labour, 
however,  not  depending  for  its  whole  remuneration  upon  the  bread, 
but  for  a part  only  ; ships  being  usually,  during  the  course  of  their 
existence,  employed  in  the  transport  of  many  different  kinds  of 
commodities. 

To  estimate,  therefore,  the  labour  of  which  any  given  com- 
modity is  the  result  is  far  from  a simple  operation.  The  items 
in  the  calculation  are  very  numerous — as  it  may  seem  to  some 
persons,  infinitely  so ; for  if,  as  a part  of  the  labour  employed  in 
making  bread,  we  count  the  labour  of  the  blacksmith  who  made 
the  plough,  why  not  also  (it  may  be  asked)  the  labour  of  making 
the  tools  used  by  the  blacksmith,  and  the  tools  used  in  making 
those  tools,  and  so  back  to  the  origin  of  things  ? But  after  mounting 
one  or  two  steps  in  this  ascending  scale,  we  come  into  a region  of 
fractions  too  minute  for  calculation.  Suppose,  for  instance,  that 
the  same  plough  will  last,  before  being  worn  out,  a dozen  years. 
Only  one-twelfth  of  the  labour  of  making  the  plough  must  be  placed 
to  the  account  of  each  year’s  harvest.  A twelfth  part  of  the  labour 
of  making  a plough  is  an  appreciable  quantity.  But  the  same 
set  of  tools,  perhaps,  suffice  to  the  plough-maker  for  forging  a 
hundred  ploughs,  which  serve  during  the  twelve  years  of  their 
existence  to  prepare  the  soil  of  as  many  different  farms.  A twelve- 
hundredth  part  of  the  labour  of  making  his  tools,  is  as  much, 
therefore,  as  has  been  expended  in  procuring  one  year’s  harvest 
of  a single  farm  : and  when  this  fraction  comes  to  be  further  appor- 
tioned among  the  various  sacks  of  com  and  loaves  of  bread,  it  is 
seen  at  once  that  such  quantities  are  not  worth  taking  into  the 


LABOUR  AS  AN  AGENT  OF  PRODUCTION 


31 


account  for  any  practical  purpose  connected  with  the  commodity.  It 
is  true  that,  if  the  tool-maker  had  not  laboured,  the  corn  and  bread 
never  would  have  been  produced ; but  they  will  not  be  sold  a 
tenth  part  of  a farthing  dearer  in  consideration  of  his  labour. 

§ 2.  Another  of  the  modes  in  which  labour  is  indirectly  or 
remotely  instrumental  to  the  production  of  a thing  requires  par- 
ticular notice  : namely,  when  it  is  employed  in  producing  subsistence 
to  maintain  the  labourers  while  they  are  engaged  in  the  production. 
This  previous  employment  of  labour  is  an  indispensable  condition 
to  every  productive  operation,  on  any  other  than  the  very  smallest 
scale.  Except  the  labour  of  the  hunter  and  fisher,  there  is  scarcely 
any  kind  of  labour  to  which  the  returns  are  immediate.  Productive 
operations  require  to  be  continued  a certain  time,  before  their 
fruits  are  obtained.  Unless  the  labourer,  before  commencing  his 
work,  possesses  a store  of  food,  or  can  obtain  access  to  the  stores 
of  some  one  else,  in  sufficient  quantity  to  maintain  him  until  the 
production  is  completed,  he  can  undertake  no  labour  but  such  as 
can  be  carried  on  at  odd  intervals,  concurrently  with  the  pursuit  of 
his  subsistence.  He  cannot  obtain  food  itself  in  any  abundance ; 
for  every  mode  of  so  obtaining  it  requires  that  there  be  already 
food  in  store.  Agriculture  only  brings  forth  food  after  the  lapse  of 
months ; and  though  the  labours  of  the  agriculturist  are  not 
necessarily  continuous  during  the  whole  period,  they  must  occupy 
a considerable  part  of  it.  Not  only  is  agriculture  impossible  without 
food  produced  in  advance,  but  there  must  be  a very  great  quantity 
in  advance  to  enable  any  considerable  community  to  support  itself 
wholly  by  agriculture.  A country  hke  England  or  France  is  only 
able  to  carry  on  the  agriculture  of  the  present  year,  because  that 
of  past  years  has  provided,  in  those  countries  or  somewhere  else, 
sufficient  food  to  support  their  agricultural  population  until  the 
next  harvest.  They  are  only  enabled  to  produce  so  many  other 
things  besides  food,  because  the  food  which  was  in  store  at  the 
close  of  the  last  harvest  suffices  to  maintain  not  only  the  agricultural 
labourers,  but  a large  industrious  population  besides. 

The  labour  employed  in  producing  this  stock  of  subsistence 
forms  a great  and  important  part  of  the  past  labour  which  has 
been  necessary  to  enable  present  labour  to  be  carried  on.  But 
there  is  a difference,  requiring  particular  notice,  between  this  and 
the  other  kinds  of  previous  or  preparatory  labour.  The  miller,  the 
reaper,  the  ploughman,  the  plough-maker,  the  waggoner  and 


32 


BOOK  I.  CHAPTER  II.  § 2 


waggon-maker,  even  the  sailor  and  ship-builder  when  employed, 
derive  their  remuneration  from  the  ultimate  product — the  bread 
made  from  the  corn  on  which  they  have  severally  operated,  or 
<«upplied  the  instruments  for  operating.  The  labour  that  produced 
the  food  which  fed  all  these  labourers  is  as  necessary  to  the  ultimate 
result,  the  bread  of  the  present  harvest,  as  any  of  those  other  portions 
of  labour ; but  is  not,  like  them,  remunerated  from  it.  That 
previous  labour  has  received  its  remuneration  from  the  previous 
food.  In  order  to  raise  any  product,  there  are  needed  labour, 
tools,  and  materials,  and  food  to  feed  the  labourers.  But  the 
tools  and  materials  are  of  no  use  except  for  obtaining  the  product,  or 
at  least  are  to  be  applied  to  no  other  use,  and  the  labour  of  their 
construction  can  be  remunerated  only  from  the  product  when 
obtained.  The  food,  on  the  contrary,  is  intrinsically  useful,  and  is 
applied  to  the  direct  use  of  feeding  human  beings.  The  labour 
expended  in  producing  the  food,  and  recompensed  by  it,  needs 
pot  be  remunerated  over  again  from  the  produce  of  the  subsequent 
labour  which  it  has  fed.  If  we  suppose  that  the  same  body  of 
labourers  carried  on  a manufacture,  and  grew  food  to  sustain 
themselves  while  doing  it,  they  have  had  for  their  trouble  the  food 
and  the  manufactured  article ; but  if  they  also  grew  the  material 
and  made  the  tools,  they  have  had  nothing  for  that  trouble  but  the 
manufactured  article  alone. 

The  claim  to  remuneration  founded  on  the  possession  of  food, 
available  for  the  maintenance  of  labourers,  is  of  another  kind ; 
remuneration  for  abstinence,  not  for  labour.  If  a person  has  a store 
of  food,  he  has  it  in  his  power  to  consume  it  himself  in  idleness, 
or  in  feeding  others  to  attend  on  him,  or  to  fight  for  him,  or  to 
sing  or  dance  for  him.  If,  instead  of  these  things,  he  gives  it  to 
productive  labourers  to  support  them  during  their  work,  he  can, 
and  naturally  will,  claim  a remuneration  from  the  produce.  He 
will  not  be  content  with  simple  repayment ; if  he  receives  merely  that, 
he  is  only  in  the  same  situation  as  at  first,  and  has  derived  no  { 
advantage  from  delaying  to  apply  his  savings  to  his  own  benefit  or 
pleasure.  He  will  look  for  some  equivalent  for  this  forbearance : 
he  will  expect  his  advance  of  food  to  come  back  to  him  with  an 
increase,  called  in  the  language  of  business,  a profit ; and  the  hope 
of  this  profit  will  generally  have  been  a part  of  the  inducement 
which  made  him  accumulate  a stock,  by  economizing  in  his  own 
consumption  ; or,  at  any  rate,  which  made  him  forego  the  applica- 
tion of  it,  when  accumulated,  to  his  personal  ease  or  satisfaction. 


LABOUR  AS  AN  AGENT  OF  PRODUCTION 


33 


The  food  also  which  maintained  other  workmen  while  producing 
the  tools  or  materials  must  have  been  provided  in  advance  by  some 
one,  and  he,  too,  must  have  his  profit  from  the  ultimate  product ; 
but  there  is  this  difference,  that  here  the  ultimate  product  has 
to  supply  not  only  the  profit,  but  also  the  remuneration  of  the  labour. 
The  tool-maker  (say,  for  instance,  the  plough-maker)  does  not 
indeed  usually  wait  for  his  payment  until  the  harvest  is  reaped ; 
the  farmer  advances  it  to  him,  and  steps  into  his  place  by  becoming 
the  owner  of  the  plough.  Nevertheless,  it  is  from  the  harvest  that 
the  payment  is  to  come;  since  the  farmer  would  not  undertake 
this  outlay  unless  he  expected  that  the  harvest  would  repay  him, 
and  with  a profit  too  on  this  fresh  advance ; that  is,  unless  the 
harvest  would  yield,  besides  the  remuneration  of  the  farm  labourers 
(and  a profit  for  advancing  it),  a sufficient  residue  to  remunerate 
the  plough-maker’s  labourers,  give  the  plough-maker  a profit, 
and  a profit  to  the  farmer  on  both. 

§ 3.  From  these  considerations  it  appears,  that  in  an  enumera- 
tion and  classification  of  the  kinds  of  industry  which  are  intended 
for  the  indirect  or  remote  furtherance  of  other  productive  labour, 
we  need  not  include  the  labour  of  producing  subsistence  or  other 
necessaries  of  life  to  be  consumed  by  productive  labourers  ; for  the 
main  end  and  purpose  of  this  labour  is  the  subsistence  itself ; and 
though  the  possession  of  a store  of  it  enables  other  work  to  be  done, 
this  is  but  an  incidental  consequence.  The  remaining  modes  in 
which  labour  is  indirectly  instrumental  to  production  may  be 
arranged  under  five  heads. 

First : Labour  employed  in  producing  materials,  on  which 
industry  is  to  be  afterwards  employed.  This  is,  in  many  cases, 
a labour  of  mere  appropriation ; extractive  industry,  as  it  has 
been  aptly  named  by  M.  Dunoyer.  The  labour  of  the  miner, 
for  example,  consists  of  operations  for  digging  out  of  the  earth 
substances  convertible  by  industry  into  various  articles  fitted 
for  human  use.  Extractive  industry,  however,  is  not  confined 
to  the  extraction  of  materials.  Coal,  for  instance,  is  employed, 
not  only  in  the  process  of  industry,  but  in  directly  warming  human 
beifigs.  When  so  used,  it  is  not  a material  of  production,  but  is 
itself  the  ultimate  product.  So,  also,  in  the  case  of  a mine  of  precious 
stones.  These  are  to  some  small  extent  employed  in  the  productive 
arts,  as  diamonds  by  the  glass-cutter,  emery  and  corundum  for 
polishing,  but  their  principal  destination,  that  of  ornament,  is  a 

0 


34  BOOK  I.  CHAPTER  H.  § 4 

direct  use ; tliougli  they  commonly  require,  before  being  so  used, 
some  process  of  manufacture,  which  may  perhaps  warrant  our 
regarding  them  as  materials.  Metallic  ores  of  all  sorts  are  materials 

Under  the  head,  production  of  materials,  we  must  include 
the  industry  of  the  wood-cutter,  when  employed  in  cutting  and 
preparing  timber  for  building,  or  wood  for  the  purposes  of  the 
carpenter’s  or  any  other  art.  In  the  forests  of  America,  Norway, 
Germany,  the  Pyrenees  and  Alps,  this  sort  of  labour  is  largely 
employed  on  trees  of  spontaneous  growth.  In  other  cases,  we  must 
add  to  the  labour  of  the  wood-cutter  that  of  the  planter  and 

cultivator.  . , , , t 

Under  the  same  head  are  also  comprised  the  laboum  of  the 
agriculturist  in  growing  flax,  hemp,  cotton,  feeding  silkworms, 
raising  food  for  cattle,  producing  bark,  dye-stuffs,  some  oleaginous 
plants,  and  many  other  things  only  Useful  because  required  in 
other  departments  of  industry.  So,  too,  the  labour  of  the  hunter, 
as  far  as  his  object  is  furs  or  feathers;  of  the  shepherd  and  the 
cattle-breeder,  in  respect  of  wool,  hides,  horn,  bristles,  horse-hair, 
and  the  like.  The  things  used  as  materials  in  some  process  or  other 
of  manufacture  are  of  a most  miscellaneous  character,  drawn  from 
almost  every  quarter  of  the  animal,  vegetable,  and  mineral  kingdoms. 
And  besides  this,  the  finished  products  of  many  branches  of  industry 
are  the  materials  of  others.  The  thread  produced  by  the  spmneJ 
is  applied  to  hardly  any  use  except  as  material  for  the  weaver 
Even  the  product  of  the  loom  is  chiefly  used  as  material  for  the 
fabricators  of  articles  of  dress  or  furniture,  or  of  further  instruments 
of  productive  industry,  as  in  the  case  of  the  sail-maker.  The  currier 
and  tanner  find  their  whole  occupation  in  converting  raw  material 
into  what  may  be  termed  prepared  material.  In  strictness  of 
speech,  almost  all  food,  as  it  comes  from  the  hands  of  the  agri- 
culturist, is  nothing  more  than  material  for  the  occupation  of  the 
baker  or  the  cook. 


§ 4.  The  second  kind  of  indirect  labour  is  that  employed  in 
making  tools  or  implements  for  the  assistance  of  labour.  ^ I use 
these  terms  in  their  most  comprehensive  sense,  embracing  all 
permanent  instruments  or  helps  to  production,  from  a flint  and 
steel  for  striking  a fight,  to  a steam-ship,  or  the  most  complex 
apparatus  of  manufacturing  machinery.  There  may  be  some 
hesitation  where  to  draw  the  fine  between  implements  and  materials ; 


LABOUR  AS  AN  AGENT  OF  PRODUCTION  35 

and  some  things  used  in  production  (such  as  fuel)  would  scarcely 
in  common  language  be  called  by  either  name,  popular  phraseology 
being  shaped  out  by  a different  class  of  necessities  from  those  of 
scientific  exposition.  To  avoid  a multiplication  of  classes  and 
denominations  answering  to  distinctions  of  no  scientific  importance 
political  economists  generally  include  all  things  which  are  used  as 
tmmeAate  means  of  production  (the  means  which  are  not  immediate 
mil  be  considered  presently)  either  in  the  class  of  implements  or  in 
that  of  materials.  Perhaps  the  line  is  most  usually  and  most  con- 
veniently drawn  by  considering  as  a material  every  instrument 
of  production  which  can  only  be  used  once,  being  destroyed  (at 
kast  as  an  instrument  for  the  purpose  in  hand)  by  a single  employ- 
ment Thus  fuel,  once  burnt,  cannot  be  again  used  as  fuel ; what 
can  be  so  used  is  only  any  portion  which  has  remained  unburnt 
the  first  time.  _ And  not  only  it  cannot  be  used  without  being  con- 
sumed, but  It  13  only  useful  by  being  consumed;  for  if  no  part  of 
the  fuel  were  destroyed,  no  heat  would  be  generated.  A fleece 
again  is  dertroyed  as  a fleece  by  being  spun  into  thread ; and  the 
thread  cannot  be  nsed  as  thread  when  woven  into  cloth.  But  an 
axe  IS  not  destroyed  as  an  axe  by  cutting  down  a tree  : it  may  be 
used  afterwards  to  cut  down  a hundred  or  a thousand  more ; and 
ough  deteriorated  in  some  small  degree  by  each  use,  it  does  not  do 
Its  work  by  being  deteriorated,  as  the  coal  and  the  fleece  do  theirs 
y being  destroyed ; on  the  contrary,  it  is  the  better  instrument  the 
better  It  resists  detenoration.  There  are  some  things,  rightly  classed 
M materials,  which  may  be  used  as  such  a second  and  a thfrd  time, 
but  not  while  the  product  to  which  they  at  first  contributed  remains 

ed  to  form  a plough  or  a steam-engine;  the  stones  with  wLh 

another.  But  this  cannot  be  done  while  the  original  product 
tkn  oTtb  fi  “ suspended,  until  the  Lhaus- 

thev  m ^ I®"  classed  as  implements  ; 

they  may  be  usod  repeatedly  for  fresh  work,  until  the  time,  sometimes 

done  by  them  may  subsist  unimpaired,  and  when  it  perishes,  do^ 

SO  by  Its  own  laws,  or  by  casualties  of  its  own.* 

(Octob?;  Review 

rather  difforen  ly  : implements 


36 


BOOK  I.  CHAPTER  II.  § 5 


The  only  practical  difference  of  much  importance  arising  from 
the  distinction  between  materials  and  implements  is  one  which  has 
attracted  our  attention  in  another  case.  Since  materials  are 
destroyed  as  such  by  being  once  used,  the  whole  of  the  labour 
required  for  their  production,  as  well  as  the  abstinence  of  the  person 
who  supplied  the  means  for  carrying  it  on,  must  be  remunerated 
from  the  fruits  of  that  single  use.  Implements,  on  the  contrary, 
being  susceptible  of  repeated  employment,  the  whole  of  the  products 
which  they  are  instrumental  in  bringing  into  existence  are  a fund 
which  can  be  drawn  upon  to  remunerate  the  labour  of  their  construc- 
tion, and  the  abstinence  of  those  by  whose  accumulations  that 
labour  was  supported.  It  is  enough  if  each  product  contributes 
a fraction,  commonly  an  insignificant  one,  towards  the  remuneration 
of  that  labour  and  abstinence,  or  towards  indemnifying  the  imme- 
diate producer  for  advancing  that  remuneration  to  the  person  who 
produced  the  tools. 

§ 5.  Thirdly : Besides  materials  for  industry  to  employ  itself 
on,  and  implements  to  aid  it,  provision  must  be  made  to  prevent 
its  operations  from  being  disturbed,  and  its  products  injured,  either 
by  the  destroying  agencies  of  nature,  or  by  the  violence  or  rapacity 
of  men.  This  gives  rise  to  another  mode  in  which  labour,  not 
employed  directly  about  the  product  itself,  is  instrumental  to  its 
production  ; namely,  when  employed  for  the  'protection  of  industry. 
Such  is  the  object  of  all  buildings  for  industrial  purposes ; all 
manufactories,  warehouses,  docks,  granaries,  barns,  farm-buildings 
devoted  to  cattle,  or  to  the  operations  of  agricultural  labour. 
I exclude  those  in  which  the  labourers  live,  or  which  are  destined 
for  their  personal  accommodation : these,  like  their  food,  supply 
actual  wants,  and  must  be  counted  in  the  remuneration  of  their 
labour.  There  are  many  modes  in  which  labour  is  still  more  directly 
applied  to  the  protection  of  productive  operations.  The  herdsman 
has  little  other  occupation  than  to  protect  the  cattle  from  harm : 
the  positive  agencies  concerned  in  the  realization  of  the  product 
go  on  nearly  of  themselves.  I have  already  mentioned  the  labour 

matter  of  exchange,”  and  as  implements  (or  instruments)  “ the  things  which 
are  employed  in  producing  that  change,  but  do  not  themselves  become  part  of 
the  exchangeable  result.”  According  to  these  definitions,  the  fuel  consumed 
in  a manufactory  would  be  considered,  not  as  a material,  but  as  an  instrument. 
This  use  of  the  terms  accords  better  than  that  proposed  in  the  text  with  the 
primitive  physical  meaning  of  the  word  “ material  ” ; but  the  distinction  on 
which  it  is  grounded  is  one  almost  irrelevant  to  political  econon^y. 


LABOUR  AS  AN  AGENT  OE  PRODUCTION  37 

of  the  hedger  and  ditcher,  of  the  builder  of  walls  or  dykes.  To 
these  must  be  added  that  of  the  soldier,  the  policeman,  and  the 
judge.  These  functionaries  are  not  indeed  employed  exclusively  in 
the  protection  of  industry,  nor  does  their  payment  constitute,  to 
the  individual  producer,  a part  of  the  expenses  of  production. 
But  they  are  paid  from  the  taxes,  which  are  derived  from  the  produce 
of  industry  ; and  in  any  tolerably  governed  country  they  render  to 
Its  operations  a service  far  more  than  equivalent  to  the  cost.  To 
society  at  large  they  are  therefore  part  of  the  expenses  of  production  ; 
and  if  the  returns  to  production  were  not  sufficient  to  maintain  these 
labourers  in  addition  to  all  the  others  required,  production,  at  least 
in  that  form  and  manner,  could  not  take  place.  Besides,  if  the 
protection  which  the  government  affords  to  the  operations  of  indus- 
try were  not  afforded,  the  producers  would  be  under  a necessity 
of  either  withdrawing  a large  share  of  their  time  and  labour  from 
production,  to  employ  it  in  defence,  or  of  engaging  armed  men  to 
defend  them;  aU  which  labour,  in  that  case,  must  be  directly 
remunerated  from  the  produce ; and  things  which  could  not  pay 
for  this  additional  labour,  would  not  be  produced.  Under  the 
present  arrangements,  the  product  pays  its  quota  towards  the 
same  protection,  and,  notwithstanding  the  waste  and  prodigality 
incident  to  government  expenditure,  obtains  it  of  better  quality 
at  a much  smaller  cost. 

§ 6.  Fourthly  : There  is  a very  great  amount  of  labour  em- 
ployed, not  in  bringing  the  product  into  existence,  but  in  rendering 
it,  when  in  existence,  accessible  to  those  for  whose  use  it  is  intended. 
Many  important  classes  of  labourers  find  their  sole  employment  in 
some  function  of  this  kind.  There  is  first  the  whole  class  of  carriers, 
by  land  or  water : muleteers,  waggoners,  bargemen,  sailors,  wharf- 
men,  coalheavers,  porters,  railway  establishments,  and  the  like. 
Next,  there  are  the  constructors  of  all  the  implements  of  transport ; 
ships,  barges,  carts,  locomotives,  &c.,  to  which  must  be  added  roads! 
canals,  and  railways.  Roads  are  sometimes  made  by  the  govern- 
ment, and  opened  gratuitously  to  the  pubHc ; but  the  labour  of 
making  them  is  not  the  less  paid  for  from  the  produce.  Each 
producer,  in  paying  his  quota  of  the  taxes  levied  generally  for  the 
construction  of  roads,  pays  for  the  use  of  those  which  conduce  to 
his  convenience ; and  if  made  with  any  tolerable  judgment,  they 
increase  the  returns  to  his  industry  by  far  more  than  an  equivalent 
amount. 


38 


BOOK  I.  CHAPTER  IL  § 6 


Another  numerous  class  of  labourers  employed  in  rendering  the 
things  produced  accessible  to  their  intended  consumers  is  the  class 
of  dealers  and  traders,  or,  as  they  may  be  termed,  distributors. 
There  would  be  a great  waste  of  time  and  trouble,  and  an  incon- 
venience often  amounting  to  impracticability,  if  consumers  could 
only  obtain  the  articles  they  want  by  treating  directly  with  the 
producers.  Both  producers  and  consumers  are  too  much  scattered, 
and  the  latter  often  at  too  great  a distance  from  the  former.  To 
diminish  this  loss  of  time  and  labour,  the  contrivance  of  fairs  and 
markets  was  early  had  recourse  to,  where  consumers  and  producers 
might  periodically  meet,  without  any  intermediate  agency ; and 
this  plan  answers  tolerably  well  for  many  articles,  especially  agri- 
cultural produce,  agriculturists  having  at  some  seasons  a certain 
quantity  of  spare  time  on  their  hands.  But  even  in  this  case, 
attendance  is  often  very  troublesome  and  inconvenient  to  buyers 
who  have  other  occupations,  and  do  not  live  in  the  immediate 
vicinity ; while,  for  all  articles  the  production  of  which  requires 
continuous  attention  from  the  producers,  these  periodical  markets 
must  be  held  at  such  considerable  intervals,  and  the  wants  of  the 
consumers  must  either  be  provided  for  so  long  beforehand,  or 
must  remain  so  long  unsupplied,  that  even  before  the  resources  of 
society  admitted  of  the  establishment  of  shops,  the  supply  of  these 
wants  fell  universally  into  the  hands  of  itinerant  dealers  ; the  pedlar, 
who  might  appear  once  a month,  being  preferred  to  the  fair,  which 
only  returned  once  or  twice  a year.  In  country  districts,  remote 
from  towns  or  large  villages,  the  industry  of  the  pedlar  is  not  yet 
wholly  superseded.  But  a dealer  who  has  a fixed  abode  and  fixed 
customers  is  so  much  more  to  be  depended  on,  that  consumers 
prefer  resorting  to  him  if  he  is  conveniently  accessible  ; and  dealers 
therefore  find  their  advantage  in  establishing  themselves  in  every 
locality  where  there  are  sufficient  consumers  near  at  hand  to  afford 
them  a remuneration. 

In  many  cases  the  producers  and  dealers  are  the  same  persons, 
at  least  as  to  the  ownership  of  the  funds  and  the  control  of  the 
operations.  The  tailor,  the  shoemaker,  the  baker,  and  many  other 
tradesmen,  are  the  producers  of  the  articles  they  deal  in,  so  far  as 
regards  the  last  stage  in  the  production.  This  union,  however,  of 
the  functions  of  manufacturer  and  retailer  is  only  expedient  when 
the  article  can  advantageously  be  made  at  or  near  the  place  conveni- 
ent for  retailing  it,  and  is,  besides,  manufactured  and  sold  in  small 
parcels.  When  things  have  to  be  brought  from  a distance,  the  same 


LABOUR  AS  AN  AGENT  OF  PRODUCTION 


39 


person  cannot  effectually  superintend  both  the  making  and  the 
retailing  of  them ; when  they  are  best  and  most  cheaply  made  on  a 
large  scale,  a single  manufactory  requires  so  many  local  channels 
to  carry  off  its  supply,  that  the  retailing  is  most  conveniently 
delegated  to  other  agency  ; and  even  shoes  and  coats,  when  they  are 
to  be  furnished  in  large  quantities  at  once,  as  for  the  supply  of  a regi- 
ment or  of  a workhouse,  are  usually  obtained  not  directly  from  the 
producers,  but  from  intermediate  dealers,  who  make  it  their  business 
to  ascertain  from  what  producers  they  can  be  obtained  best  and 
cheapest.  Even  when  things  are  destined  to  be  at  last  sold  by  retail, 
convenience  soon  creates  a class  of  wholesale  dealers.  When  pro- 
ducts and  transactions  have  multiplied  beyond  a certain  point ; 
when  one  manufactory  supplies  many  shops,  and  one  shop  has  often 
to  obtain  goods  from  many  different  manufactories,  the  loss  of  time 
and  trouble  both  to  the  manufacturers  and  to  the  retailers  by  treating 
directly  with  one  another  makes  it  more  convenient  to  them  to  treat 
with  a smaller  number  of  great  dealers  or  merchants,  who  only  buy 
to  sell  again,  collecting  goods  from  the  various  producers  and 
distributing  them  to  the  retailers,  to  be  by  them  further  distributed 
among  the  consumers.  Of  these  various  elements  is  composed  the 
Distributing  Class,  whose  agency  is  supplementary  to  that  of  the 
Producing  Class  : and  the  produce  so  distributed,  or  its  price,  is 
the  source  from  which  the  distributors  are  remunerated  for  their 
exertions,  and  for  the  abstinence  which  enabled  them  to  advance 
the  funds  needful  for  the  business  of  distribution. 

§ 7.  We  have  now  completed  the  enumeration  of  the  modes 
in  which  labour  employed  on  external  nature  is  subservient  to 
production.  But  there  is  yet  another  mode  of  employing  labour, 
which  conduces  equally,  though  still  more  remotely,  to  that  end  : 
this  is,  labour  of  which  the  subject  is  human  beings.  Every  human 
being  has  been  brought  up  from  infancy  at  the  expense  of  much 
labour  to  some  person  or  persons,  and  if  this  labour,  or  part  of  it, 
had  not  been  bestowed,  the  child  would  never  have  attained  the  age 
and  strength  which  enabled  him  to  become  a labourer  in  his  turn. 
To  the  community  at  large,  the  labour  and  expense  of  rearing  its 
infant  population  form  a part  of  the  outlay  which  is  a condition  of 
production,  and  which  is  to  be  replaced  with  increase  from  the 
future  produce  of  their  labour.  By  the  individuals,  this  labour  and 
expense  are  usually  incurred  from  other  motives  than  to  obtain  such 
ultimate  return,  and,  for  most  purposes  of  political  economy,  need 


40 


BOOK  I.  CHAPTER  II.  § 8 


not  be  taken  into  account  as  expenses  of  production.  But  the  tech- 
nical or  industrial  education  of  the  community  ; the  labour  employed 
in  learning  and  in  teaching  the  arts  of  production,  in  acquiring  and 
communicating  skill  in  those  arts ; this  labour  is  really,  and  in 
general  solely,  undergone  for  the  sake  of  the  greater  or  more  valu- 
able produce  thereby  attained,  and  in  order  that  a remuneration, 
equivalent  or  more  than  equivalent,  may  be  reaped  by  the  learner, 
besides  an  adequate  remuneration  for  the  labour  of  the  teacher, 
when  a teacher  has  been  employed. 

As  the  labour  which  confers  productive  powers,  whether  of  hand 
ar  of  head,  may  be  looked  upon  as  part  of  the  labour  by  which 
society  accomplishes  its  productive  operations,  or  in  other  words, 
as  part  of  what  the  produce  costs  to  society,  so  too  may  the  laboul 
employed  in  keeping  up  productive  powers ; in  preventing  them 
from  being  destroyed  or  weakened  by  accident  or  disease.  The 
labour  of  a physician  or  surgeon,  when  made  use  of  by  persons 
engaged  in  industry,  must  be  regarded  in  the  economy  of  society 
as  a sacrifice  incurred,  to  preserve  from  perishing  by  death  or 
infirmity  that  portion  of  the  productive  resources  of  society  which 
is  fixed  in  the  lives  and  bodily  or  mental  powers  of  its  productive 
members.  To  the  individuals,  indeed,  this  forms  but  a part,  some- 
times an  imperceptible  part,  of  the  motives  that  induce  them  to 
submit  to  medical  treatment : it  is  not  principally  from  economical 
motives  that  persons  have  a limb  amputated,  or  endeavour  to  be 
cured  of  a fever ; though,  when  they  do  so,  there  is  generally  sufficient 
inducement  for  it  even  on  that  score  alone.  This  is,  therefore, 
one  of  the  cases  of  labour  and  outlay  which,  though  conducive  to 
production,  yet  not  being  incurred  for  that  end,  or  for  the  sake  of 
the  returns  arising  from  it,  are  out  of  the  sphere  of  most  of  the 
general  propositions  which  political  economy  has  occasion  to  assert 
respecting  productive  labour : though,  when  society  and  not  the 
individuals  are  considered,  this  labour  and  outlay  must  be  regarded 
as  part  of  the  advance  by  which  society  effects  its  productive 
operations,  and  for  which  it  is  indemnified  by  the  produce. 

§ 8.  Another  kind  of  labour,  usually  classed  as  mental,  but 
conducing  to  the  ultimate  product  as  directly,  though  not  so  imme- 
diately, as  manual  labour  itself,  is  the  labour  of  the  inventors  of 
industrial  processes.  I say,  usually  classed  as  mental,  because  in 
reality  it  is  not  exclusively  so.  All  human  exertion  is  compounded 
of  some  mental  and  some  bodily  elements.  The  stupidest  hodman, 


LABOUR  AS  AN  AGENT  OF  PRODUCriON 


41 


who  repeats  from  day  to  day  the  mechanical  act  of  climbing  a ladder, 
performs  a function  partly  intellectual ; so  much  so,  indeed,  that 
the  most  intelligent  dog  or  elephant  could  not,  probably,  be  taught 
to  do  it.  The  dullest  human  being,  instructed  beforehand,  is  capable 
of  turning  a mill ; but  a horse  cannot  turn  it  without  somebody  to 
drive  and  watch  him.  On  the  other  hand,  there  is  some  bodily 
ingredient  in  the  labour  most  purely  mental,  when  it  generates  any 
external  result.  Newton  could  not  have  produced  the  Principia 
without  the  bodily  exertion  either  of  penmanship  or  of  dictation  ; 
and  he  must  have  drawn  many  diagrams,  and  written  out  many 
calculations  and  demonstrations,  while  he  was  preparing  it  in  his 
mind.  Inventors,  besides  the  labour  of  their  brains,  generally  go 
through  much  labour  with  their  hands,  in  the  models  which  they 
construct  and  the  experiments  they  have  to  make  before  their 
idea  can  realize  itself  successfully  in  act.  Whether  mental,  however, 
or  bodily,  their  labour  is  a part  of  that  by  which  the  production  is 
brought  about.  The  labour  of  Watt  in  contriving  the  steam-engine 
was  as  essential  a part  of  production  as  that  of  the  mechanics  who 
build  or  the  engineers  who  work  the  instrument ; and  was  undergone, 
no  less  than  theirs,  in  the  prospect  of  a remuneration  from  the 
produce.  The  labour  of  invention  is  often  estimated  and  paid  on 
the  very  same  plan  as  that  of  execution.  Many  manufacturers  of 
ornamental  goods  have  inventors  in  their  employment,  who  receive 
wages  or  salaries  for  designing  patterns,  exactly  as  others  do  for  copy- 
ing them.  All  this  is  strictly  part  of  the  labour  of  production  ; as 
the  labour  of  the  author  of  a book  is  equally  a part  of  its  production 
with  that  of  the  printer  and  binder. 

In  a national,  or  universal  point  of  view,  the  labour  of  the 
savant,  or  speculative  thinker,  is  as  much  a part  of  production 
in  the  very  narrowest  sense,  as  that  of  the  inventor  of  a practical 
art ; many  such  inventions  having  been  the  direct  consequences 
of  theoretic  discoveries,  and  every  extension  of  knowledge  of  the 
powers  of  nature  being  fruitful  of  applications  to  the  purposes  of 
outward  life.  The  electro-magnetic  telegraph  was  the  wonderful 
and  most  imexpected  consequence  of  the  experiments  of  (Ersted 
and  the  mathematical  investigations  of  Ampere  ; and  the  modern 
art  of  navigation  is  an  unforeseen  emanation  from  the  purely 
speculative  and  apparently  merely  curious  enquiry,  by  the  mathe- 
maticians of  Alexandria,  into  the  properties  of  three  curves  formed 
by  the  intersection  of  a plane  surface  and  a cone.  No  limit  can 
be  set  to  the  importance,  even  in  a purely  productive  and  material 


42 


BOOK  L CHAPTER  H.  § 9 


point  of  view,  of  mere  thought.  Inasmuch,  however,  as  these 
material  fruits,  though  the  result,  are  seldom  the  direct  purpose 
of  the  pursuits  of  savants,  nor  is  their  remuneration  in  general  derived 
from  the  increased  production  which  may  be  caused  incidentally,  and 
mostly  after  a long  interval,  by  their  discoveries ; this  ultimate 
influence  does  not,  for  most  of  the  purposes  of  political  economy, 
require  to  be  taken  into  consideration  ; and  speculative  thinkers 
are  generally  classed  as  the  producers  only  of  the  books,  or  other 
useable  or  saleable  articles,  which  directly  emanate  from  them. 
But  when  (as  in  political  economy  one  should  always  be  prepared 
to  do)  we  shift  our  point  of  view,  and  consider  not  individual  acts, 
and  the  motives  by  which  they  are  determined,  but  national  and 
universal  results,  intellectual  speculation  must  be  looked  upon  as 
a most  influential  part  of  the  productive  labour  of  society,  and  the 
portion  of  its  resources  employed  in  carrying  on  and  in  remunerating 
such  labour  as  a highly  productive  part  of  its  expenditure. 

§ 9.  In  the  foregoing  survey  of  the  modes  of  employing  labour 
in  furtherance  of  production,  I have  made  little  use  of  the  popular 
distinction  of  industry  into  agricultural,  manufacturing,  and  com- 
mercial. For,  in  truth,  this  division  fulfils  very  badly  the  purposes 
of  a classification.  Many  great  branches  of  productive  industry 
find  no  place  in  it,  or  not  without  much  straining ; for  example 
(not  to  speak  of  hunters  or  fishers)  the  miner,  the  road-maker,  and 
the  sailor.  The  limit,  too,  between  agricultural  and  manufacturing 
industry  cannot  be  precisely  drawn.  The  miller,  for  instance, 
and  the  baker — are  they  to  be  reckoned  among  agriculturists,  or 
among  manufacturers  ? Their  occupation  is  in  its  nature  manu- 
facturing ; the  food  has  finally  parted  company  with  the  soil  before 
it  is  handed  over  to  them  ; this,  however,  might  be  said  with  equal 
truth  of  the  thresher,  the  winnower,  the  makers  of  butter  and 
cheese ; operations  always  counted  as  agricultural,  probably  because 
it  is  the  custom  for  them  to  be  performed  by  persons  resident 
on  the  farm,  and  under  the  same  superintendence  as  tillage.  For 
many  purposes  all  these  persons,  the  miller  and  baker  inclusive, 
must  be  placed  in  the  same  class  with  ploughmen  and  reapers. 
They  are  all  concerned  in  producing  food,  and  depend  for  their 
remuneration  on  the  food  produced;  when  the  one  class  abounds 
and  flourishes,  the  others  do  so  too ; they  form  collectively  the 
agricultural  interest  ” ; they  render  but  one  service  to  the 
community  by  their  united  labours,  and  are  paid  from  one 


LABOUR  AS  AN  AGENT  OF  PRODUCTION 


43 


common  source.  Even  the  tillers  of  the  soil,  again,  when  the 
produce  is  not  food,  but  the  materials  of  what  are  commonly 
termed  manufactures,  belong  in  many  respects  to  the  same 
division  in  the  economy  of  society  as  manufacturers.  The 
cotton-planter  of  Carolina  and  the  wool-grower  of  Australia 
have  more  interests  in  common  with  the  spinner  and  weaver 
than  with  the  corn-grower.  But,  on  the  other  hand,  the  industry 
which  operates  immediately  upon  the  soil  has,  as  we  shall  see 
hereafter,  some  properties  on  which  many  important  consequences 
depend,  and  which  distinguish  it  from  all  the  subsequent  stages  of 
production,  whether  carried  on  by  the  same  person  or  not ; from 
the  industry  of  the  thresher  and  winnower,  as  much  as  from  that 
of  the  cotton-spinner.  When  I speak,  therefore,  of  agricultural 
labour,  I shall  generally  mean  this,  and  this  exclusively,  unless 
the  contrary  is  either  stated  or  implied  in  the  context.  The 
term  manufacturing  is  too  vague  to  be  of  much  use  when 
precision  is  required,  and  when  I employ  it,  I wish  to  be  understood 
as  intending  to  speak  popularly  rather  than  scientifically. 


CHAPTEK  III 


OF  UNPRODUCTIVE  LABOUR 

§ 1.  Labour  is  indispensable  to  production,  but  has  not 
always  production  for  its  effect.  There  is  much  labour,  and  of 
a high  order  of  usefulness,  of  which  production  is  not  the  object. 
Labour  has  accordingly  been  distinguished  into  Productive  and 
Unproductive.  There  has  been  not  a little  controversy  among 
political  economists  on  the  question,  what  kinds  of  labour  should 
be  reputed  to  be  unproductive  ; and  they  have  not  always  perceived, 
that  there  was  in  reality  no  matter  of  fact  in  dispute  between  them. 

Many  writers  have  been  unwilling  to  class  any  labour  as  pro- 
ductive, unless  its  result  is  palpable  in  some  material  object,  capable 
of  being  transferred  from  one  person  to  another.  There  are  others 
(among  whom  are  Mr.  M‘Culloch  and  M.  Say)  who,  looking  upon 
the  word  unproductive  as  a term  of  disparagement,  remonstrate 
against  imposing  it  upon  any  labour  which  is  regarded  as  useful 
— which  produces  a benefit  or  a pleasure  worth  the  cost.  The 
labour  of  officers  of  government,  of  the  army  and  navy,  of  physicians, 
lawyers,  teachers,  musicians,  dancers,  actors,  domestic  servants, 
&c.,  when  they  really  accomplish  what  they  are  paid  for,  and  are 
not  more  numerous  than  is  required  for  its  performance,  ought  not, 
say  these  writers,  to  be  “ stigmatized  ” as  unproductive,  an  expression 
which  they  appear  to  regard  as  synonymous  with  wasteful  or 
worthless.  But  this  seems  to  be  a misunderstanding  of  the  matter 
in  dispute.  Production  not  being  the  sole  end  of  human  exist- 
ence, the  term  unproductive  does  not  necessarily  imply  any 
stigma ; nor  was  ever  intended  to  do  so  in  the  present  case.  The 
question  is  one  of  mere  language  and  classification.  Differences 
of  language,  however,  are  by  no  means  unimportant,  even  when 
not  grounded  on  differences  of  opinion ; for  though  either  of 
two  expressions  may  be  consistent  with  the  whole  truth,  they 
generally  tend  to  fix  attention  upon  different  parts  of  it.  We 
must  therefore  enter  a little  into  the  consideration  of  the  various 


UNPRODUCTIVE  LABOUR 


45 


meanings  which  may  attach  to  the  words  productive  and  un- 
productive when  applied  to  labour. 

In  the  first  place,  even  in  what  is  called  the  production  of  material 
objects,  it  must  be  remembered  that  what  is  produced  is  not  the 
matter  composing  them.  All  the  labour  of  all  the  human  beings 
in  the  world  could  not  produce  one  particle  of  matter.  To  weave 
broadcloth  is  but  to  re-arrange,  in  a peculiar  manner,  the  particles  of 
wool ; to  grow  corn  is  only  to  put  a portion  of  matter  called  a seed, 
into  a situation  where  it  can  draw  together  particles  of  matter  from 
the  earth  and  air,  to  form  the  new  combination  called  a plant. 
Though  we  cannot  create  matter,  we  can  cause  it  to  assume  pro- 
perties, by  which,  from  having  been  useless  to  us,  it  becomes  useful. 
What  we  produce,  or  desire  to  produce,  is  always,  as  M.  Say  rightly 
terms  it,  an  utility.  Labour  is  not  creative  of  objects,  but  of  utilities. 
Neither,  again,  do  we  consume  and  destroy  the  objects  themselves  ; 
the  matter  of  which  they  were  composed  remains,  more  or  less 
altered  in  form  : what  has  really  been  consumed  is  only  the  quahties 
by  which  they  were  fitted  for  the  purpose  they  have  been  applied 
to.  It  is,  therefore,  pertinently  asked  by  M.  Say  and  others — since, 
when  we  are  said  to  produce  objects,  we  only  produce  utility,  why 
should  not  all  labour  which  produces  utility  be  accounted  productive  ? 
Why  refuse  that  title  to  the  surgeon  who  sets  a limb,  the  judge 
or  legislator  who  confers  security,  and  give  it  to  the  lapidary  who 
cuts  and  polishes  a diamond  ? Why  deny  it  to  the  teacher  from 
whom  I learn  an  art  by  which  I can  gain  my  bread,  and  accord  it  to 
the  confectioner  who  makes  bonbons  for  the  momentary  pleasure 
of  a sense  of  taste  ? 

It  is  quite  true  that  all  these  kinds  of  labour  are  productive 
of  utihty ; and  the  question  which  now  occupies  us  could  not 
have  been  a question  at  all,  if  the  production  of  utility  were  enough 
to  satisfy  the  notion  which  mankind  have  usually  formed  of  pro- 
ductive labour.  Production,  and  productive,  are  of  course  elliptical 
expressions,  involving  the  idea  of  a something  produced ; but 
this  something,  in  common  apprehension,  I conceive  to  be,  not 
utility,  but  Wealth.  Productive  labour  means  labour  productive 
of  wealth.  We  are  recalled,  therefore,  to  the  question  touched  upon 
in  our  first  chapter,  what  Wealth  is,  and  whether  only  material  pro- 
ducts, or  all  useful  products,  are  to  be  included  in  it. 

§ 2.  Now  the  utilities  produced  by  labour  are  of  three  kinds. 
They  are, 


16 


BOOK  I.  CHAPl’ER  III.  § 2 


First,  utilities  fixed  and  embodied  in  outward  objects ^ by 
labour  employed  in  investing  external  material  things  with  properties 
which  render  them  serviceable  to  human  beings.  This  is  the  common 
case,  and  requires  no  illustration. 

Secondly,  utihties  fixed  and  embodied  in  human  beings ; the 
labour  being  in  this  case  employed  in  conferring  on  human  beings 
qualities  which  render  them  serviceable  to  themselves  and  others. 
To  this  class  belongs  the  labour  of  all  concerned  in  education; 
not  only  schoolmasters,  tutors,  and  professors,  but  governments, 
so  far  as  they  aim  successfully  at  the  improvement  of  the  people ; 
moralists,  and  clergymen,  as  far  as  productive  of  benefit ; the 
labour  of  physicians,  as  far  as  instrumental  in  preserving  life  and 
physical  or  mental  efficiency  ; of  the  teachers  of  bodily  exercises, 
and  of  the  various  trades,  sciences,  and  arts,  together  with  the  labour 
of  the  learners  in  acquiring  them ; and  all  labour  bestowed  by 
any  persons,  throughout  life,  in  improving  the  knowledge  or  culti- 
vating the  bodily  or  mental  faculties  of  themselves  or  others. 

Thirdly  and  lastly,  utihties  not  fixed  or  embodied  in  any  object, 
but  consisting  in  a mere  service  rendered ; a pleasure  given,  an 
inconvenience  or  a pain  averted,  during  a longer  or  a shorter  time, 
but  without  leaving  a permanent  acquisition  in  the  improved 
qualities  of  any  person  or  thing ; the  labour  being  employed  in 
producing  an  utihty  directly,  not  (as  in  the  two  former  cases)  in 
fitting  some  other  thing  to  afford  an  utility.  Such,  for  example, 
is  the  labour  of  the  musical  performer,  the  actor,  the  public  de- 
claimer  or  reciter,  and  the  showman.  Some  good  may  no  doubt  be 
produced,  and  much  more  might  be  produced,  beyond  the  moment, 
upon  the  feehngs  and  disposition,  or  general  state  of  enjoyment 
of  the  spectators ; or  instead  of  good  there  may  be  harm  ; but 
neither  the  one  nor  the  other  is  the  effect  intended,  is  the  result 
for  which  the  exhibitor  works  and  the  spectator  pays ; nothing 
but  the  immediate  pleasure.  Such,  again,  is  the  labour  of  the  army 
and  navy ; they,  at  the  best,  prevent  a country  from  being  con- 
quered, or  from  being  injured  or  insulted,  which  is  a service,  but 
in  all  other  respects  leave  the  country  neither  improved  nor 
deteriorated.  Such,  too,  is  the  labour  of  the  legislator,  the  judge, 
the  officer  of  justice,  and  all  other  agents  of  government,  in  their 
ordinary  functions,  apart  from  any  influence  they  may  exert  on 
the  improvement  of  the  national  mind.  The  service  which  they 
render  is  to  maintain  peace  and  security  ; these  compose  the 
utility  which  they  produce.  It  may  appear  to  some,  that  carriers, 


UNPRODUCTIVE  LABOUR 


47 


and  merchants  or  dealers,  should  be  placed  in  this  same  class,  since 
their  labour  does  not  add  any  properties  to  objects  : but  I reply  that 
it  does  : it  adds  the  property  of  being  in  the  place  where  they  are 
wanted,  instead  of  being  in  some  other  place : which  is  a very 
useful  property,  and  the  utility  it  confers  is  embodied  in  the  things 
themselves,  which  now  actually  are  in  the  place  where  they  are 
required  for  use,  and  in  consequence  of  that  increased  utility  could 
be  sold  at  an  increased  price,  proportioned  to  the  labour  expended 
in  conferring  it.  This  labour,  therefore,  does  not  belong  to  the 
third  class,  but  to  the  first. 

§ 3.  We  have  now  to  consider  which  of  these  three  classes  of 
labour  should  be  accounted  productive  of  wealth,  since  that  is 
what  the  term  productive,  when  used  by  itself,  must  be  understood 
to  import.  Utilities  of  the  third  class,  consisting  in  pleasures 
which  only  exist  while  being  enjoyed,  and  services  which  only  exist 
while  being  performed,  cannot  be  spoken  of  as  wealth,  except  by 
an  acknowledged  metaphor.  It  is  essential  to  the  idea  of  wealth 
to  be  susceptible  of  accumulation : things  which  cannot,  after  being 
produced,  be  kept  for  some  time  before  being  used,  are  never,  I 
think,  regarded  as  wealth,  since  however  much  of  them  may  be 
produced  and  enjoyed,  the  person  benefited  by  them  is  no  richer, 
is  nowise  improved  in  circumstances.  But  there  is  not  so  distinct 
and  positive  a violation  of  usage  in  considering  as  wealth  any  product 
which  is  both  useful  and  susceptible  of  accumulation.  The  skill,  and 
the  energy  and  perseverance,  of  the  artisans  of  a country,  are 
reckoned  part  of  its  wealth,  no  less  than  their  tools  and  machinery.* 

* Some  authorities  look  upon  it  as  an  essential  element  in  the  idea  of  wealth, 
that  it  should  be  capable  not  solely  of  being  accumulated  but  of  being  trans- 
ferred ; and  inasmuch  as  the  valuable  qualities,  and  even  the  productive 
capacities,  of  a human  being,  cannot  be  detached  from  him  and  passed  to  some 
one  else,  they  deny  to  these  the  appellation  of  wealth,  and  to  the  labour 
expended  in  acquiring  them  the  name  of  productive  labour.  It  seems  to  me, 
however,  that  the  skill  of  an  artisan  (for  instance)  being  both  a desirable 
possession,  and  one  of  a certain  durability  (not  to  say  productive  even  of  national 
wealth),  there  is  no  better  reason  for  refusing  to  it  the  title  of  wealth  because 
it  is  attached  to  a man,  than  to  a coalpit  or  manufactory  because  they 
are  attached  to  a place.  Besides,  if  the  skill  itself  cannot  be  parted  with  to 
a purchaser,  the  use  of  it  may  ; if  it  cannot  be  sold,  it  can  be  hired  ; and  it 
may  be,  and  is,  sold  outright  in  all  countries  whose  laws  permit  that  the  man 
himself  should  be  sold  along  with  it.  Its  defect  of  transferability  does  not  result 
from  a natural  but  from  a legal  and  moral  obstacle. 

The  human  being  himself  (as  formerly  observed)  I do  not  class  as  wealth. 
He  is  the  purpose  for  which  wealth  exists.  But  his  acquired  capacities,  which 
exist  only  as  means,  and  have  been  called  into  existence  by  labour,  fall  rightly, 
as  it  seems  to  me,  within  that  designation. 


48 


BOOK  I.  CHAPTER  III.  § 3 


According  to  this  definition,  we  should  regard  all  labour  as  pro- 
ductive which  is  employed  in  creating  permanent  utilities,  whether 
embodied  in  human  beings,  or  in  any  other  animate  or  inanimate 
objects.  This  nomenclature  I have,  in  a former  publication,*  recom- 
mended, as  most  conducive  to  the  ends  of  classification ; and  I 
am  still  of  that  opinion. 

But  in  applying  the  term  wealth  to  the  industrial  capacities 
of  human  beings,  there  seems  always,  in  popular  apprehension, 
to  be  a tacit  reference  to  material  products.  The  skill  of  an  artisan 
is  accounted  wealth,  only  as  being  the  means  of  acquiring  wealth 
in  a material  sense ; and  any  qualities  not  tending  visibly  to  that 
object  are  scarcely  so  regarded  at  all.  A country  would  hardly  be 
said  to  be  richer,  except  by  a metaphor,  however  precious  a possession 
it  might  have  in  the  genius,  the  virtues,  or  the  accomplishments 
of  its  inhabitants  ; unless  indeed  these  were  looked  upon  as  market- 
able articles,  by  which  it  could  attract  the  material  wealth  of  other 
countries,  as  the  Greeks  of  old,  and  several  modern  nations  have 
done.  While,  therefore,  I should  prefer,  were  I constructing  a 
new  technical  language,  to  make  the  distinction  turn  upon  the 
permanence  rather  than  upon  the  materiality  of  the  product,  yet 
when  employing  .terms  which  common  usage  has  taken  complete 
possession  of,  it  seems  advisable  so  to  employ  them  as  to  do  the 
least  possible  violence  to  usage ; since  any  improvement  in  ter- 
minology obtained  by  straining  the  received  meaning  of  a popular 
phrase  is  generally  purchased  beyond  its  value,  by  the  obscurity 
arising  from  the  conflict  between  new  and  old  associations. 

I shall,  therefore,  in  this  treatise,  when  speaking  of  wealth, 
understand  by  it  only  what  is  called  material  wealth,  and  by  pro- 
ductive labour  only  those  kinds  of  exertion  which  produce  utihties 
embodied  in  material  objects.  But  in  limiting  myself  to  this  sense 
of  the  word,  I mean  to  avail  myself  of  the  full  extent  of  that  restricted 
acceptation,  and  I shall  not  refuse  the  appellation  productive,  to 
labour  which  yields  no  material  product  as  its  direct  result,  provided 
that  an  increase  of  material  products  is  its  ultimate  consequence. 
Thus,  labour  expended  in  the  acquisition  of  manufacturing  skill,  I 
class  as  productive,  not  in  virtue  of  the  skill  itself,  but  of  the  manu- 
factured products  created  by  the  skill,  and  to  the  creation  of  which 
the  labour  of  learning  the  trade  is  essentially  conducive.  The 
labour  of  officers  of  government  in  affording  the  protection  which, 

* Essays  on  some  Unsettled  Questions  of  Political  Economy.  Essay  IIL 
On  the  words  Productive  and  Unproductive. 


UNPRODUCTIVE  LABOUR 


49 


afforded  in  some  manner  or  other,  is  indispensable  to  the  prosperity 
of  industry,  must  be  classed  as  productive  even  of  material  wealth, 
because  without  it,  material  wealth,  in  anything  like  its  present 
abundance,  could  not  exist.  Such  labour  may  be  said  to  be  produc- 
tive indirectly  or  mediately,  in  opposition  to  the  labour  of  the 
ploughman  and  the  cotton-spinner,  which  are  productive  immedi- 
ately. They  are  all  alike  in  this,  that  they  leave  the  community 
richer  in  material  products  than  they  found  it ; they  increase,  or 
tend  to  increase,  material  wealth, 

§ 4.  By  Unproductive  Labour,  on  the  contrary,  will  be  under- 
stood labour  which  does  not  terminate  in  the  creation  of  material 
wealth  ; which,  however  largely  or  successfully  practised,  does  not 
render  the  community,  and  the  world  at  large,  richer  in  material 
products,  but  poorer  by  all  that  is  consumed  by  the  labourers  while 
so  employed. 

All  labour  is,  in  the  language  of  political  economy,  unproductive, 
which  ends  in  immediate  enjoyment,  without  any  increase  of  the 
accumulated  stock  of  permanent  means  of  enjoyment.  And  all 
labour,  according  to  our  present  definition,  must  be  classed  as 
unproductive,  which  terminates  in  a permanent  benefit,  however 
important,  provided  that  an  increase  of  material  products  forms 
no  part  of  that  benefit.  The  labour  of  saving  a friend’s  life  is  not 
productive,  unless  the  friend  is  a productive  labourer,  and  produces 
more  than  he  consumes.  To  a religious  person  the  saving  of  a soul 
must  appear  a far  more  important  service  than  the  saving  of  a life  ; 
but  he  will  not  therefore  call  a missionary  or  a clergyman  productive 
labourers,  unless  they  teach,  as  the  South  Sea  Missionaries  have  in 
some  cases  done,  the  arts  of  civilization  in  addition  to  the  doctrines 
of  their  religion.  It  is,  on  the  contrary,  evident  that  the  greater 
number  of  missionaries  or  clergymen  a nation  maintains,  the  less 
it  has  to  expend  on  other  things  ; while  the  more  it  expends  judi- 
ciously in  keeping  agriculturists  and  manufacturers  at  work,  the 
more  it  will  have  for  every  other  purpose.  By  the  former  it  dimin- 
ishes, ccBteris  paribus,  its  stock  of  material  products  ; by  the  latter, 
it  increases  them. 

Unproductive  may  be  as  useful  as  productive  labour ; it  may 
be  more  useful,  even  in  point  of  permanent  advantage ; or  its  use 
may  consist  only  in  pleasurable  sensation,  which  when  gone  leaves 
no  trace  ; or  it  may  not  afford  even  this,  but  may  be  absolute  waste. 
In  any  case  society  or  mankind  grow  no  richer  by  it,  but  poorer.  All 


50 


BOOH  L CHAPTER  HI.  § 4 


material  products  consumed  by  any  one  while  he  produces  notMng 
are  so  much  subtracted,  for  the  time,  from  the  material  products 
which  society  would  otherwise  have  possessed.  But  though  society 
grows  no  richer  by  unproductive  labour,  the  individual  may.  An 
unproductive  labourer  may  receive  for  his  labour,  from  those  who 
derive  pleasure  or  benefit  from  it,  a remuneration  which  may  be  to 
him  a considerable  source  of  wealth ; but  his  gain  is  balanced  by  their 
loss  ; they  may  have  received  a full  equivalent  for  their  expenditure, 
but  they  are  so  much  poorer  by  it.  When  a tailor  makes  a coat 
and  sells  it,  there  is  a transfer  of  the  price  from  the  customer  to  the 
tailor,  and  a coat  besides  which  did  not  previously  exist ; but  what 
is  gained  by  an  actor  is  a mere  transfer  from  the  spectator’s  funds 
to  his,  leaving  no  article  of  wealth  for  the  spectator’s  indemnifica- 
tion. Thus  the  community  collectively  gains  nothipg  by  the  actor’s 
labour ; and  it  loses,  of  his  receipts,  all  that  portion  which  he 
consumes,  retaining  only  that  which  he  lays  by.  A community^ 
however,  may  add  to  its  wealth  by  unproductive  labour,  at  the 
expense  of  other  communities,  as  an  individual  may  at  the  expense 
of  other  individuals.  The  gains  of  Italian  opera  singers,  German 
governesses,  French  ballet  dancers,  &c.,  are  a source  of  wealth, 
as  far  as  they  go,  to  their  respective  countries,  if  they  return  thither. 
The  petty  states  of  Greece,  especially  the  ruder  and  more  backward 
of  those  states,  were  nurseries  of  soldiers,  who  hired  themselves 
to  the  princes  and  satraps  of  the  East  to  carry  on  useless  and  destruc- 
tive wars,  and  returned  with  their  savings  to  pass  their  declining 
years  in  their  own  country : these  were  unproductive  labourers, 
and  the  pay  they  received,  together  with  the  plunder  they  took, 
was  an  outlay  without  return  to  the  countries  which  furnished  it ; 
but,  though  no  gain  to  the  world,  it  was  a gain  to  Greece.  At  a 
later  period  the  same  country  and  its  colonies  supplied  the  Roman 
empire  with  another  class  of  adventurers,  who,  under  the  name  of 
philosophers  or  of  rhetoricians,  taught  to  the  youth  of  the  higher 
classes  what  were  esteemed  the  most  valuable  accomplishments : 
these  were  mainly  unproductive  labourers,  but  their  ample  recom- 
pense was  a source  of  wealth  to  their  own  country.  In  none  of  these 
cases  was  there  any  accession  of  wealth  to  the  world.  The  services 
of  the  labourers,  if  useful,  were  obtained  at  a sacrifice  to  the  world 
of  a portion  of  material  wealth  ; if  useless,  all  that  these  labourers 
consumed  was  to  the  world  waste. 

To  be  wasted,  however,  is  a liability  not  confined  to  unproductive 
labour.  Productive  labour  may  equally  be  wasted,  if  more  of  it  is 


UNPRODUCTIVE  LABOUR 


51 


expended  than  really  conduces  to  production.  If  defect  of  skill  in 
labourers,  or  of  judgment  in  those  who  direct  them,  causes  a mis- 
application of  productive  industry  ; if  a farmer  persists  in  ploughing 
with  three  horses  and  two  men,  when  experience  has  shown  that  two 
horses  and  one  man  are  sufficient,  the  surplus  labour,  though  em- 
ployed for  purposes  of  production,  is  wasted.  If  a new  process  is 
adopted  which  proves  no  better,  or  not  so  good  as  those  before  in 
use,  the  labour  expended  in  perfecting  the  invention  and  in  carrying 
it  into  practice,  though  employed  for  a productive  purpose,  is  wasted. 
Productive  labour  may  render  a nation  poorer,  if  the  wealth  it  pro- 
duces, that  is,  the  increase  it  makes  in  the  stock  of  useful  or  agreeable 
things,  be  of  a kind  not  immediately  wanted  ; as  when  a commodity 
is  unsaleable,  because  produced  in  a quantity  beyond  the  present 
demand  ; or  when  speculators  build  docks  and  warehouses  before 
there  is  any  trade.  Some  of  the  States  of  North  America,^  by  making 
premature  railways  and  canals,  are  thought  to  have  made  this 
kind  of  mistake ; and  it  was  for  some  time  doubtful  whether  Eng- 
land, in  the  disproportionate  development  of  railway  enterprise, 
had  not,  in  some  degree,  followed  the  example.  Labour  sunk  in 
expectation  of  a distant  return,  when  the  great  exigencies  or  limited 
resources  of  the  community  require  that  the  return  be  rapid,  may 
leave  the  country  not  only  poorer  in  the  meanwhile,  by  all  which 
those  labourers  consume,  but  less  rich  even  ultimately  than  if 
immediate  returns  had  been  sought  in  the  first  instance,  and  enter- 
prises for  distant  profit  postponed. 

§ 5.  The  distinction  of  Productive  and  Unproductive  is  ap- 
plicable to  consumption  as  well  as  to  labour.  All  the  members 
of  the  community  are  not  labourers,  but  all  are  consumers,  and 
consume  either  unproductively  or  productively.  Whoever  con- 
tributes nothing  directly  or  indirectly  to  production,  is  an  unpro- 
ductive consumer.  The  only  productive  consumers  are  productive 
labourers  ; the  labour  of  direction  being  of  course  included,  as  well 
as  that  of  execution.  But  the  consumption  even  of  productive 
labourers  is  not  all  of  it  productive  consumption.  There  is  unpro- 
ductive consumption  by  productive  consumers.  What  they 
consume  in  keeping  up  or  improving  their  health,  strength,  and 
capacities  of  work,  or  in  rearing  other  productive  labourers  to  succ  eed 

^ [“  The  bankrupt  states  of  North  America  ” in  all  editions  until  the  7th 
(1871).  “It  remains  to  be  shown  whether  England,”  &c.,  remained  two  lines 
below  until  the  5th  ed.  (1862).! 


62 


BOOK  I.  CHAPTER  III.  § 6 


them,  is  productive  consumption.  But  consumption  on  pleasures  or 
luxuries,  whether  by  the  idle  or  by  the  industrious,  since  production 
is  neither  its  object  nor  is  any  way  advanced  by  it,  must  be  reckoned 
unproductive  : with  a reservation  perhaps  of  a certain  quantum  of 
enjoyment  which  may  be  classed  among  necessaries,  since  anything 
short  of  it  would  not  be  consistent  with  the  greatest  efficiency  of 
labour.  That  alone  is  productive  consumption,  which  goes  to  main- 
tain and  increase  the  productive  powers  of  the  community  ; either 
those  residing  in  its  soil,  in  its  materials,  in  the  number  and 
efficiency  of  its  instruments  of  production,  or  in  its  people. 

There  are  numerous  products  which  may  be  said  not  to  admit 
of  being  consumed  otherwise  than  unproductively.  The  annual 
consumption  of  gold  lace,  pine  apples,  or  champagne,  must  be  reck- 
oned unproductive,  since  these  things  give  no  assistance  to  produc- 
tion, nor  any  support  to  life  or  strength,  but  what  would  equally  be 
given  by  things  much  less  costly.  Hence  it  might  be  supposed  that 
the  labour  employed  in  producing  them  ought  not  to  be  regarded 
as  productive,  in  the  sense  in  which  the  term  is  understood  by 
political  economists.  I grant  that  no  labour  tends  to  the  permanent 
enrichment  of  society,  which  is  employed  in  producing  things  for 
the  use  of  unproductive  consumers.  The  tailor  who  makes  a coat 
for  a man  who  produces  nothing,  is  a productive  labourer ; but  in  a 
few  weeks  or  months  the  coat  is  worn  out,  while  the  wearer  has  not 
produced  anything  to  replace  it,  and  the  community  is  then  no 
richer  by  the  labour  of  the  tailor,  than  if  the  same  sum  had  been 
paid  for  a stall  at  the  opera.  Nevertheless,  society  has  been  richer 
by  the  labour  while  the  coat  lasted,  that  is,  until  society,  through 
one  of  its  unproductive  members,  chose  to  consume  the  produce 
of  the  labour  unproductively.  The  case  of  the  gold  lace  or  the  pine 
apple  is  no  further  different,  than  that  they  are  still  further  removed 
than  the  coat  from  the  character  of  necessaries.  These  things  also 
are  wealth  until  they  have  been  consumed. 

§ 6.  We  see,  however,  by  this,  that  there  is  a distinction,  more 
important  to  the  wealth  of  a community  than  even  that  between 
productive  and  unproductive  labour;  the  distinction,  namely, 
between  labour  for  the  supply  of  productive,  and  for  the  supply  of 
unproductive,  consumption ; between  labour  employed  in  keeping 
up  or  in  adding  to  the  productive  resources  of  the  country,  and  that 
which  is  employed  otherwise.  Of  the  produce  of  the  country,  a 
part  only  is  destined  to  be  consumed  productively ; the  remainder 


UNPRODUCTIVE  LABOUR 


63 


supplies  the  unproductive  consumption  of  producers,  and  the 
entire  consumption  of  the  unproductive  classes.  Suppose  that  the 
proportion  of  the  annual  produce  applied  to  the  first  purpose 
amounts  to  half ; then  one-half  the  productive  labourers  of  the 
country  are  all  that  are  employed  in  the  operations  on  which 
the  permanent  wealth  of  the  country  depends.  The  other  half  are 
occupied  from  year  to  year  and  from  generation  to  generation  in 
producing  things  which  are  consumed  and  disappear  without  return  ; 
and  whatever  this  half  consume  is  as  completely  lost,  as  to  any 
permanent  effect  on  the  national  resources,  as  if  it  were  consumed 
unproductively.  Suppose  that  this  second  half  of  the  labouring 
population  ceased  to  work,  and  that  the  government  or  their  parishes 
maintained  them  in  idleness  for  a whole  year  : the  first  half  would 
suffice  to  produce,  as  they  had  done  before,  their  own  necessaries 
and  the  necessaries  of  the  second  half,  and  to  keep  the  stock  of 
materials  and  implements  undiminished  : the  unproductive  classes, 
indeed,  would  be  either  starved  or  obliged  to  produce  their  own 
subsistence,  and  the  whole  community  would  be  reduced  during  a year 
to  bare  necessaries  ; but  the  sources  of  production  would  be  unim- 
paired, and  the  next  year  there  would  not  necessarily  be  a smaller 
produce  than  if  no  such  interval  of  inactivity  had  occurred ; while 
if  the  case  had  been  reversed,  if  the  first  half  of  the  labourers  had 
suspended  their  accustomed  occupations,  and  the  second  half 
had  continued  theirs,  the  country  at  the  end  of  the  twelvemonth 
would  have  been  entirely  impoverished. 

It  would  be  a great  error  to  regret  the  large  proportion  of  the 
annual  produce,  which  in  an  opulent  country  goes  to  supply  unpro- 
ductive consumption.  It  would  be  to  lament  that  the  community 
has  so  much  to  spare  from  its  necessities,  for  its  pleasures  and  for  all 
higher  uses.  This  portion  of  the  produce  is  the  fund  from  which 
all  the  wants  of  the  community,  other  than  that  of  mere  living,  are 
provided  for ; the  measure  of  its  means  of  enjoyment,  and  of  its 
power  of  accomplishing  all  purposes  not  productive.  That  so  great  a 
surplus  should  be  available  for  such  purposes,  and  that  it  should  be 
applied  to  them,  can  only  be  a subject  of  congratulation.  The  things 
to  be  regretted,  and  which  are  not  incapable  of  being  remedied, 
are  the  prodigious  inequality  with  which  this  surplus  is  distributed, 
the  httle  worth  of  the  objects  to  which  the  greater  part  of  it  is 
devoted,  and  the  large  share  which  falls  to  the  lot  of  persons  who 
render  no  equivalent  service  in  return. ^ 

‘ [See  Appendix  D.  Productive  and  Unproductive.'] 


CHAPTER  IV 


OP  CAPITAL 

§ 1.  It  has  been  seen  in  the  preceding  chapters  that  besides 
the  primary  and  universal  requisites  of  production,  labour  and 
natural  agents,  there  is  another  requisite  without  which  no  pro- 
ductive operations,  beyond  the  rude  and  scanty  beginnings  of  primi- 
tive industry,  are  possible  : namely,  a stock,  previously  accumulated, 
of  the  products  of  former  labour.  This  accumulated  stock  of  the 
produce  of  labour  is  termed  Capital.  The  function  of  Capital  in 
production  it  is  of  the  utmost  importance  thoroughly  to  understand, 
since  a number  of  the  erroneous  notions  with  which  our  subject 
is  infested  originate  in  an  imperfect  and  confused  apprehension 
of  this  point. 

Capital,  by  persons  wholly  unused  to  reflect  on  the  subject,  is 
supposed  to  be  synonymous  with  money.  To  expose  this  mis- 
apprehension, would  be  to  repeat  what  has  been  said  in  the  intro- 
ductory chapter.  Money  is  no  more  synonymous  with  capital  than 
it  is  with  wealth.  Money  cannot  in  itself  perform  any  part  of  the 
office  of  capital,  since  it  can  afford  no  assistance  to  production.  To 
do  this,  it  must  be  exchanged  for  other  things  ; and  anything,  which 
is  susceptible  of  being  exchanged  for  other  things,  is  capable  of 
contributing  to  production  in  the  same  degree.  What  capital  does 
for  production,  is  to  afford  the  shelter,  protection,  tools  and  materials 
w^hich  the  work  requires,  and  to  feed  and  otherwise  maintain  the 
labourers  during  the  process.  These  are  the  services  which  present 
labour  requires  from  past,  and  from  the  produce  of  past,  labour. 
Whatever  things  are  destined  for  this  use — destined  to  supply 
productive  labour  with  these  various  prerequisites — are  Capital. 

To  familiarize  ourselves  with  the  conception,  let  us  consider 
what  is  done  with  the  capital  invested  in  any  of  the  branches  of 
business  which  compose  the  productive  industry  of  a country.  A 
manufacturer,  for  example,  has  one  part  of  his  capital  in  the  form 


CAPITAL 


50 


of  buildings,  fitted  and  destined  for  carrying  on  bis  branch  of  manu- 
facture. Another  part  he  has  in  the  form  of  machinery.  A third 
consists,  if  he  be  a spinner,  of  raw  cotton,  flax,  or  wool ; if  a weaver, 
of  flaxen,  woollen,  silk,  or  cotton,  thread ; and  the  like,  according 
to  the  nature  of  the  manufacture.  Food  and  clothing  for  his  opera- 
tives it  is  not  the  custom  of  the  present  age  that  he  should  directly 
provide  ; and  few  capitalists,  except  the  producers  of  food  or 
clothing,  have  any  portion  worth  mentioning  of  their  capital  in 
that  shape.  Instead  of  this,  each  capitalist  has  money,  which  he 
pays  to  his  workpeople,  and  so  enables  them  to  supply  themselves  : 
he  has  also  finished  goods  in  his  warehouses,  by  the  sale  of  which  he 
obtains  more  money,  to  employ  in  the  same  manner,  as  well  as  to 
replenish  his  stock  of  materials,  to  keep  his  buildings  and  machinery 
in  repair,  and  to  replace  them  when  worn  out.  His  money  and 
finished  goods,  however,  are  not  wholly  capital,  for  he  does  not  wholly 
devote  them  to  these  purposes  : he  employs  a part  of  the  one,  and 
of  the  proceeds  of  the  other,  in  supplying  his  personal  consumption 
and  that  of  his  family,  or  in  hiring  grooms  and  valets,  or  maintaining 
hunters  and  hounds,  or  in  educating  his  children,  or  in  paying  taxes, 
or  in  charity.  What  then  is  his  capital  ? Precisely  that  part  of  his 
possessions,  whatever  it  be,  which  is  to  constitute  his  fund  for 
carrying  on  fresh  production.  It  is  of  no  consequence  that  a part, 
or  even  the  whole  of  it,  is  in  a form  in  which  it  cannot  directly 
supply  the  wants  of  labourers. 

Suppose,  for  ir stance,  that  the  capitalist  is  a hardware  manu- 
facturer, and  that  his  stock  in  trade,  over  and  above  his  machinery, 
consists  at  present  wholly  in  iron  goods.  Iron  goods  cannot  feed 
labourers.  Nevertheless,  by  a mere  change  of  the  destination  of 
these  iron  goods,  he  can  cause  labourers  to  be  fed.  Suppose  that 
with  a portion  of  the  proceeds  he  intended  to  maintain  a pack  of 
hounds,  or  an  establishment  of  servants ; and  that  he  changes  his 
intention,  and  employs  it  in  his  business,  paying  it  in  wages  to 
additional  workpeople.  These  workpeople  are  enabled  to  buy  and 
consume  the  food  which  would  otherwise  have  been  consumed  by  the 
hounds  or  by  the  servants ; and  thus,  without  the  employer’s  ha\dng 
seen  or  touched  one  particle  of  the  food,  his  conduct  has  determined 
that  so  much  more  of  the  food  existing  in  the  country  has  been 
devoted  to  the  use  of  productive  labourers,  and  so  much  less  con- 
sumed in  a manner  wholly  unproductive.  Now  vary  the  hypothesis, 
and  suppose  that  what  is  thus  paid  in  wages  woiild  otherwise  have 
been  laid  out  not  in  feeding  servants  or  hounds,  but  in  buying  plate 


66 


BOOK  I.  CHAPTER  IV.  § 2 


and  jewels ; and  in  order  to  render  the  effect  perceptible,  let  us 
suppose  that  the  change  takes  place  on  a considerable  scale,  and 
that  a large  sum  is  diverted  from  buying  plate  and  jewels  to  employ- 
ing productive  labourers,  whom  we  shall  suppose  to  have  been 
previously,  like  the  Irish  peasantry  [1848],  only  half  employed 
and  half  fed.  The  labourers,  on  receiving  their  increased  wages, 
will  not  lay  them  out  in  plate  and  jewels,  but  in  food.  There  is  not, 
however,  additional  food  in  the  country ; nor  any  unproductive 
labourers  or  animals,  as  in  the  former  case,  whose  food  is  set  free 
for  productive  purposes.  Food  will  therefore  be  imported  if  possible ; 
if  not  possible,  the  labourers  will  remain  for  a season  on  their  short 
allowance : but  the  consequence  of  this  change  in  the  demand  for 
commodities,  occasioned  by  the  change  in  the  expenditure  of 
capitalists  from  unproductive  to  productive,  is  that  next  year  more 
food  will  be  produced,  and  less  plate  and  jewellery.  So  that  again, 
without  having  had  anything  to  do  with  the  food  of  the  labourers 
directly,  the  conversion  by  individuals  of  a portion  of  their  property, 
no  matter  of  what  sort,  from  an  unproductive  destination  to  a pro- 
ductive, has  had  the  effect  of  causing  more  food  to  be  appropriated 
to  the  consumption  of  productive  labourers.  The  distinction,  then, 
between  Capital  and  Not-capital,  does  not  lie  in  the  kind  of  commo- 
dities, but  in  the  mind  of  the  capitalist — in  his  will  to  employ  them 
for  one  purpose  rather  than  another ; and  all  property,  however 
ill  adapted  in  itself  for  the  use  of  labourers,  is  a part  of  capital, 
so  soon  as  it,  or  the  value  to  be  received  from  it,  is  set  apart  for 
productive  reinvestment.  The  sum  of  all  the  values  so  destined 
by  their  respective  possessors,  composes  the  capital  of  the  country. 
Whether  aU  those  values  are  in  a shape  directly  applicable  to  pro- 
ductive uses,  makes  no  difference.  Their  shape,  whatever  it  may 
be,  is  a temporary  accident : but  once  destined  for  production,  they 
do  not  fail  to  find  a way  of  transforming  themselves  into  things 
capable  of  being  applied  to  it. 

§ 2.  As  whatever  of  the  produce  of  the  country  is  devoted  to 
production  is  capital,  so,  conversely,  the  whole  of  the  capital  of  the 
country  is  devoted  to  production.  This  second  proposition,  however, 
must  be  taken  with  some  limitations  and  explanations.  A fund  may 
be  seeking  for  productive  employment,  and  find  none,  adapted  to 
the  inclinations  of  its  possessor : it  then  is  capital  still,  but  unem- 
ployed capital.  Or  the  stock  may  consist  of  unsold  goods,  not 
susceptible  of  direct  application  to  productive  uses,  and  not,  at  the 


CAPITAL 


67 


moment,  marketable  : these,  until  sold,  are  in  the  condition  of 
unemployed  capital.  Again,  artificial  or  accidental  circumstances 
may  render  it  necessary  to  possess  a larger  stock  in  advance,  that 
is,  a larger  capital  before  entering  on  production,  than  is  required 
by  the  nature  of  things.  Suppose  that  the  government  lays  a tax  on 
the  production  in  one  of  its  earlier  stages,  as  for  instance  by  taxing 
the  material.  The  manufacturer  has  to  advance  the  tax,  before 
commencing  the  manufacture,  and  is  therefore  under  a necessity  of 
having  a larger  accumulated  fund  than  is  required  for,  or  is 
actually  employed  in,  the  production  which  he  carries  on.  He 
must  have  a larger  capital,  to  maintain  the  same  quantity  of 
productive  labour ; or  (what  is  equivalent)  with  a given  capital 
he  maintains  less  labour.  This  mode  of  levying  taxes,  therefore, 
limits  unnecessarily  the  industry  of  the  country : a portion  of 
the  fund  destined  by  its  owners  for  production  being  diverted 
from  its  purpose,  and  kept  in  a constant  state  of  advance  to  the 
government. 

For  another  example : a farmer  may  enter  on  his  farm  at  such 
a time  of  the  year,  that  he  may  be  required  to  pay  one,  two,  or  even 
three  quarters’  rent  before  obtaining  any  return  from  the  produce. 
This,  therefore,  must  be  paid  out  of  his  capital.  Now  rent,  when 
paid  for  the  land  itself,  and  not  for  improvements  made  in  it  by  labour, 
is  not  a productive  expenditure.  It  is  not  an  outlay  for  the 
support  of  labour,  or  for  the  provision  of  implements  or  materials 
the  produce  of  labour.  It  is  the  price  paid  for  the  use  of  an 
appropriated  natural  agent.  This  natural  agent  is  indeed  as  in- 
dispensable (and  even  more  so)  as  any  implement : but  the 
having  to  pay  a price  for  it,  is  not.  In  the  case  of  the  implement 
(a  thing  produced  by  labour)  a price  of  some  sort  is  the  necessary 
condition  of  its  existence ; but  the  land  exists  by  nature.  The 
payment  for  it,  therefore,  is  not  one  of  the  expenses  of  pro- 
duction ; and  the  necessity  of  making  the  payment  out  of  capital 
makes  it  requisite  that  there  should  be  a greater  capital,  a greater 
antecedent  accumulation  of  the  produce  of  past  labour,  than  is 
naturally  necessary,  or  than  is  needed  where  land  is  occupied  on  a 
different  system.  This  extra  capital,  though  intended  by  its  owners 
for  production,  is  in  reality  employed  unproductively,  and  annually 
replaced,  not  from  any  produce  of  its  own,  but  from  the  produce  of 
the  labour  supported  by  the  remainder  of  the  farmer’s  capital. 

Finally,  that  large  portion  of  the  productive  capital  of  a country 
which  is  employed  in  paying  the  wages  and  salaries  of  labourers 


68 


BOOK  I.  CHAPTER  IV.  § 2 


evidently  is  not,  all  of  it,  strictly  and  indispensably  necessary  for 
production.  As  much  of  it  as  exceeds  the  actual  necessaries  of  life 
and  health  (an  excess  which  in  the  case  of  skilled  labourers  is 
usually  considerable)  is  not  expended  in  supporting  labour,  but 
in  remunerating  it,  and  the  labourers  could  wait  for  this  part  of  their 
remuneration  until  the  production  is  completed ; it  needs  not 
necessarily  pre-exist  as  capital : and  if  they  unfortunately  had  to 
forego  it  altogether,  the  same  amount  of  production  might  take 
place.  In  order  that  the  whole  remuneration  of  the  labourers  should 
be  advanced  to  them  in  daily  or  weekly  payments,  there  must  exist 
in  advance,  and  be  appropriated  to  productive  use,  a greater  stock, 
or  capital,  than  would  suffice  to  carry  on  the  existing  extent  of 
production : greater,  by  whatever  amount  of  remuneration  the 
labourers  received,  beyond  what  the  self-interest  of  a prudent  slave- 
master  would  assign  to  his  slaves.  In  truth,  it  is  only  after  an 
abundant  capital  had  already  been  accumulated,  that  the  practice 
of  paying  in  advance  any  remuneration  of  labour  beyond  a bare 
subsistence  could  possibly  have  arisen  : since  whatever  is  so  paid, 
is  not  really  applied  to  production,  but  to  the  unproductive  consump- 
tion of  productive  labourers,  indicating  a fund  for  production 
sufficiently  ample  to  admit  of  habitually  diverting  a part  of  it  to  a 
mere  convenience. 

It  will  be  observed  that  I have  assumed,  that  the  labourers  are 
always  subsisted  from  capital : and  this  is  obviously  the  fact, 
though  the  capital  needs  not  necessarily  be  furnished  by  a person 
called  a capitalist.  When  the  labourer  maintains  himself  by  funds 
of  his  own,  as  when  a peasant-farmer  or  proprietor  lives  on  the 
produce  of  his  land,  or  an  artisan  works  on  his  own  account,  they  are 
still  supported  by  capital,  that  is,  by  funds  provided  in  advance. 
The  peasant  does  not  subsist  this  year  on  the  produce  of  this  year’s 
harvest,  but  on  that  of  the  last.  The  artisan  is  not  living  on  the 
proceeds  of  the  work  he  has  in  hand,  but  on  those  of  work  previously 
executed  and  disposed  of.  Each  is  supported  by  a small  capital  of 
his  own,  which  he  periodically  replaces  from  the  produce  of  his 
labour.  The  large  capitalist  is,* in  like  manner,  maintained  from 
funds  provided  in  advance.  If  he  personally  conducts  his  operations, 
as  much  of  his  personal  or  household  expenditure  as  does  not  exceed 
a fair  remuneration  of  his  labour  at  the  market  price  must  be  con- 
sidered a part  of  his  capital,  expended,  like  any  other  capital,  for 
production : and  his  personal  consumption,  so  far  as  it  consists  of 
necessaries,  is  productive  consumption. 


CAPITAL 


59 


§ 3.  At  the  risk  of  being  tedious,  I must  add  a few  more  illus- 
trations, to  bring  out  into  a still  clearer  and  stronger  light  the  idea 
of  Capital.  As  M.  Say  truly  remarks,  it  is  on  the  very  elements  of 
our  subject  that  illustration  is  most  usefully  bestowed,  since  the 
greatest  errors  which  prevail  in  it  may  be  traced  to  the  want  of  a 
thorough  mastery  over  the  elementary  ideas.  Nor  is  this  surprising : 
a branch  may  be  diseased  and  all  the  rest  healthy,  but  unsoundness 
at  the  root  diffuses  unhealthiness  through  the  whole  tree. 

Let  us  therefore  consider  whether,  and  in  what  cases,  the  property 
of  those  who  live  on  the  interest  of  what  they  possess,  without  being 
personally  engaged  in  production,  can  be  regarded  as  capital.  It  is 
so  called  in  common  language,  and,  with  reference  to  the  individual, 
not  improperly.  All  funds  from  which  the  possessor  derives  an 
income,  which  income  he  can  use  without  sinking  and  dissipating 
the  fund  itself,  are  to  him  equivalent  to  capital.  But  to  transfer 
hastily  and  inconsiderately  to  the  general  point  of  view  propositions 
which  are  true  of  the  individual  has  been  a source  of  innumerable 
errors  in  political  economy.  In  the  present  instance,  that  which  is 
virtually  capital  to  the  individual,  is  or  is  not  capital  to  the  nation, 
according  as  the  fund  which  by  the  supposition  he  has  not  dissipated, 
has  or  has  not  been  dissipated  by  somebody  else. 

For  example,  let  property  of  the  value  of  ten  thousand  pounds 
belonging  to  A,  be  lent  to  B,  a farmer  or  manufacturer,  and  employed 
profitably  in  B’s  occupation.  It  is  as  much  capital  as  if  it  belonged 
to  B.  A is  really  a farmer  or  manufacturer,  not  personally,  but  in 
respect  of  his  property.  Capital  worth  ten  thousand  pounds  is 
employed  in  production — in  maintaining  labourers  and  providing 
tools  and  materials ; which  capital  belongs  to  A,  while  B takes  the 
trouble  of  employing  it,  and  receives  for  his  remuneration  the  differ- 
ence between  the  profit  which  it  yields  and  the  interest  he  pays 
to  A.  This  is  the  simplest  case. 

Suppose  next  that  A’s  ten  thousand  pounds,  instead  of  being 
lent  to  B,  are  lent  on  mortgage  to  C,  a landed  proprietor,  by  whom 
they  are  employed  in  improving  the  productive  powers  of  his  estate, 
by  fencing,  draining,  road-making,  or  permanent  manures.  TLis 
is  productive  employment.  The  ten  thousand  pounds  are  sunk, 
but  not  dissipated.  They  yield  a permanent  return  ; the  land  now 
affords  an  increase  of  produce,  sufficient,  in  a few  years,  if  the  outlay 
has  been  judicious,  to  replace  the  amount,  and  in  time  to  multiply 
it  manifold.  Here,  then,  is  the  value  of  ten  thousand  pounds, 
employed  in  increasing  the  produce  of  the  country.  This  constitutes 


BOOK  I.  CHAPTER  IV.  § 3 


a capital,  for  which  C,  if  he  lets  his  land,  receives  the  returns  in  the 
nominal  form  of  increased  rent ; and  the  mortgage  entitles  A to 
receive  from  these  returns,  in  the  shape  of  interest,  such  annual  sum 
as  has  been  agreed  on.  We  will  now  vary  the  circumstances,  and 
suppose  that  C does  not  employ  the  loan  in  improving  his  land,  but 
in  paying  off  a former  mortgage,  or  in  making  a provision  for  children. 
Whether  the  ten  thousand  pounds  thus  employed  are  capital  or  not, 
will  depend  on  what  is  done  with  the  amount  by  the  ultimate  receiver. 
If  the  children  invest  their  fortunes  in  a productive  employment,  or 
the  mortgagee  on  being  paid  off  lends  the  amount  to  another  land- 
holder to  improve  his  land,  or  to  a manufacturer  to  extend  his 
business,  it  is  still  capital,  because  productively  employed. 

Suppose,  however,  that  C,  the  borrowing  landlord,  is  a spend- 
thrift, who  burdens  his  land  not  to  increase  his  fortune  but  to 
squander  it,  expending  the  amount  in  equipages  and  entertainments. 
In  a year  or  two  it  is  dissipated,  and  without  return.  A is  as  rich 
as  before ; he  has  no  longer  his  ten  thousand  pounds,  but  he  has  a 
lien  on  the  land,  which  he  could  still  sell  for  that  amount.  C, 
however,  is  10,000?.  poorer  than  formerly ; and  nobody  is  richer. 
It  may  be  said  that  those  are  richer  who  have  made  profit 
out  of  the  money  while  it  was  being  spent.  No  doubt  if  0 lost 
it  by  gaming,  or  was  cheated  of  it  by  his  servants,  that  is  a mere 
transfer,  not  a destruction,  and  those  who  have  gained  the 
amount  may  employ  it  productively.  But  if  C has  received  the 
fair  value  for  his  expenditure  in  articles  of  subsistence  or  luxury, 
which  he  has  consumed  on  himself,  or  by  means  of  his  servants  or 
guests,  these  articles  have  ceased  to  exist,  and  nothing  has  been 
produced  to  replace  them  : while  if  the  same  sum  had  been  employed 
in  farming  or  manufacturing,  the  consumption  which  would  have 
taken  place  would  have  been  more  than  balanced  at  the  end  of  the 
year  by  new  products,  created  by  the  labour  of  those  who  would  in 
that  case  have  been  the  consumers.  By  C’s  prodigality,  that  which 
would  have  been  consumed  with  a return,  is  consumed  without 
return.  C’s  tradesmen  may  have  made  a profit  during  the  process  ;; 
but  if  the  capital  had  been  expended  productively,  an  equivalent 
profit  would  have  been  made  by  builders,  fencers,  tool-makers,  and 
the  tradespeople  who  supply  the  consumption  of  the  labouring  classes ; 
while  at  the  expiration  of  the  time  (to  say  nothing  of  any  increase),, 
C would  have  had  the  ten  thousand  pounds  or  its  value  replaced 
to  him,  which  now  he  has  not.  There  is,  therefore,  on  the  general 
result,  a difference  to  the  disadvantage  of  the  community,  of 


CAPITAL 


61 


at  least  ten  thousand  pounds,  being  the  amount  of  C’s  unproductive 
expenditure.  To  A,  the  difference  is  not  material,  since  his  income 
is  secured  to  him,  and  while  the  security  is  good,  and  the  market 
rate  of  interest  the  same,  he  can  always  sell  the  mortgage  at  its 
original  value.  To  A,  therefore,  the  lien  of  ten  thousand  pounds  on 
C’s  estate,  is  virtually  a capital  of  that  amount ; but  is  it  so  in 
reference  to  the  community  ? It  is  not.  A had  a capital  of  ten 
thousand  pounds,  but  this  has  been  extinguished — dissipated  and 
destroyed  by  C’s  prodigality.  A now  receives  his  income,  not 
from  the  produce  of  his  capital,  but  from  some  other  source  of  income 
belonging  to  C,  probably  from  the  rent  of  his  land,  that  is,  from 
payments  made  to  him  by  farmers  out  of  the  produce  of  their  capital. 
The  national  capital  is  diminished  by  ten  thousand  pounds,  and  the 
national  income  by  all  which  those  ten  thousand  pounds,  employed 
as  capital,  would  have  produced.  The  loss  does  not  fall  on  the  owner 
of  the  destroyed  capital,  since  the  destroyer  has  agreed  to  indemnify 
him  for  it.  But  his  loss  is  only  a small  portion  of  that  sustained  by 
the  community,  since  what  was  devoted  to  the  use  and  consumption 
of  the  proprietor  was  only  the  interest ; the  capital  itself  was,  or 
would  have  been,  employed  in  the  perpetual  maintenance  of  an 
equivalent  number  of  labourers,  regularly  reproducing  what  they 
consumed:  and  of  this  maintenance  they  are  deprived  without 
compensation. 

Let  us  now  vary  the  hypothesis  still  further,  and  suppose  that 
the  money  is  borrowed,  not  by  a landlord,  but  by  the  State.  A 
lends  his  capital  to  Government  to  carry  on  a war : he  buys  from 
the  State  what  are  called  government  securities ; that  is,  obligations 
on  the  government  to  pay  a certain  annual  income.  If  the  govern- 
ment employed  the  money  in  making  a railroad,  this  might  be  a 
productive  employment,  and  A’s  property  would  still  be  used  as 
capital ; but  since  it  is  employed  in  war,  that  is,  in  the  pay  of  officers 
and  soldiers  who  produce  nothing,  and  in  destroying  a quantity  of 
gunpowder  and  bullets  without  return,  the  government  is  in  the 
situation  of  C,  the  spendthrift  landlord,  and  A’s  ten  thousand  pounds 
are  so  much  national  capital  which  once  existed,  but  exists  no  longer : 
virtually  thrown  into  the  sea,  as  far  as  wealth  or  production  is 
concerned ; though  for  other  reasons  the  employment  of  it  may 
have  been  justifiable.  A’s  subsequent  income  is  derived,  not  from 
the  produce  of  his  own  capital,  but  from  taxes  drawn  from  the 
produce  of  the  remaining  capital  of  the  community  ; to  whom  his 
capital  is  not  yielding  any  return,  to  indemnify  them  for  the  payment 


62 


BOOK  I.  CHAPTER  IV.  § 3 


it  is  lost  and  gone,  and  what  he  now  possesses  is  a claim  on  the  returns 
to  other  people’s  capital  and  industry.  This  claim  he  can  sell,  and 
get  back  the  equivalent  of  his  capital,  which  he  may  afterwards 
employ  productively.  True ; but  he  does  not  get  back  his  own 
capital,  or  anything  which  it  has  produced  ; that,  and  all  its  possible 
returns,  are  extinguished  : what  he  gets  is  the  capital  of  some  other 
person,  which  that  person  is  willing  to  exchange  for  his  lien  on  the 
taxes.  Another  capitalist  substitutes  himself  for  A as  a mortgagee 
of  the  public,  and  A substitutes  himself  for  the  other  capitalist 
as  the  possessor  of  a fund  employed  in  production,  or  available  for 
it.  By  this  exchange  the  productive  powers  of  the  community  are 
neither  increased  nor  diminished.  The  breach  in  the  capital  of 
the  country  was  made  when  the  government  spent  A’s  money: 
whereby  a value  of  ten  thousand  pounds  was  withdrawn  or  withheld 
from  productive  employment,  placed  in  the  fund  for  unproductive 
consumption,  and  destroyed  without  equivalent.^ 


* [See  Appendix  E.  The  Definition  of  Capital.^ 


CHAPTER  V 


FUNDAMENTAL  PROPOSITIONS  RESPECTING  CAPITAL 

§ 1.  If  the  preceding  explanations  have  answered  their  purpose, 
they  have  given  not  only  a sufficiently  complete  possession  of  the 
idea  of  Capital  according  to  its  definition,  but  a sufficient  familiarity 
with  it  in  the  concrete,  and  amidst  the  obscurity  with  which  the 
complication  of  individual  circumstances  surrounds  it,  to  have 
prepared  even  the  unpractised  reader  for  certain  elementary  pro- 
positions or  theorems  respecting  capital,  the  full  comprehension  of 
which  is  already  a considerable  step  out  of  darkness  into  light. 

The  first  of  these  propositions  is.  That  industry  is  limited  by 
capital.  This  is  so  obvious  as  to  be  taken  for  granted  in  many 
common  forms  of  speech  ; but  to  see  a truth  occasionally  is  one  thing, 
to  recognise  it  habitually,  and  admit  no  propositions  inconsistent  with 
it,  is  another.  The  axiom  was  until  lately  almost  universally  disre- 
garded by  legislators  and  political  writers ; and  doctrines  irrecon- 
cileable  with  it  are  still  very  commonly  professed  and  inculcated. 

The  following  are  common  expressions  implying  its  truth.  The 
act  of  directing  industry  to  a particular  employment  is  described 
by  the  phrase  “ applying  capital  ” to  the  employment.  To  employ 
industry  on  the  land  is  to  apply  capital  to  the  land.  To  employ 
labour  in  a manufacture  is  to  invest  capital  in  the  manufacture. 
This  implies  that  industry  cannot  be  employed  to  any  greater  extent 
than  there  is  capital  to  invest.  The  proposition,  indeed,  must 
be  assented  to  as  soon  as  it  is  distinctly  apprehended.  The  expres- 
sion “ applying  capital  ” is  of  course  metaphorical : what  is  really 
applied  is  labour ; capital  being  an  indispensable  condition.  Again, 
we  often  speak  of  the  “ productive  powers  of  capital.”  This  ex- 
pression is  not  literally  correct.  The  only  productive  powers  are 
those  of  labour  and  natural  agents ; or  if  any  portion  of  capital 
can  by  a stretch  of  language  be  said  to  have  a productive  power  of 
its  own,  it  is  only  tools  and  machinery,  which,  like  wind  or  water. 


64 


BOOK  I.  CHAPTER  V.  § 1 


may  be  said  to  co-operate  with  labour.  The  food  of  labourers  and 
the  materials  of  production  have  no  productive  power ; but  labour 
cannot  exert  its  productive  power  unless  provided  with  them. 
There  can  be  no  more  industry  than  is  supplied  with  materials  to 
work  up  and  food  to  eat.  Self-evident  as  the  thing  is,  it  is  often 
forgotten  that  the  people  of  a country  are  maintained  and  have 
their  wants  supplied,  not  by  the  produce  of  present  labour,  but 
of  past.  They  consume  what  ha^  been  produced,  not  what  is  about 
to  be  produced.  Now,  of  what  has  been  produced,  a part  only  is 
allotted  to  the  support  of  productive  labour ; and  there  will  not 
and  cannot  be  more  of  that  labour  than  the  portion  so  allotted 
(which  is  the  capital  of  the  country)  can  feed,  and  provide  with  the 
materials  and  instruments  of  production. 

Yet,  in  disregard  of  a fact  so  evident,  it  long  continued  to  be 
believed  that  laws  and  governments,  without  creating  capital, 
could  create  industry.  Not  by  making  the  people  more  laborious, 
or  increasing  the  efficiency  of  their  labour;  these  are  objects  to 
which  the  government  can,  in  some  degree,  indirectly  contribute. 
But  without  any  increase  in  the  skill  or  energy  of  the  labourers,  and 
without  causing  any  persons  to  labour  who  had  previously  been 
maintained  in  idleness,  it  was  still  thought  that  the  government, 
without  providing  additional  funds,  could  create  additional  employ- 
ment. A government  would,  by  prohibitory  laws,  put  a stop  to 
the  importation  of  some  commodity;  and  when  by  this  it  had 
caused  the  commodity  to  be  produced  at  home,  it  would  plume 
itself  upon  having  enriched  the  country  with  a new  branch  of 
industry,  would  parade  in  statistical  tables  the  amount  of  produce 
yielded  and  labour  employed  in  the  production,  and  take  credit  for 
the  whole  of  this  as  a gain  to  the  country,  obtained  through  the 
prohibitory  law.  Although  this  sort  of  pohtical  arithmetic  has 
fallen  a little  into  discredit  in  England,  it  still  flourishes  in  the 
nations  of  Continental  Europe.  Had  legislators  been  aware  that 
industry  is  limited  by  capital,  they  would  have  seen  that,  the 
aggregate  capital  of  the  country  not  having  been  increased,  any 
portion  of  it  which  they  by  their  laws  had  caused  to  be  embarked 
in  the  newly-acquired  branch  of  industry  must  have  been  with- 
drawn or  withheld  from  some  other ; in  which  it  gave,  or  would 
have  given,  employment  to  probably  about  the  same  quantity 
of  labour  which  it  employs  in  its  new  occupation.* 

* An  exception  must  be  admitted  when  the  industry  created  or  upheld 
by  the  restrictive  law  belongs  to  the  class  of  what  are  called  domestic 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


66 


§ 2.  Because  industry  is  limited  by  capital,  we  are  not  however 
to  infer  that  it  always  reaches  that  limit.  Capital  may  be  tem- 
porarily unemployed,  as  in  the  case  of  unsold  goods,  or  funds  that 
have  not  yet  found  an  investment : during  this  interval  it  does  not 
set  in  motion  any  industry.  Or  there  may  not  be  as  many  labourers 
obtainable,  as  the  capital  would  maintain  and  employ.  This  has 
been  known  to  occur  in  new  colonies,  where  capital  has  sometimes 
perished  uselessly  for  want  of  labour : the  Swan  River  settlement 
(now  called  Western  Australia),  in  the  first  years  after  its  foundation, 
was  an  instance.  There  are  many  persons  maintained  from  existing 
capital,  who  produce  nothing,  or  who  might  produce  much  more 
than  they  do.  If  the  labourers  were  reduced  to  lower  wages,  or 
induced  to  work  more  hours  for  the  same  wages,  or  if  their  families, 
who  are  already  maintained  from  capital,  were  employed  to  a 
greater  extent  than  they  now  are  in  adding  to  the  produce,  a given 
capital  would  afford  employment  to  more  industry.  The  un- 
productive consumption  of  productive  labourers,  the  whole  of 
which  is  now  supplied  by  capital,  might  cease,  or  be  postponed  until 
the  produce  came  in ; and  additional  productive  labourers  might 
be  maintained  with  the  amount.  By  such  means  society  might 
obtain  from  its  existing  resources  a greater  quantity  of  produce  : 
and  to  such  means  it  has  been  driven,  when  the  sudden  destruction 
of  some  large  portion  of  its  capital  rendered  the  employment 
of  the  remainder  with  the  greatest  possible  effect  a matter  of 
paramount  consideration  for  the  time. 

When  industry  has  not  come  up  to  the  limit  imposed  by  capital, 
governments  may,  in  various  ways,  for  example  by  importing  addi- 
tional labourers,  bring  it  nearer  to  that  limit : as  by  the  importation 

manufactures.  These  being  carried  on  by  persons  already  fed — by  labouring 
families,  in  the  intervals  of  other  employment — no  transfer  of  capital  to  the 
occupation  is  necessary  to  its  being  undertaken,  beyond  the  value  of  the 
materials  and  tools,  which  is  often  inconsiderable.  If,  therefore,  a protecting 
duty  causes  this  occupation  to  be  carried  on,  when  it  otherwise  would  not, 
there  is  in  this  case  a real  increase  of  the  production  of  the  country. 

In  order  to  render  our  theoretical  proposition  invulnerable,  this  peculiar 
case  must  be  allowed  for ; but  it  does  not  touch  the  practical  doctrine  of  free 
trade.  Domestic  manufactures  cannot,  from  the  very  nature  of  things,  require 
protection,  since  the  subsistence  of  the  labourers  being  provided  from  other 
sources,  the  price  of  the  product,  however  much  it  may  be  reduced,  is  nearly 
all  clear  gain.  If,  therefore,  the  domestic  producers  retire  from  the  competition, 
it  is  never  from  necessity,  but  because  the  product  is  not  worth  the  labour 
it  costs,  in  the  opinion  of  the  best  judges,  those  who  enjoy  the  one  and  undergo 
the  other.  They  prefer  the  sacrifice  of  buying  their  clothing  to  the  labour  of 
making  it.  They  will  not  continue  their  labour  unless  society  will  give  them 
more  for  it,  than  in  their  own  opinion  its  product  is  worth. 

D 


BOOK  I.  CHAPTER  V.  § 3 


of  Coolies  and  free  Negroes  into  the  West  Indies.  There  is; 
another  way  in  which  governments  can  create  additional  industry.. 
They  can  create  capital.  They  may  lay  on  taxes,  and  employ 
the  amount  productively.  They  may  do  what  is  nearly  equivalent 
they  may  lay  taxes  on  income  or  expenditure,  and  apply  the  proceeds; 
towards  paying  ofi  the  public  debts.  The  fundholder,  when  paid 
off,  would  still  desire  to  draw  an  income  from  his  property,  most; 
of  which  therefore  would  find  its  way  into  productive  employment,, 
while  a great  part  of  it  would  have  been  drawn  from  the  fund 
for  unproductive  expenditure,  since  people  do  not  wholly  pay 
their  taxes  from  what  they  would  have  saved,  but  partly,  if  not 
chiefly,  from  what  they  would  have  spent.  It  may  be  added, 
that  any  increase  in  the  productive  power  of  capital  (or,  more  properly 
speaking,  of  labour)  by  improvements  in  the  arts  of  fife,  or  otherwise, 
tends  to  increase  the  employment  for  labour ; since,  when  there  is. 
a greater  produce  altogether,  it  is  always  probable  that  some  portion 
of  the  increase  will  be  saved  and  converted  into  capital ; especially 
when  the  increased  returns  to  productive  industry  hold  out  an 
additional  temptation  to  the  conversion  of  funds  from  an  unpro^ 
ductive  destination  to  a productive. 

§ 3.  While,  on  the  one  hand,  industry  is  limited  by  capital, 
so  on  the  other,  every  increase  of  capital  gives,  or  is  capable  of 
giving,  additional  employment  to  industry ; and  this  without 
assignable  limit.  I do  not  mean  to  deny  that  the  capital,  or  part 
of  it,  may  be  so  employed  as  not  to  support  labourers,  being  fixed 
in  machinery,  buildings,  improvement  of  land,  and  the  like.  In 
any  large  increase  of  capital  a considerable  portion  will  generally 
be  thus  employed,  and  will  only  co-operate  with  labourers,  not 
maintain  them.  What  I do  intend  to  assert  is,  that  the  portion 
which  is  destined  to  their  maintenance,  may  (supposing  no  altera- 
tion in  anything  else)  be  indefinitely  increased,  without  creating  an 
impossibihty  of  finding  them  employment : in  other  words,  that 
if  there  are  human  beings  capable  of  work,  and  food  to  feed  them, 
they  may  always  be  employed  in  producing  something.  This 
proposition  requires  to  be  somewhat  dwelt  upon,  being  one  of  those 
which  it  is  exceedingly  easy  to  assent  to  when  presented  in  general 
terms,  but  somewhat  difficult  to  keep  fast  hold  of,  in  the  crowd  and 
confusion  of  the  actual  facts  of  society.  It  is  also  very  much  opposed 
to  common  doctrines.  There  is  not  an  opinion  more  general  among 
mankind  than  this,  that  the  unproductive  expenditure  of  the  rich 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


67 


is  necessary  to  the  employment  of  the  poor.  Before  Adam  Smith, 
the  doctrine  had  hardly  been  questioned  ; and  even  since  his  time, 
authors  of  the  highest  name  and  of  great  merit*  have  contended, 
that  if  consumers  were  to  save  and  convert  into  capital  more  than 
a hmited  portion  of  their  income,  and  were  not  to  devote  to  un- 
productive consumption  an  amount  of  means  bearing  a certain 
ratio  to  the  capital  of  the  country,  the  extra  accumulation  would 
be  merely  so  much  waste,  since  there  would  be  no  market  for  the 
commodities  which  the  capital  so  created  would  produce.  I conceive 
this  to  be  one  of  the  many  errors  arising  in  pohtical  economy,  from 
the  practice  of  not  beginning  with  the  examination  of  simple  cases, 
but  rushing  at  once  into  the  complexity  of  concrete  phenomena. 

Every  one  can  see  that  if  a benevolent  government  possessed 
all  the  food,  and  all  the  implements  and  materials,  of  the  community, 
it  could  exact  productive  labour  from  all  capable  of  it,  to  whom 
it  allowed  a share  in  the  food,  and  could  be  in  no  danger  of  wanting 
a field  for  the  employment  of  this  productive  labour,  since  as  long 
as  there  was  a single  want  unsaturated  (which  material  objects 
could  supply)  of  any  one  individual,  the  labour  of  the  community 
could  be  turned  to  the  production  of  something  capable  of  satisfying 
that  want.  Now,  the  individual  possessors  of  capital,  whvcn  they 
add  to  it  by  fresh  accumulations,  are  doing  precisely  the  same 
thing  which  we  suppose  to  be  done  by  a benevolent  government. 
As  it  is  allowable  to  put  any  case  by  way  of  hypothesis,  let  us 
imagine  the  most  extreme  case  conceivable.  Suppose  that  every 
capitalist  came  to  be  of  opinion  that,  not  being  more  meritorious 
than  a well-conducted  labourer,  he  ought  not  to  fare  better ; and 
accordingly  laid  by,  from  conscientious  motives,  the  surplus  of 
his  profits  ; or  suppose  this  abstinence  not  spontaneous,  but  imposed 
by  law  or  opinion  upon  all  capitalists,  and  upon  landowners  like- 
wise. Unproductive  expenditure  is  now  reduced  to  its  lowest 
limit : and  it  is  asked,  how  is  the  increased  capital  to  find  employ- 
ment ? Who  is  to  buy  the  goods  which  it  will  produce  ? There  are 
no  longer  customers  even  for  those  which  were  produced  before. 
The  goods,  therefore,  (it  is  said)  will  remain  unsold ; they  will  perish 
in  the  warehouses ; until  capital  is  brought  down  to  what  it  was 
originally,  or  rather  to  as  much  less,  as  the  demand  of  the  consumers 
has  lessened.  But  this  is  seeing  only  one-half  of  the  matter.  In 
the  case  supposed,  there  would  no  longer  be  any  demand  for  luxuries, 


For  example,  Mr.  Malthus,  Dr.  Chalmers,  M.  de  Sismondi. 


68 


BOOK  I.  CHAPTER  V.  § 4 


on  tlie  part  of  capitalists  and  landowners.  But  when  these  classes 
turn  their  income  into  capital,  they  do  not  thereby  annihilate  their 
power  of  consumption ; they  do  but  transfer  it  from  themselves 
to  the  labourers  to  whom  they  give  employment.  Now,  there  are 
two  possible  suppositions  in  regard  to  the  labourers  ; either  there 
is,  or  there  is  not,  an  increase  of  their  numbers,  proportional  to  the 
increase  of  capital.  If  there  is,  the  case  offers  no  difficulty.  The 
production  jf  necessaries  for  the  new  population,  takes  the  place 
of  the  production  of  luxurie€  for  a portion  of  the  old,  and  supplies 
exactly  the  amount  of  employment  which  has  been  lost.  But 
suppose  that  there  is  no  increase  of  population.  The  whole 
of  what  was  previously  expended  in  luxuries,  by  capitalists  and 
landlords,  is  distributed  among  the  existing  labourers,  in  the  form 
of  additional  wages.  We  will  assume  them  to  be  already  sufficiently 
supplied  with  necessaries.  What  follows  ? That  the  labourers 
become  consumers  of  luxuries  ; and  the  capital  previously  employed 
in  the  production  of  luxuries  is  still  able  to  employ  itself  in  the 
same  manner : the  difference  being,  that  the  luxuries  are  shared 
among  the  community  generally,  instead  of  being  confined  to  a 
few.  The  increased  accumulation  and  increased  production  might, 
rigorously  speaking,  continue,  until  every  labourer  had  every 
indulgence  of  wealth,  consistent  with  continuing  to  work  ; supposing 
that  the  power  of  their  labour  were  physically  sufficient  to  produce 
all  this  amount  of  indulgences  for  their  whole  number.  Thus  the 
limit  of  wealth  is  never  deficiency  of  consumers,  but  of  producers  and 
productive  power.  Every  addition  to  capital  gives  to  labour  either 
additional  employment,  or  additional  remuneration ; enriches  either 
the  country,  or  the  labouring  class.  If  it  finds  additional  hands  to  set 
to  work,  it  increases  the  aggregate  produce ; if  only  the  same  hands, 
it  gives  them  a larger  share  of  it ; and  perhaps  even  in  this  case,  by 
stimulating  them  to  greater  exertion,  augments  the  produce  itself. 

§ 4.  A second  fundamental  theorem  respecting  Capital  relates 
to  the  source  from  which  it  is  derived.  It  is  the  result  of  saving. 
The  evidence  of  this  hes  abundantly  in  what  has  been  already  said 
on  the  subject.  But  the  proposition  needs  some  further  illustration. 

If  all  persons  were  to  expend  in  personal  indulgences  all  that 
they  produce,  and  all  the  income  they  receive  from  what  is  produced 
by  others,  capital  could  not  increase.  All  capital,  with  a trifling 
exception,  was  originally  the  result  of  saving.  I say,  with  a trifling 
exception  ; because  a person  who  labours  on  his  own  account  may 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


spend  on  his  own  account  all  he  produces,  without  becoming  destitute; 
and  the  provision  of  necessaries  on  which  he  subsists  until  he  has 
reaped  his  harvest,  or  sold  his  commodity,  though  a real  capital, 
cannot  be  said  to  have  been  saved,  since  it  is  all  used  for  the  supply 
of  his  own  wants,  and  perhaps  as  speedily  as  if  it  had  been  consumed 
in  idleness.  We  may  imagine  a number  of  individuals  or  families 
settled  on  as  many  separate  pieces  of  land,  each  living  on  what  their 
own  labour  produces,  and  consuming  the  whole  produce.  But  even 
these  must  save  (that  is,  spare  from  their  personal  consumption)  as 
much  as  is  necessary  for  seed.  Some  saving,  therefore,  there  must 
have  been,  even  in  this  simplest  of  all  states  of  economical  relations  ; 
people  must  have  produced  more  than  they  used,  or  used  less  than 
they  produced.  Still  more  must  they  do  so  before  they  can  employ 
other  labourers,  or  increase  their  production  beyond  what  can  be 
accomplished  by  the  work  of  their  own  hands.  All  that  any  one 
employs  in  supporting  and  carrying  on  any  other  labour  than  his  own, 
must  have  been  originally  brought  together  by  saving ; soniebody 
must  have  produced  it  and  forborne  to  consume  it.  We  may  say, 
therefore,  without  material  inaccuracy,  that  all  capital,  and  especially 
all  addition  to  capital,  is  the  result  of  saving. 

In  a rude  and  violent  state  of  society,  it  continually  happens 
that  the  person  who  has  capital  is  not  the  very  person  who  has 
saved  it,  but  some  one  who,  being  stronger,  or  belonging  to  a more 
powerful  community,  has  possessed  himself  of  it  by  plunder.  And 
even  in  a state  of  things  in  which  property  was  protected,  the  in- 
crease of  capital  has  usually  been,  for  a long  time,  mainly  derived 
from  privations  which,  though  essentially  the  same  with  saving,  are 
not  generally  called  by  that  name,  because  not  voluntary.  The  actual 
producers  have  been  slaves,  compelled  to  produce  as  much  as  force 
could  extort  from  them,  and  to  consume  as  little  as  the  self-interest 
or  the  usually  very  slender  humanity  of  their  taskmasters  would 
permit.  This  kind  of  compulsory  saving,  however,  would  not  have 
caused  any  increase  of  capital,  unless  a part  of  the  amount  had  been 
saved  over  again,  voluntarily,  by  the  master.  If  all  that  he  made  his 
slaves  produce  and  forbear  to  consume,  had  been  consumed  by  him 
on  personal  indulgences,  he  would  not  have  increased  his  capital, 
nor  been  enabled  to  maintain  an  increasing  number  of  slaves.  To 
maintain  any  slaves  at  all,  implied  a previous  saving ; a stock, 
at  least  of  food,  provided  in  advance.  This  saving  may  not,  how- 
ever, have  been  made  by  any  self-imposed  privation  of  the  master  ; 
but  more  probably  by  that  of  the  slaves  themselves  while  free  ; the 


70 


BOOK  I.  CHAPTER  V.  § 6 


rapine  or  war,  which  deprived  them  of  their  personal  liberty,  having 
transferred  also  their  accumulations  to  the  conqueror. 

There  are  other  cases  in  which  the  term  saving,  with  the  associa- 
tions usually  belonging  to  it,  does  not  exactly  fit  the  operation  by 
which  capital  is  increased.  If  it  were  said  for  instance,  that  the  only 
way  to  accelerate  the  increase  of  capital  is  by  increase  of  saving, 
the  idea  would  probably  be  suggested  of  greater  abstinence,  and 
increased  privation.  But  it  is  obvious  that  whatever  increases  the 
productive  power  of  labour  creates  an  additional  fund  to  make 
savings  from,  and  enables  capital  to  be  enlarged  not  only  without 
additional  privation,  but  concurrently  with  an  increase  of  personal 
consumption.  Nevertheless,  there  is  here  an  increase  of  saving, 
in  the  scientific  sense.  Though  there  is  more  consumed,  there  is  also 
more  spared.  There  is  a greater  excess  of  production  over  con- 
sumption. It  is  consistent  with  correctness  to  call  this  a greater 
saving.  Though  the  term  is  not  unobjectionable,  there  is  no  other 
which  is  not  liable  to  as  great  objections.  To  consume  less  than  is 
produced,  is  saving ; and  that  is  the  process  by  which  capital  is 
increased ; not  necessarily  by  consuming  less,  absolutely.  We 
must  not  allow  ourselves  to  be  so  much  the  slaves  of  words,  as  to  be 
unable  to  use  the  word  saving  in  this  sense,  without  being  in  danger 
of  forgetting  that  to  increase  capital  there  is  another  way  besides 
consuming  less,  namely,  to  produce  more. 

§ 5.  A third  fundamental  theorem  respecting  Capital,  closely 
connected  with  the  one  last  discussed,  is,  that  although  saved, 
and  the  result  of  saving,  it  is  nevertheless  consumed.  The  word 
saving  does  not  imply  that  what  is  saved  is  not  consumed,  nor  even 
necessarily  that  its  consumption  is  deferred  ; but  only  that,  if  con- 
sumed immediately,  it  is  not  consumed  by  the  person  who  saves  it. 
If  merely  laid  by  for  future  use,  it  is  said  to  be  hoarded  ; and  while 
hoarded,  is  not  consumed  at  all.  But  if  employed  as  capital,  it  is  all 
consumed ; though  not  by  the  capitahst.  Part  is  exchanged  for 
tools  or  machinery,  which  are  worn  out  by  use ; part  for  seed  or 
materials,  which  are  destroyed  as  such  by  being  sown  or  wrought 
up,  and  destroyed  altogether  by  the  consumption  of  the  ultimate 
product.  The  remainder  is  paid  in  wages  to  productive  labourers, 
who  consume  it  for  their  daily  wants ; or  if  they  in  their  turn  save 
any  part,  this  also  is  not,  generally  speaking,  hoarded,  but  (through 
savings  banks,  benefit  clubs,  or  some  other  channel)  re-employed  as 
capital,  and  consumed. 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


71 


The  principle  now  stated  is  a strong  example  of  the  necessity 
of  attention  to  the  most  elementary  truths  of  our  subject : for  it  is 
one  of  the  most  elementary  of  them  all,  and  yet  no  one  who  has  not 
bestowed  some  thought  on  the  matter  is  habitually  aware  of  it, 
and  most  are  not  even  willing  to  admit  it  when  first  stated.  To 
the  vulgar,  it  is  not  at  all  apparent  that  what  is  saved  is  consumed. 
To  them,  every  one  who  saves  appears  in  the  light  of  a person  who 
hoards  : they  may  think  such  conduct  permissible,  or  even  laudable, 
when  it  is  to  provide  for  a family,  and  the  like ; but  they  have  no 
conception  of  it  as  doing  good  to  other  people  : saving  is  to  them 
another  word  for  keeping  a thing  to  oneself  ; while  spending  appears 
to  them  to  be  distributing  it  among  others.  The  person  who 
expends  his  fortune  in  unproductive  consumption  is  looked  upon  as 
diffusing  benefits  all  around ; and  is  an  object  of  so  much  favour, 
that  some  portion  of  the  same  popularity  attaches  even  to  him  who 
spends  what  does  not  belong  to  him  ; who  not  only  destroys  his  own 
capital,  if  he  ever  had  any,  but  under  pretence  of  borrowing,  and  on 
promise  of  repayment,  possesses  himself  of  capital  belonging  to 
others,  and  destroys  that  likewise. 

This  popular  error  comes  from  attending  to  a small  portion 
only  of  the  consequences  that  flow  from  the  saving  or  the  spending  ; 
all  the  effects  of  either  which  are  out  of  sight  being  out  of  mind. 
The  eye  follows  what  is  saved  into  an  imaginary  strong-box,  and 
there  loses  sight  of  it ; what  is  spent,  it  follows  into  the  hands  of 
tradespeople  and  dependents ; but  without  reaching  the  ultimate 
destination  in  either  case.  Saving  (for  productive  investment), 
and  spending,  coincide  very  closely  in  the  first  stage  of  their  opera- 
tions. The  effects  of  both  begin  with  consumption ; with  the 
destruction  of  a certain  portion  of  wealth  ; only  the  things  consumed, 
and  the  persons  consuming,  are  different.  There  is,  in  the  one  case, 
a wearing  out  of  tools,  a destruction  of  material,  and  a quantity 
of  food  and  clothing  supplied  to  labourers,  which  they  destroy 
by  use : in  the  other  case,  there  is  a consumption,  that  is  to  say,  a 
destruction,  of  wines,  equipages,  and  furniture.  Thus  far,  the  con- 
sequence to  the  national  wealth  has  been  much  the  same  ; an  equi- 
valent quantity  of  it  has  been  destroyed  in  both  cases.  But  in  the 
spending,  this  first  stage  is  also  the  final  stage;  that  particular  amount 
of  the  produce  of  labour  has  disappeared,  and  there  is  nothing  left ; 
while,  on  the  contrary,  the  saving  person,  during  the  whole  time 
that  the  destruction  was  going  on,  has  had  labourers  at  work  repair- 
ing it ; who  are  ultimately  found  to  have  replaced,  with  an  increase. 


72 


BOOK  I.  CHAPTER  V.  § 6 


the  equivalent  of  what  has  been  consumed.  And  as  this  operation 
admits  of  being  repeated  indefinitely  without  any  fresh  act  of 
saving,  a saving  once  made  becomes  a fund  to  maintain  a corres- 
ponding number  of  labourers  in  perpetuity,  reproducing  annually 
their  own  maintenance  with  a profit. 

It  is  the  intervention  of  money  which  obscures,  to  an  unpractised 
apprehension,  the  true  character  of  these  phenomena.  Almost  all 
expenditure  being  carried  on  by  means  of  money,  the  money  comes 
to  be  looked  upon  as  the  main  feature  in  the  transaction  ; and 
since  that  does  not  perish,  but  only  changes  hands,  people  overlook 
the  destruction  which  takes  place  in  the  case  of  unproductive 
expenditure.  The  money  being  merely  transferred,  they  think  the 
wealth  also  has  only  been  handed  over  from  the  spendthrift  to  other 
people.  But  this  is  simply  confounding  money  with  wealth.  The 
wealth  which  has  been  destroyed  was  not  the  money,  but  the  wines, 
equipages,  and  furniture  which  the  money  purchased ; and  these 
having  been  destroyed  without  return,  society  collectively  is  poorer 
by  the  amount.  It  may  be  said,  perhaps,  that  wines,  equipages, 
and  furniture,  are  not  subsistence,  tools,  and  materials,  and  could 
not  in  any  case  have  been  applied  to  the  support  of  labour  ; that  the> 
are  adapted  for  no  other  than  unproductive  consumption,  and  that 
the  detriment  to  the  wealth  of  the  community  was  when  they  were 
produced,  not  when  they  were  consumed.  I am  willing  to  allow 
this,  as  far  as  is  necessary  for  the  argument,  and  the  remark  would 
be  very  pertinent  if  these  expensive  luxuries  were  drawn  from  an 
existing  stock,  never  to  be  replenished.  But  since,  on  the  contrary, 
they  continue  to  be  produced  as  long  as  there  are  consumers  for 
them,  and  are  produced  in  increased  quantity  to  meet  an  increased 
demand ; the  choice  made  by  a consumer  to  expend  five  thousand 
a year  in  luxuries  keeps  a corresponding  number  of  labourers 
employed  from  year  to  year  in  producing  things  which  can  be  of  no 
use  to  production  ; their  services  being  lost  so  far  as  regards  the  f 
increase  of  the  national  wealth,  and  the  tools,  materials,  and  food  j 
which  they  annually  consume  being  so  much  subtracted  from  the  f 
general  stock  of  the  community  applicable  to  productive  purposes.  ;; 
In  proportion  as  any  class  is  improvident  or  luxurious,  the  industry  | 
of  the  country  takes  the  direction  of  producing  luxuries  for  their  1 
use ; while  not  only  the  employment  for  productive  labourers  is 
diminished,  but  the  subsistence  and  instruments  which  are  the 
means  of  such  employment  do  actually  exist  in  smaller  quantity. 

Saving,  in  short,  enriches,  and  spending  impoverishes,  the 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


73 


community  along  with  the  individual ; which  is  but  saying  in 
other  words,  that  society  at  large  is  richer  by  what  it  expends 
in  maintaining  and  aiding  productive  labour,  but  poorer  by  what 
it  consumes  in  its  enjoyments.* 


§ 6.  To  return  to  our  fundamental  theorem.  Everything 
which  is  produced  is  consumed ; both  what  is  saved  and  what  is 
said  to  be  spent ; and  the  former  quite  as  rapidly  as  the  latter. 
All  the  ordinary  forms  of  language  tend  to  disguise  this.  When 
people  talk  of  the  ancient  wealth  of  a country,  of  riches  inherited 

* It  is  worth  while  to  direct  attention  to  several  circumstances  which  to  a 
certain  extent  diminish  the  detriment  caused  to  the  general  wealth  by  the 
prodigality  of  individuals,  or  raise  up  a compensation,  more  or  less  ample,  as 
a consequence  of  the  detriment  itself.  One  of  these  is,  that  spendthrifts  do  not 
usually  succeed  in  consuming  all  they  spend.  Their  habitual  carelessness  as  to 
expenditure  causes  them  to  be  cheated  and  robbed  on  all  quarters,  often  by 
persons  of  frugal  habits.  Large  accumulations  are  continually  made  by  the 
agents,  stewards,  and  even  domestic  servants,  of  improvident  persons  of  fortune ; 
and  they  pay  much  higher  prices  for  all  purchases  than  people  of  careful 
\abits,  which  accounts  for  their  being  popular  as  customers.  They  are, 
therefore,  actually  not  able  to  get  into  their  possession  and  destroy  a quantity 
of  wealth  by  any  means  equivalent  to  the  fortune  which  they  dissipate.  Much 
of  it  is  merely  transferred  to  others,  by  whom  a part  may  be  saved.  Another 
thing  to  be  observed  is,  that  the  prodigality  of  some  may  reduce  others  to  a 
forced  economy.  Suppose  a sudden  demand  for  some  article  of  luxury,  caused 
by  the  caprice  of  a prodigal,  which  not  having  been  calculated  on  beforehand, 
there  has  been  no  increase  of  the  usual  supply.  The  price  will  rise  ; and  may 
rise  beyond  the  means  or  the  inclinations  of  some  of  the  habitual  consumers, 
who  may  in  consequence  forego  their  accustomed  indulgence,  and  save  the 
amount.  If  they  do  not,  but  continue  to  expend  as  great  a value  as  before 
on  the  commodity,  the  dealers  in  it  obtain,  for  only  the  same  quantity  of  the 
article,  a return  increased  by  the  whole  of  what  the  spendthrift  has  paid  ; and 
thus  the  amount  which  he  loses  is  transferred  bodily  to  them,  and  may  be  added 
to  their  capital : his  increased  personal  consumption  being  made  up  by  th« 
privations  of  the  other  purchasers,  who  have  obtained  less  than  usual  of  their 
accustomed  gratification  for  the  same  equivalent.  On  the  other  hand,  a counter- 
process must  be  going  on  somewhere,  since  the  prodigal  must  have  diminished 
his  purchases  in  some  other  quarter  to  balance  the  augmentation  in  this  ; he  has 
perhaps  called  in  funds  employed  in  sustaining  productive  labour,  and  the 
dealers  in  subsistence  and  in  the  instruments  of  production  have  had  commodi- 
ties left  on  their  hands,  or  have  received,  for  the  usual  amount  of  commodities, 
a less  than  usual  return.  But  such  losses  of  income  or  capital,  by  industrious 
persons  except  when  of  extraordinary  amount,  are  generally  made  up  by 
increased  pinching  and  privation ; so  that  the  capital  of  the  community  may 
not  be,  on  the  whole,  impaired,  and  the  prodigal  may  have  had  his  self-indul- 
gence at  the  expense  not  of  the  permanent  resources,  but  of  the  temporary 
pleasures  and  comforts  of  others.  For  in  every  case  the  community  are  poorer 
by  what  any  one  spends,  unless  others  are  in  consequence  led  to  curtail  their 
spending.  There  are  yet  other  and  more  recondite  ways  in  which  the  profusion 
of  some  may  bring  about  its  compensation  in  the  extra  savings  of  others  ; but 
these  can  only  be  considered  in  that  part  of  the  Fourth  Book,  which  treats  of 
the  limiting  principle  to  the  accumulation  of  capital 


74 


BOOK  I.  CHAPTER  V.  § 7 


from  ancestors,  and  similar  expressions,  the  idea  suggested  is 
that  the  riches  so  transmitted  were  produced  long  ago,  at  the  time 
when  they  are  said  to  have  been  first  acquired,  and  that  no  portion 
of  the  capital  of  the  country  was  produced  this  year,  except  as  much 
as  may  have  been  this  year  added  to  the  total  amount.  The  fact 
is  far  otherwise.  The  greater  part,  in  value,  of  the  wealth  now 
existing  in  England  has  been  produced  by  human  hands  within 
the  last  twelve  months.  A very  small  proportion  indeed  of  that 
large  aggregate  was  in  existence  ten  years  ago ; — of  the  present 
productive  capital  of  the  country  scarcely  any  part,  except  farm- 
houses and  manufactories,  and  a few  ships  and  machines ; and 
even  these  would  not  in  most  cases  have  survived  so  long,  if  fresh 
labour  had  not  been  employed  within  that  period  in  putting  them 
into  repair.  The  land  subsists,  and  the  land  is  almost  the  only 
thing  that  subsists.  Everything  which  is  produced  perishes,  and 
most  things  very  quickly.  Most  lands  of  capital  are  not  fitted 
by  their  nature  to  be  long  preserved.  There  are  a few,  and  but 
a few  productions,  capable  of  a very  prolonged  existence.  West- 
minster Abbey  has  lasted  many  centuries,  with  occasional  repairs ; 
some  Grecian  sculptures  have  existed  above  two  thousand  years ; 
the  Pyramids  perhaps  double  or  treble  that  time.  But  these  were 
objects  devoted  to  unproductive  use.  If  we  except  bridges  and 
aqueducts  (to  which  may  in  some  countries  be  added  tanks  and 
embankments),  there  are  few  instances  of  any  edifice  applied  to 
industrial  purposes  which  has  been  of  great  duration ; such  build- 
ings do  not  hold  out  against  wear  and  tear,  nor  is  it  good  economy 
to  construct  them  of  the  solidity  necessary  for  permanency.  Capital 
is  kept  in  existence  from  age  to  age  not  by  preservation,  but  by 
perpetual  reproduction  : every  part  of  it  is  used  and  destroyed, 
generally  very  soon  after  it  is  produced,  buli  those  who  consume 
it  are  employed  meanwhile  in  producing  more.  The  growth  of 
capital  is  similar  to  the  growth  of  population.  Every  individual  who 
is  born,  dies,  but  in  each  year  the  number  born  exceeds  the  number 
who  die : the  population,  therefore,  always  increases,  though  not 
one  person  of  those  composing  it  was  alive  imtil  a very  recent  date. 

§ 7.  This  perpetual  consumption  and  reproduction  of  capital 
affords  the  explanation  of  what  has  so  often  excited  wonder,  the 
great  rapidity  with  which  countries  recover  from  a state  of  devasta- 
tion ; the  disappearance,  in  a short  time,  of  all  traces  of  the  mischiefs 
done  by  earthquakes,  floods,  hurricanes,  and  the  ravages  of  war. 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


75 


An  enemy  lays  waste  a country  by  fire  and  sword,  and  destroys 
or  carries  away  nearly  all  the  moveable  wealth  existing  in  it : all 
the  inhabitants  are  ruined,  and  yet,  in  a few  years  after,  everything 
is  much  as  it  was  before.  This  vis  medicatrix  natures  has  been  a 
subject  of  sterile  astonishment,  or  has  been  cited  to  exemplify  the 
wonderful  strength  of  the  principle  of  saving,  which  can  repair 
such  enormous  losses  in  so  brief  an  interval.  There  is  nothing 
at  all  wonderful  in  the  matter.  What  the  enemy  have  destroyed, 
would  have  been  destroyed  in  a little  time  by  the  inhabitants 
themselves  : the  wealth  which  they  so  rapidly  reproduce,  would 
have  needed  to  be  reproduced  and  would  have  been  reproduced 
in  any  case,  and  probably  in  as  short  a time.  Nothing  is  changed, 
except  that  during  the  reproduction  they  have  not  now  the  advan- 
tage of  consuming  what  had  been  produced  previously.  The  possi- 
bility of  a rapid  repair  of  their  disasters  mainly  depends  on  whether 
the  country  has  been  depopulated.  If  its  effective  population 
have  not  been  extirpated  at  the  time,  and  are  not  starved  afterwards  ; 
then,  with  the  same  skill  and  knowledge  which  they  had  before, 
with  their  land  and  its  permanent  improvements  undestroyed, 
and  the  more  durable  buildings  probably  unimpaired,  or  only 
partially  injured,  they  have  nearly  all  the  requisites  for  their  former 
amount  of  production.  If  there  is  as  much  of  food  left  to  them, 
or  of  valuables  to  buy  food,  as  enables  them  by  any  amount  of 
privation  to  remain  alive  and  in  working  condition,  they  will  in  a 
short  time  have  raised  as  great  a produce,  and  acquired  collectively 
as  great  wealth  and  as  great  a capital,  as  before ; by  the  mere 
continuance  of  that  ordinary  amount  of  exertion  which  they  are 
accustomed  to  employ  in  their  occupations.  Nor  does  this  evince 
any  strength  in  the  principle  of  saving,  in  the  popular  sense  of  the 
term,  since  what  takes  place  is  not  intentional  abstinence,  but 
involuntary  privation. 

Yet  so  fatal  is  the  habit  of  thinking  through  the  medium  of  only 
one  set  of  technical  phrases,  and  so  little  reason  have  studious  men 
to  value  themselves  on  being  exempt  from  the  very  same  mental 
infirmities  which  beset  the  vulgar,  that  this  simple  explanation 
was  never  given  (so  far  as  I am  aware)  by  any  political  economist 
before  Dr.  Chalmers  ; a writer  many  of  whose  opinions  I think  erro- 
neous, but  who  has  always  the  merit  of  studying  phenomena  at  first 
hand,  and  expressing  them  in  a language  of  his  own,  which  often 
uncovers  aspects  of  the  truth  that  the  received  phraseologies  only 
tend  to  hi^e. 


76 


BOOK  I.  CHAPTER  V.  § 8 


§ 8.  The  same  author  carries  out  this  train  of  thought  to  some 
important  conclusions  on  another  closely  connected  subject,  that 
of  government  loans  for  war  purposes  or  other  unproductive  ex- 
penditure. These  loans,  being  drawn  from  capital  (in  lieu  of  taxes, 
which  would  generally  have  been  paid  from  income,  and  made  up  in 
part  or  altogether  by  increased  economy)  must,  according  to  the 
principles  we  have  laid  down,  tend  to  impoverish  the  country  : yet 
the  years  in  which  expenditure  of  this  sort  has  been  on  the  greatest 
scale  have  often  been  years  of  great  apparent  prosperity : the 
wealth  and  resources  of  the  country,  instead  of  diminishing,  have 
given  every  sign  of  rapid  increase  during  the  process,  and  of  greatly 
expanded  dimensions  after  its  close.  This  was  confessedly  the  case 
with  Great  Britain  during  the  last  long  Continental  war ; and  it 
would  take  some  space  to  enumerate  all  the  unfounded  theories 
in  political  economy  to  which  that  fact  gave  rise,  and  to  which  it 
secured  temporary  credence  ; almost  all  tending  to  exalt  unproduc- 
tive expenditure,  at  the  expense  of  productive.  Without  entering 
into  all  the  causes  which  operated,  and  which  commonly  do  operate, 
to  prevent  these  extraordinary  drafts  on  the  productive  resources 
of  a country  from  being  so  much  felt  as  it  might  seem  reasonable 
to  expect,  we  will  suppose  the  most  unfavourable  case  possible: 
that  the  whole  amount  borrowed  and  destroyed  by  the  government 
was  abstracted  by  the  lender  from  a productive  employment  in 
which  it  had  actually  been  invested.  The  capital,  therefore,  of  the 
country,  is  this  year  diminished  by  so  much.  But  unless  the  amount 
abstracted  is  something  enormous,  there  is  no  reason  in  the  nature 
of  the  case  why  next  year  the  national  capital  should  not  be  as  great 
as  ever.  The  loan  cannot  have  been  taken  from  that  portion  of 
the  capital  of  the  country  which  consists  of  tools,  machinery,  and 
buildings.  It  must  have  been  wholly  drawn  from  the  portion  em- 
ployed in  paying  labourers  : and  the  labourers  will  suffer  accordingly. 
But  if  none  of  them  are  starved ; if  their  wages  can  bear  such  an 
amount  of  reduction,  or  if  charity  interposes  between  them  and 
absolute  destitution,  there  is  no  reason  that  their  labour  should 
produce  less  in  the  next  year  than  in  the  year  before.  If  they 
produce  as  much  as  usual,  having  been  paid  less  by  so  many  millions 
sterling,  these  millions  are  gained  by  their  employers.  The  breach 
made  in  the  capital  of  the  country  is  thus  instantly  repaired,  but 
repaired  by  the  privations  and  often  the  real  misery  of  the  labouring 
class.  Here  is  ample  reason  why  such  periods,  even  in  the  most 
unfavourable  circumstances,  may  easily  be  times  of  great  gain 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


77 


to  those  whose  prosperity  usually  passes,  in  the  estimation  of  society, 
for  national  prosperity.* 

This  leads  to  the  vexed  question  to  which  Dr.  Chalmers  has  very 
particularly  adverted  ; whether  the  funds  required  by  a government 
for  extraordinary  unproductive  expenditure,  are  best  raised  by  loans, 
the  interest  only  being  provided  by  taxes,  or  whether  taxes  should 
be  at  once  laid  on  to  the  whole  amount ; which  is  called  in  the 
financial  vocabulary,  raising  the  whole  of  the  supplies  within  the 
year.  Dr.  Chalmers  is  strongly  for  the  latter  method.  He  says, 
the  common  notion  is  that  in  calling  for  the  whole  amount  in  one 
year,  you  require  what  is  either  impossible,  or  very  inconvenient ; 
that  the  people  cannot,  without  great  hardship,  pay  the  whole  at 
once  out  of  their  yearly  income  ; and  that  it  is  much  better  to  require 
of  them  a small  payment  every  year  in  the  shape  of  interest,  than  so 
great  a sacrifice  once  for  all.  To  which  his  answer  is,  that  the 
sacrifice  is  made  equally  in  either  case.  Whatever  is  ^ent,  cannot 
but  be  drawn  from  yearly  income.  The  whole  and  every  part  of 
the  wealth  produced  in  the  country  forms,  or  helps  to  form,  the 
yearly  income  of  somebody.  The  privation  which  it  is  supposed 
must  result  from  taking  the  amount  in  the  shape  of  taxes  is  not 
avoided  by  taking  it  in  a loan.  The  suffering  is  not  averted,  but 
only  thrown  upon  the  labouring  classes,  the  least  able,  and  who 

♦ On  the  other  hand,  it  must  be  remembered  that  war  abstracts  from  pro- 
ductive employment  not  only  capital,  but  likewise  labourers  ; that  the  funds 
withdrawn  from  the  remuneration  of  productive  labourers  are  partly  employed 
in  paying  the  same  or  other  individuals  for  unproductive  labour  ; and  that  by 
this  portion  of  its  effects  war  expenditure  acts  in  precisely  the  opposite  manner 
to  that  which  Dr.  Chalmers  points  out,  and,  so  far  as  it  goes,  directly  coun- 
teracts the  effects  described  in  the  text.  So  far  as  labourers  are  taken  from 
production,  to  man  the  army  and  navy,  the  labouring  classes  are  not  damaged, 
the  capitalists  are  not  benefited,  and  the  general  produce  of  the  country  is 
diminished,  by  war  expenditure.  Accordingly,  Dr.  Chalmers’s  doctrine,  though 
true  of  this  country,  is  wholly  inapplicable  to  countries  differently  circum- 
stanced ; to  France,  for  example,  during  the  Napoleon  wars.  At  that  period 
the  draught  on  the  labouring  population  of  France,  for  a long  series  of  years,  was 
enormous,  while  the  funds  which  supported  the  war  were  mostly  supplied  by 
contributions  levied  on  the  countries  overrun  by  the  French  arms,  a very  small 
proportion  alone  consisting  of  French  capital.  In  France,  accordingly,  the 
wages  of  labour  did  not  fall,  but  rose ; the  employers  of  labour  were  not  benefited, 
but  injured  ; while  the  wealth  of  the  country  was  impaired  by  the  suspension  or 
total  loss  of  so  vast  an  amount  of  its  productive  labour.  In  England  all  this 
was  reversed.  England  employed  comparatively  few  additional  soldiers  and 
sailors  of  her  own,  while  she  diverted  hundreds  of  millions  of  capital  from 
productive  employment,  to  supply  munitions  of  war  and  support  armies  for 
her  Continental  allies.  Consequently,  as  shown  in  the  text,  her  labourers 
suffered,  her  capitalists  prospered,  and  her  permanent  productive  resources  did 
not  fall  off. 


78 


BOOK  1.  CHAPTER  V.  § 8 


least  ottglit,  to  bear  it : while  all  the  inconveniences,  physical,  moral, 
and  political,  produced  by  maintaining  taxes  for  the  perpetual 
payment  of  the  interest,  are  incurred  in  pure  loss.  Whenever 
capital  is  withdrawn  from  production,  or  from  the  fund  destined 
for  production,  to  be  lent  to  the  State,  and  expended  unproduo- 
tively,  that  whole  sum  is  withheld  from  the  labouring  classes  : the 
loan,  therefore,  is  in  truth  paid  off  the  same  year  ; the  whole  of  the 
sacrifice  necessary  for  paying  it  off  is  actually  made  : only  it  is  paid 
to  the  wrong  persons,  and  therefore  does  not  extinguish  the  claim ; 
and  paid  by  the  very  worst  of  taxes,  a tax  exclusively  on  the  labour- 
ing class.  And  after  having,  in  this  most  painful  and  unjust  way, 
gone  through  the  whole  effort  necessary  for  extinguishing  the  debt, 
the  country  remains  charged  with  it,  and  with  the  payment  of  its 
interest  in  perpetuity. 

These  views  appear  to  me  strictly  just,  in  so  far  as  the  value 
absorbed  in  loans  would  otherwise  have  been  employed  in  productive 
industry  within  the  country.  The  practical  state  of  the  case, 
however,  seldom  exactly  corresponds  with  this  supposition.  Ths 
loans  of  the  less  wealthy  countries  are  made  chiefly  with  foreign 
capital,  which  would  not,  perhaps,  have  been  brought  in  to  be 
invested  on  any  less  security  than  that  of  the  government : while 
those  of  rich  and  prosperous  countries  are  generally  made,  not  with 
funds  withdrawn  from  productive  employment,  but  with  the  new 
accumulations  constantly  making  from  income,  and  often  with  a 
part  of  them  which,  if  not  so  taken,  would  have  migrated  to  colonies, 
or  sought  other  investments  abroad.  In  these  cases  (which  will  be 
more  particularly  examined  hereafter*),  the  sum  wanted  may  be 
obtained  by  loan  without  detriment  to  the  labourers,  or  derangement 
of  the  national  industry,  and  even  perhaps  with  advantage  to 
both,  in  comparison  with  raising  the  amount  by  taxation,  since  taxes, 
especially  when  heavy,  are  almost  always  partly  paid  at  the  expense 
of  what  would  otherwise  have  been  saved  and  added  to  capital. 
Besides,  in  a country  which  makes  so  great  yearly  additions  to  its 
wealth  that  a part  can  be  taken  and  expended  unproductively 
without  diminishing  capital,  or  even  preventing  a considerable 
increase,  it  is  evident  that  even  if  the  whole  of  what  is  so  taken 
would  have  become  capital,  and  obtained  employment  in  the 
country,  the  effect  on  the  labouring  classes  is  far  less  prejudicial, 
and  the  case  against  the  loan  system  much  less  strong,  than  in  the 
case  first  supposed.  This  brief  anticipation  of  a discussion  which 
♦ Infra,  book  iv.  chaps,  iv.  v. 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


79 


will  find  its  proper  place  elsewhere  appeared  necessary  to  prevent 
false  inferences  from  the  premises  previously  laid  down. 

§ 9.  We  now  pass  to  a fourth  fundamental  theorem  respecting 
Capital,  which  is,  perhaps,  oftener  overlooked  or  misconceived 
than  even  any  of  the  foregoing.  What  supports  and  employs 
productive  labour,  is  the  capital  expended  in  setting  it  to  work, 
and  not  the  demand  of  purchasers  for  the  produce  of  the  labour 
when  completed.  Demand  for  commodities  is  not  demand  for 
labour.  The  demand  for  commodities  determines  in  what  particular 
branch  of  production  the  labour  and  capital  shall  be  employed ; 
it  determines  the  direction  of  the  laboui  ; but  not  the  more  or  less 
of  the  labour  itself,  or  of  the  maintenance  or  payment  of  the  labour. 
These  depend  on  the  amount  of  the  capital,  or  other  funds  directly 
devoted  to  the  sustenance  and  remuneration  of  labour. 

Suppose,  for  instance,  that  there  is  a demand  for  velvet ; a fund 
ready  to  be  laid  out  in  buying  velvet,  but  no  capital  to  establish  the 
manufacture.  It  is  of  no  consequence  how  great  the  demand  may 
be ; unless  capital  is  attracted  into  the  occupation,  there  will  be 
no  velvet  made,  and  consequently  none  bought ; unless,  indeed, 
the  desire  of  the  intending  purchaser  for  it  is  so  strong,  that  he  em- 
ploys part  of  the  price  he  would  have  paid  for  it  in  making  advances 
to  work-people,  that  they  may  employ  themselves  in  making 
velvet ; that  is,  unless  he  converts  part  of  his  income  into  capital, 
and  invests  that  capital  in  the  manufacture.  Let  us  now  reverse 
the  hypothesis,  and  suppose  that  there  is  plenty  of  capital  ready  for 
making  velvet,  but  no  demand.  Velvet  will  not  be  made ; but 
there  is  no  particular  preference  on  the  part  of  capital  for 
making  velvet.  Manufacturers  and  their  labourers  do  not  produce 
for  the  pleasure  of  their  customers,  but  for  the  supply  of  their  own 
wants ; and,  having  still  the  capital  and  the  labour  which  are  the 
essentials  of  production,  they  can  either  produce  something  else 
which  is  in  demand,  or  if  there  be  no  other  demand,  they  themselves 
have  one,  and  can  produce  the  things  which  they  want  for  their  own 
consumption.  So  that  the  employment  afforded  to  labour  does  not 
depend  on  the  purchasers,  but  on  the  capital.^  I am,  of  course, 
not  taking  into  consideration  the  effects  of  a sudden  change.  If 
the  demand  ceases  unexpectedly,  after  the  commodity  to  supply  it 
is  already  produced,  this  introduces  a different  element  into  the 

* [This  sentence  replaced  in  the  3rd  ed.  (1852)  the  original  text;  “So  that 
the  capital  cannot  be  dispensed  with — the  purchasers  can.”] 


80 


BOOK  I.  CHAPTER  V.  § » 


question  : the  capital  has  actually  been  consumed  in  producing  some- 
thing which  nobody  wants  or  uses,  and  it  has  therefore  perished,  and 
the  employment  which  it  gave  to  labour  is  at  an  end,  not  because 
there  is  no  longer  a demand,  but  because  there  is  no  longer  a capital. 
This  case  therefore  does  not  test  the  principle.  The  proper  test  is, 
to  suppose  that  the  change  is  gradual  and  foreseen,  and  is  attended 
with  no  waste  of  capital,  the  manufacture  being  discontinued  by 
merely  not  replacing  the  machinery  as  it  wears  out,  and  not  re- 
investing the  money  as  it  comes  in  from  the  sale  of  the  produce. 
The  capital  is  thus  ready  for  a new  employment,  in  which  it  will 
maintain  as  much  labour  as  before.  The  manufacturer  and  his 
work-people  lose  the  benefit  of  the  skill  and  knowledge  which  they 
had  acquired  in  the  particular  business,  and  which  can  only  be 
partially  of  use  to  them  in  any  other ; and  that  is  the  amount  of 
loss  to  the  community  by  the  change.  But  the  labourers  can  still 
work ; and  the  capital  which  previously  employed  them  will,  either 
in  the  same  hands,  or  by  being  lent  to  others,  employ  either  those 
labourers  or  an  equivalent  number  in  some  other  occupation. 

This  theorem,  that  to  purchase  produce  is  not  to  employ  labour ; 
that  the  demand  for  labour  is  constituted  by  the  wages  which  precede 
the  production,  and  not  by  the  demand  which  may  exist  for  the 
commodities  resulting  from  the  production  ; is  a proposition  which 
greatly  needs  all  the  illustration  it  can  receive.  It  is,  to  common 
apprehension,  a paradox ; and  even  among  political  economists 
of  reputation,  I can  hardly  point  to  any,  except  Mr.  Ricardo  and  M. 
Say,  who  have  kept  it  constantly  and  steadily  in  view.  Almost  all 
others  occasionally  express  themselves  as  if  a person  who  buys  com- 
modities, the  produce  of  labour,  was  an  employer  of  labour,  and 
created  a demand  for  it  as  really,  and  in  the  same  sense,  as  if  he 
bought  the  labour  itself  directly,  by  the  payment  of  wages.  It  is 
no  wonder  that  political  economy  advances  slowly,  when  such  a 
question  as  this  still  remains  open  at  its  very  threshold.  ^ I appre- 
hend, that  if  by  demand  for  labour  be  meant  the  demand  by  which 
wages  are  raised,  or  the  number  of  labourers  in  employment  increased, 
demand  for  commodities  does  not  constitute  demand  for  labour. 

1 [The  rest  of  this  paragraph  replaced  in  the  3rd  ed.  (1852)  the  original  text : 
I am  desirous  of  impressing  on  the  reader  that  a demand  for  commodities 
does  not  in  any  manner  constitute  a demand  for  labour,  but  only  determines 
into  a particular  channel  a portion,  more  or  less  considerable,  of  the  demand 
already  existing.  It  determines  that  a part  of  the  labour  and  capital  of  the 
community  shall  be  employed  in  producing  certain  things  instead  of  other 
things.  The  demand  for  labour  is  constitute  solely  by  the  funds  directly  set 
apart  for  the  use  of  labourers.”] 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


81 


I conceive  that  a person  who  buys  commodities  and  consumes  them 
himself,  does  no  good  to  the  labouring  classes ; and  that  it  is  only  by 
what  he  abstains  from  consuming,  and  expends  in  direct  payments 
to  labourers  in  exchange  for  labour,  that  he  benefits  the  labouring 
classes,  or  adds  anything  to  the  amount  of  their  employment. 

For  the  better  illustration  of  the  principle,  let  us  put  the  following 
case.  A consumer  may  expend  his  income  either  in  buying  services, 
or  commodities.  He  may  employ  part  of  it  in  hiring  journeyman 
bricklayers  to  build  a house,  or  excavators  to  dig  artificial  lakes, 
or  labourers  to  make  plantations  and  lay  out  pleasure  grounds ; 
or,  instead  of  this,  he  may  expend  the  same  value  in  buying  velvet 
and  lace.  The  question  is,  whether  the  difference  between  these 
two  modes  of  expending  his  income  affects  the  interest  of  the 
labouring  classes.  It  is  plain  that  in  the  first  of  the  two  cases  he 
employs  labourers,  who  will  be  out  of  employment,  or  at  least  out 
of  that  employment,  in  the  opposite  case.  But  those  from  whom 
I differ  say  that  this  is  of  no  consequence,  because  in  buying 
velvet  and  lace  he  equally  employs  labourers,  namely,  those  who 
make  the  velvet  and  lace.  I contend,  however,  that  in  this  last 
case  he  does  not  employ  labourers ; but  merely  decides  in  what 
kind  of  work  some  other  person  shall  employ  them.  The  con- 
sumer does  not  with  his  own  funds  pay  to  the  weavers  and 
lacemakers  their  day’s  wages.  He  buys  the  finished  commodity, 
which  has  been  produced  by  labour  and  capital,  the  labour  not  being 
paid  nor  the  capital  furnished  by  him,  but  by  the  manufacturer. 
Suppose  that  he  had  been  in  the  habit  of  expending  this  portion 
of  his  income  in  hiring  journeyman  bricklayers,  who  laid  out  the 
amount  of  their  wages  in  food  and  clothing,  which  were  also  pro- 
duced by  labour  and  capital.  He,  however,  determines  to  prefer 
velvet,  for  which  he  thus  creates  an  extra  demand.  This  demand 
cannot  be  satisfied  without  an  extra  supply,  nor  can  the  supply 
be  produced  without  an  extra  capital : where,  then,  is  the  capital 
to  come  from  ? There  is  nothing  in  the  consumer’s  change  of 
purpose  which  makes  the  capital  of  the  country  greater  than  it 
otherwise  was.  It  appears,  then,  that  the  increased  demand  for 
velvet  could  not  for  the  present  be  supplied,  were  it  not  that  the  very 
circumstance  which  gave  rise  to  it  has  set  at  liberty  a capital  of  the 
exact  amount  required.  The  very  sum  which  the  consumer  now 
employs  in  buying  velvet,  formerly  passed  into  the  hands  of  journey- 
man bricklayers,  who  expended  it  in  food  and  necessaries,  which  they 
now  either  go  without,  or  squeeze  by  their  competition  from  the 


82 


BOOK  I.  CHAPTER  V.  § 9 


shares  of  other  labourers.  The  labour  and  capital,  therefore,  which 
formerly  produced  necessaries  for  the  use  of  these  bricklayers,  are 
deprived  of  their  market,  and  must  look  out  for  other  employment ; 
and  they  find  it  in  making  velvet  for  the  new  demand.  I do  not  ! 
mean  that  the  very  same  labour  and  capital  which  produced  the  | 
necessaries  turn  themselves  to  producing  the  velvet ; but,  in  some  | 
one  or  other  of  a hundred  modes,  they  take  the  place  of  that  which 
does.  There  was  capital  in  existence  to  do  one  of  two  things — to 
make  the  velvet,  or  to  produce  necessaries  for  the  journeyman 
bricklayers  ; but  not  to  do  both.  It  was  at  the  option  of  the  con- 
sumer which  of  the  two  should  happen  ; and  if  he  chooses  the  velvet, 
they  go  without  the  necessaries. 

1 For  further  illustration,  let  us  suppose  the  same  case  reversed. 

The  consumer  has  been  accustomed  to  buy  velvet,  but  resolves  to 
discontinue  that  expense,  and  to  employ  the  same  annual  sum  in 
hiring  bricklayers.  If  the  common  opinion  be  correct,  this  change 
in  the  mode  of  his  expenditure  gives  no  additional  employment  to 
labour,  but  only  transfers  employment  from  velvet-makers  to 
bricklayers.  On  closer  inspection,  however,  it  will  be  seen  that 
there  is  an  increase  of  the  total  sum  apphed  to  the  remuneration 
of  labour.  The  velvet  manufacturer,  supposing  him  aware  of  the 
diminished  demand  for  his  commodity,  diminishes  the  production,  and 
sets  at  hberty  a corresponding  portion  of  the  capital  employed  in  the 
manufacture.  This  capital,  thus  withdrawn  from  the  maintenance 
of  velvet-makers,  is  not  the  same  fund  with  that  which  the  customer 
employs  in  maintaining  bricklayers  ; it  is  a second  fund.  There  are,  j 
therefore,  two  funds  to  be  employed  in  the  maintenance  and  remuner-  | 
ation  of  labour,  where  before  there  was  only  one.  There  is  not  a trans- 
fer of  employment  from  velvet-makers  to  bricklayers ; there  is  a ; 
new  employment  created  for  bricklayers,  and  a transfer  of  employ- 
ment from  velvet-makers  to  some  other  labourers,  most  probably 
those  who  produce  the  food  and  other  things  which  the  bricklayers  j 
consume. 

In  answer  to  this  it  is  said,  that  though  money  laid  out  in  buying 
velvet  is  not  capital,  it  replaces  a capital ; that  though  it  does  not 
create  a new  demand  for  labour,  it  is  the  necessary  means  of  enabhng 
the  existing  demand  to  be  kept  up.  The  funds  (it  may  be  said) 
of  the  manufacturer,  while  locked  up  in  velvet,  cannot  be  directly  • 

1 [In  the  2nd  ed.  (1849)  there  was  here  inserted  “ a different  mode  of  stating 
the  argument,**  In  the  3rd  ed.  (1852)  this  became  the  long  footnote  of  this 
lection  ; and  five  new  paragraphs  were  inserted  at  this  point.] 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


83 


applied  to  the  maintenance  of  labour  ; they  do  not  begin  to  consti- 
tute a demand  for  labour  until  the  velvet  is  sold,  and  the  capital 
which  made  it  replaced  from  the  outlay  of  the  purchaser  ; and  thus, 
it  may  be  said,  the  velvet-maker  and  the  velvet-buyer  have  not  two 
capitals,  but  only  one  capital  between  them,  which  by  the  act  of 
purchase  the  buyer  transfers  to  the  manufacturer,  and  if  instead  of 
buying  velvet  he  buys  labour,  he  simply  transfers  this  capital  else- 
where, extinguishing  as  much  demand  for  labour  in  one  quarter  as  he 
creates  in  another. 

The  premises  of  this  argument  are  not  denied.  To  set  free 
a capital  which  would  otherwise  be  locked  up  in  a form  useless 
for  the  support  of  labour,  is,  no  doubt,  the  same  thing  to  the 
interests  of  labourers  as  the  creation  of  a new  capital.  It  is  per- 
fectly true  that  if  I expend  1000k  in  buying  velvet,  I enable  the 
manufacturer  to  employ  lOOOk  in  the  maintenance  of  labour, 
which  could  not  have  been  so  employed  while  the  velvet  remained 
unsold:  and  if  it. would  have  remained  unsold  for  ever  unless 
I bought  it,  then  by  changing  my  purpose,  and  hiring  bricklayers 
instead,  I undoubtedly  create  no  new  demand  for  labour  : for  while 
I employ  1000k  in  hiring  labour  on  the  one  hand,  I annihilate 
for  ever  1000k  of  the  velvet-maker’s  capital  on  the  other.  But 
this  is  confounding  the  effects  arising  from  the  mere  suddenness 
of  a change  with  the  effects  of  the  change  itself.  If  when  the 
buyer  ceased  to  purchase,  the  capital  employed  in  making  velvet 
for  his  use  necessarily  perished,  then  his  expending  the  same 
amount  in  hiring  bricklayers  would  be  no  creation,  but  merely 
a transfer,  of  employment.  The  increased  employment  which  I 
contend  is  given  to  labour,  would  not  be  given  unless  the  capital 
of  the  velvet-maker  could  be  liberated,  and  would  not  be  given 
until  it  was  liberated.  But  every  one  knows  that  the  capital 
invested  in  an  employment  can  be  withdrawn  from  it,  if  sufficient 
time  be  allowed.  If  the  velvet-maker  had  previous  notice,  by 
not  receiving  the  usual  order,  he  will  have  produced  1000k  less 
velvet,  and  an  equivalent  portion  of  his  capital  will  have  been 
already  set  free.  If  he  had  no  previous  notice,  and  the  article 
consequently  remains  on  his  hands,  the  increase  of  his  stock  will 
induce  him  next  year  to  suspend  or  diminish  his  production  until 
the  surplus  is  carried  off.  When  this  process  is  complete,  the 
manufacturer  will  find  himself  as  rich  as  before,  with  undiminished 
power  of  employing  labour  in  general,  though  a portion  of  his 
capital  will  now  be  employed  in  maintaining  some  other  kind  of 


84 


BOOK  I.  CHAPTER  V.  § 9 


it.  Until  this  adjustment  has  taken  place,  the  demand  for  labour 
will  be  merely  changed,  not  increased  : but  as  soon  as  it  has  taken 
place,  the  demand  for  labour  is  increased.  Where  there  was  formerly 
only  one  capital  employed  in  maintaining  weavers  to  make  lOOOl. 
worth  of  velvet,  there  is  now  that  same  capital  employed  in  making 
something  else,  and  1000?.  distributed  among  bricklayers  besides. 
There  are  now  two  capitals  employed  in  remunerating  two  sets 
of  labourers ; while  before,  one  of  those  capitals,  that  of  the  cus- 
tomer, only  served  as  a wheel  in  the  machinery  by  which  the  other 
capital,  that  of  the  manufacturer,  carried  on  its  employment  of 
labour  from  year  to  year. 

The  proposition  for  which  I am  contending  is  in  reality  equivalent 
to  the  following,  which  to  some  minds  will  appear  a truism,  though 
to  others  it  is  a paradox  : that  a person  does  good  to  labourers, 
not  by  what  he  consumes  on  himself,  but  solely  by  what  he  does 
not  so  consume.  If  instead  of  laying  out  100?.  in  wine  or  silk,  I 
expend  it  in  wages,  the  demand  for  commodities  is  precisely  equal 
in  both  cases : in  the  one,  it  is  a demand  for  100?.  worth  of  wine 
or  silk,  in  the  other,  for  the  same  value  of  bread,  beer,  labourers’ 
clothing,  fuel,  and  indulgences  : but  the  labourers  of  the  com- 
munity have  in  the  latter  case  the  value  of  100?.  more  of  the  produce 
of  the  community  distributed  among  them.  I have  consumed 
that  much  less,  and  made  over  my  consuming  power  to  them. 
If  it  were  not  so,  my  having  consumed  less  would  not  leave  more 
to  be  consumed  by  others ; which  is  a manifest  contradiction. 
When  less  is  not  produced,  what  one  person  forbears  to  consume 
is  necessarily  added  to  the  share  of  those  to  whom  he  transfers  his 
power  of  purchase.  In  the  case  supposed  I do  not  necessarily 
consume  less  ultimately,  since  the  labourers  whom  I pay  may 
build  a house  for  me,  or  make  something  else  for  my  future  consump- 
tion. But  I have  at  all  events  postponed  my  consumption,  and 
have  turned  over  part  of  my  share  of  the  present  produce 
of  the  community  to  the  labourers.  If  after  an  interval  I am 
indemnified,  it  is  not  from  the  existing  produce,  but  from  a 
subsequent  addition  made  to  it.  I have  therefore  left  more  of  the 
existing  produce  to  be  consumed  by  others ; and  have  put  into  the 
possession  of  labourers  the  power  to  consume  it. 

1 There  cannot  be  a better  reductio  ad  absurdum  of  the  opposite 
doctrine  than  that  afforded  by  the  Poor  Law.  If  it  be  equally  for 
the  benefit  of  the  labouring  classes  whether  I consume  my  means 
' [This  paragraph  was  inserted  in  the  6th  ed.  (1865).] 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


85 


in  the  form  of  things  purchased  for  my  own  use,  or  set  aside  a 
portion  in  the  shape  of  wages  or  alms  for  their  direct  consumption,  on 
what  ground  can  the  policy  be  justified  of  taking  my  money  from 
me  to  support  paupers  ? since  my  unproductive  expenditure  would 
have  equally  benefited  them,  while  I should  have  enjoyed  it  too. 
If  society  can  both  eat  its  cake  and  have  it,  why  should  it  not 
be  allowed  the  double  indulgence  ? But  common  sense  tells  every 
one  in  his  own  case  (though  he  does  not  see  it  on  the  larger  scale), 
that  the  poor  rate  which  he  pays  is  really  subtracted  from  his  own 
consumption,  and  that  no  shifting  of  payment  backwards  and 
forwards  will  enable  two  persons  to  eat  the  same  food.  If  he  had 
not  been  required  to  pay  the  rate,  and  had  consequently  laid  out 
the  amount  on  himself,  the  poor  would  have  had  as  much  less  for 
their  share  of  the  total  produce  of  the  country,  as  he  himself  would 
have  consumed  more.* 

♦ [1849]  The  following  case,  which  presents  the  argument  in  a somewhat 
different  shape,  may  serve  for  still  further  illustration. 

Suppose  that  a rich  individual.  A,  expends  a certain  amount  daily  in  wages 
or  alms,  which,  as  soon  as  received,  is  expended  and  consumed,  in  the  form  of 
coarse  food,  by  the  receivers.  A dies,  leaving  his  property  to  B,  who  dis- 
continues this  item  of  expenditure,  and  expends  in  lieu  of  it  the  same  sum 
each  day  in  delicacies  for  his  own  table.  I have  chosen  this  supposition,  in 
order  that  the  two  cases  may  be  similar  in  all  their  circumstances,  exeept  that 
which  is  the  subject  of  comparison.  In  order  not  to  obscure  the  essential  facts 
of  the  case  by  exhibiting  them  through  the  hazy  medium  of  a money  transaction, 
let  us  further  suppose  that  A,  and  B after  him,  are  landlords  of  the  estate  on 
wliich  both  the  food  consumed  by  the  recipients  of  A’s  disbursements,  and 
the  articles  of  luxury  supplied  for  B’s  table,  are  produced  ; and  that  their 
rent  is  paid  to  them  in  kind,  they  giving  previous  notice  what  description 
of  produce  they  shall  require.  The  question  is,  whether  B’s  expenditure 
gives  as  much  employment  or  as  much  food  to  his  poorer  neighbours  as  A’s 
gave. 

From  the  case  as  stated,  it  seems  to  follow  that  while  A lived,  that  portion 
of  his  income  which  he  expended  in  wages  or  alms,  would  be  drawn  by  him  from 
the  farm  in  the  shape  of  food  for  labourers,  and  would  be  used  as  such  ; while 
B,  who  came  after  him,  would  require,  instead  of  this,  an  equivalent  value 
in  expensive  articles  of  food,  to  be  consumed  in  his  own  household  : that 
the  farmer,  therefore,  would,  under  B’s  regime,  produce  that  much  less,  of 
ordinary  food,  and  more  of  expensive  delicacies,  for  each  day  of  the  year  than 
was  produced  in  A’s  time,  and  that  there  would  be  that  amount  less  of  food 
shared,  throughout  the  year,  among  the  labouring  and  poorer  classes.  This  is 
what  would  be  conformable  to  the  principles  laid  down  in  the  text.  Those 
who  think  differently,  must,  on  the  other  hand,  suppose  that  the  luxuries 
required  by  B would  be  produced,  not  instead  of,  but  in  addition  to,  the  food 
previously  supplied  to  A’s  labourers,  and  that  the  aggregate  produce  of  the 
country  would  be  increased  in  amount.  But  when  it  is  asked,  how  this  double 
production  would  be  effected — how  the  farmer,  whose  capital  and  labour 
were  already  fully  employed,  would  be  enabled  to  supply  the  new  wants  of 
B,  without  producing  less  of  other  things  ; the  only  mode  which  presents  itself 
is,  that  he  should  first  produce  the  food,  and  then,  giving  that  food  to  the 


86 


BOOK  I.  CHAPTER  V.  § 9 


It  appears,  then,  that  a demand  delayed  until  the  work  is 
completed,  and  furnishing  no  advances,  but  only  reimbursing 
advances  made  by  others,  contributes  nothing  to  the  demand  for 
labour  ; and  that  what  is  so  expended,  is,  in  all  its  effects,  so  far  as 

labourers  whom  A formerly  fed,  should  by  means  of  their  labour,  produce  the 
luxuries  wanted  by  B.  This,  accordingly,  when  the  objectors  are  hard 
pressed,  appears  to  be  really  their  meaning.  But  it  is  an  obvious  answer, 
that,  on  this  supposition,  B must  wait  for  his  luxuries  till  the  second  year, 
and  they  are  wanted  this  year.  By  the  original  hypothesis,  he  consumes 
his  luxurious  dinner  day  by  day,  %>ari  passu  with  the  rations  of  bread  and 
potatoes  formerly  served  out  by  A to  his  labourers.  There  is  not  time  to  feed 
the  labourers  first,  and  supply  B afterwards  : he  and  they  cannot  both  have 
their  wants  ministered  to  : he  can  only  satisfy  his  own  demand  for  commodities, 
by  leaving  as  much  of  theirs,  as  was  formerly  supplied  from  that  fund, 
unsatisfied. 

It  may,  indeed,  be  rejoined  by  an  objector,  that  since,  on  the  present 
showing,  time  is  the  only  thing  wanting  to  render  the  expenditure  of  B con- 
sistent with  as  large  an  employment  to  labour  as  was  given  by  A,  why  may  we 
not  suppose  that  B postpones  his  increased  consumption  of  personal  luxuries 
until  they  can  be  furnished  to  him  by  the  labour  of  the  persons  whom  A 
employed  ? In  that  case,  it  may  be  said,  he  would  employ  and  feed  as  much 
labour  as  his  predecessors.  Undoubtedly  he  would ; but  why  ? Because  his 
income  would  be  expended  in  exactly  the  same  manner  as  his  predecessor’s ; 
it  would  be  expended  in  wages.  A reserved  from  his  personal  consumption 
a fund  which  he  paid  away  directly  to  labourers  ; B does  the  same,  only  instead 
of  papng  it  to  them  himself,  he  leaves  it  in  the  hands  of  the  farmer  who  pays  it 
3io  them  for  him.  On  this  supposition,  B,  in  the  first  year,  neither  expending 
the  amount,  as  far  as  he  is  personally  concerned,  in  A’s  manner  nor  in  his  own, 
really  saves  that  portion  of  his  income,  and  lends  it  to  the  farmer.  And  if, 
in  subsequent  years,  confining  himself  within  the  year’s  income,  he  leaves  the 
farmer  in  arrears  to  that  amount,  it  becomes  an  additional  capital,  with  which 
the  farmer  may  permanently  employ  and  feed  A’s  labourers.  Nobody  pretends 
that  such  a change  as  this,  a change  from  spending  an  income  in  wages  of  labour 
to  saving  it  for  investment,  deprives  any  labourers  of  employment.  What  is 
afl&rmed  to  have  that  effect  is,  the  change  from  hiring  labourers  to  buying 
commodities  for  personal  use  ; as  represented  by  our  original  hypothesis. 

In  our  illustration  we  have  supposed  no  buying  and  selling,  or  use  of  money. 
But  the  case  as  we  have  put  it,  corresponds  with  actual  fact  in  everything 
except  the  details  of  the  mechanism.  The  whole  of  any  country  is  virtually  a 
single  farm  and  manufactory,  from  which  every  member  of  the  community 
draws  his  appointed  share  of  the  produce,  having  a certain  number  of  counters, 
called  pounds  sterling,  put  into  his  hands,  which,  at  his  convenience,  he  brings 
back  and  exchanges  for  such  goods  as  he  prefers,  up  to  the  limit  of  the  amount. 
He  does  not,  as  in  our  imaginary  case,  give  notice  beforehand  what  things  he 
shall  require  ; but  the  dealers  and  producers  are  quite  capable  of  finding  it  out 
by  observation,  and  any  change  in  the  demand  is  promptly  followed  by  an 
adaptation  of  the  supply  to  it.  If  a consumer  changes  from  paying  away  a 
part  of  his  income  in  wages,  to  spending  it  that  same  day  (not  some  subsequent 
and  distant  day)  in  thmgs  for  his  own  consumption,  and  perseveres  in  this 
altered  practice  until  production  has  had  time  to  adapt  itself  to  the  alteration 
of  demand,  there  will  from  that  time  be  less  food  and  other  articles  for  the 
use  of  labourers,  produced  in  the  country,  by  exactly  the  value  of  the  extra 
luxuries  now  demanded  ; and  the  labourers,  as  a class,  will  be  worse  off  by  the 
precise  amouiit. 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


87 


regards  the  employment  of  the  labouring  class,  a mere  nullity ; it 
does  not  and  cannot  create  any  employment  except  at  the  expense 
of  other  employment  which  existed  before. 

But  though  a demand  for  velvet  does  nothing  more  in  regard 
to  the  employment  for  labour  and  capital,  than  to  determine  so 
much  of  the  employment  which  already  existed,  into  that  particular 
channel  instead  of  any  other  ; still,  to  the  producers  already  engaged 
in  the  velvet  manufacture,  and  not  intending  to  quit  it,  this  is  of 
the  utmost  importance.  To  them,  a falling  off  in  the  demand  is  a 
real  loss,  and  one  which,  even  if  none  of  their  goods  finally  perish 
unsold,  may  mount  to  any  height,  up  to  that  which  would  make 
them  choose,  as  the  smaller  evil,  to  retire  from  the  business.  On 
the  contrary,  an  increased  demand  enables  them  to  extend  their 
transactions — to  make  a profit  on  a larger  capital,  if  they  have  it, 
or  can  borrow  it ; and,  turning  over  their  capital  more  rapidly,  they 
will  employ  their  labourers  more  constantly,  or  employ  a greater 
number  than  before.  So  that  an  increased  demand  for  a commodity 
does  really,  in  the  particular  department,  often  cause  a greater 
employment  to  be  given  to  labour  by  the  same  capital.  The  mistake 
lies  in  not  perceiving  that,  in  the  cases  supposed,  this  advantage 
is  given  to  labour  and  capital  in  one  department,  only  by  being 
withdrawn  from  another  ; and  that,  when  the  change  has  produced 
its  natural  effect  of  attracting  into  the  employment  additional  capital 
proportional  to  the  increased  demand,  the  advantage  itself  ceases. 

The  grounds  of  a proposition,  when  well  imderstood,  usually 
give  a tolerable  indication  of  the  limitations  of  it.  The  general 
principle,  now  stated,  is  that  demand  for  commodities  determines 
merely  the  direction  of  labour,  and  the  kind  of  wealth  produced, 
but  not  the  quantity  or  efficiency  of  the  labour,  or  the  aggregate 
of  wealth.  But  to  this  there  are  two  exceptions.  First,  when 
labour  is  supported,  but  not  fully  occupied,  a new  demand  for 
something  which  it  can  produce  may  stimulate  the  labour  thus 
supported  to  increased  exertions,  of  which  the  result  may  be  an 
increase  of  wealth,  to  the  advantage  of  the  labourers  themselves 
and  of  others.  Work  which  can  be  done  in  the  spare  hours  of 
persons  subsisted  from  some  other  source,  can  (as  before  remarked) 
be  undertaken  without  withdrawing  capital  from  other  occupations, 
beyond  the  amount  (often  very  small)  required  to  cover  the  expense 
of  tools  and  materials,  and  even  this  will  often  be  provided  by 
savings  made  expressly  for  the  purpose.  The  reason  of  our  theorem 
thus  failing,  the  theorem  itself  fails,  and  employment  of  this  kind 


88 


BOOK  I.  CHAPTER  V.  § 10 


may,  by  the  springing  up  of  a demand  for  tbe  commodity,  be  called 
into  existence  without  depriving  labour  of  an  equivalent  amount 
of  employment  in  any  other  quarter.  The  demand  does  not,  even 
in  this  case,  operate  on  labour  any  otherwise  than  through  the 
medium  of  an  existing  capital,  but  it  affords  an  inducement  which 
causes  that  capital  to  set  in  motion  a greater  amount  of  labour  than 
it  did  before. 

1 The  second  exception,  of  which  I shall  speak  at  length  in  a 
subsequent  chapter,  consists  in  the  known  effect  of  an  extension 
of  the  market  for  a commodity,  in  rendering  possible  an  increased 
development  of  the  division  of  labour,  and  hence  a more  effective 
distribution  of  the  productive  forces  of  society.  This,  hke  the 
former,  is  more  an  exception  in  appearance  than  it  is  in  reality. 
It  is  not  the  money  paid  by  the  purchaser,  which  remunerates 
the  labour ; it  is  the  capital  of  the  producer  : the  demand  only 
determines  in  what  manner  that  capital  shall  be  employed,  and 
what  kind  of  labour  it  shall  remunerate ; but  if  it  determines  that 
the  commodity  shall  be  produced  on  a large  scale,  it  enables  the 
same  capital  to  produce  more  of  the  commodity,  and  may,  by  an 
indirect  effect  in  causing  an  increase  of  capital,  produce  an  eventual 
increase  of  the  remuneration  of  the  labourer. 

The  demand  for  commodities  is  a consideration  of  importance, 
rather  in  the  theory  of  exchange,  than  in  that  of  production.  Looking 
at  things  in  the  aggregate,  and  permanently,  the  remuneration  of 
the  producer  is  derived  from  the  productive  power  of  his  own 
capital.  The  sale  of  the  produce  for  money,  and  the  subsequent 
expenditure  of  the  money  in  buying  other  commodities,  are  a 
mere  exchange  of  equivalent  values  for  mutual  accommodation. 
It  is  true  that,  the  division  of  employments  being  one  of  the  principal 
means  of  increasing  the  productive  power  of  labour,  the  power  of 
exchanging  gives  rise  to  a great  increase  of  the  produce ; but  even 
then  it  is  production,  not  exchange,  which  remimerates  labour 
and  capital.  We  cannot  too  strictly  represent  to  ourselves  the 
operation  of  exchange,  whether  conducted  by  barter  or  through 
the  medium  of  money,  as  the  mere  mechanism  by  which  each  person 
transforms  the  remuneration  of  his  labour  or  of  his  capital  into 
the  particular  shape  in  which  it  is  most  convenient  to  him  to  possess 
it ; but  in  no  wise  the  source  of  the  remuneration  itself. 

§ 10.  The  preceding  principles  demonstrate  the  fallacy  of 
* [This  paragraph  was  inserted  in  the  6th  ed.  (1865).] 


FUNDAMENTAL  PROPOSITIONS  ON  CAPITAL 


89 


many  popular  arguments  and  doctrines,  which  are  continually 
reproducing  themselves  in  new  forms.  For  example,  it  has  been 
contended,  and  by  some  from  whom  better  things  might  have  been 
expected,  that  the  argument  for  the  income-tax,  grounded  on  its 
falling  on  the  higher  and  middle  classes  only,  and  sparing  the  poor, 
is  an  error  ; some  have  gone  so  far  as  to  say,  an  imposture  ; because 
in  taking  from  the  rich  what  they  would  have  expended  among  the 
poor,  the  tax  injures  the  poor  as  much  as  if  it  had  been  directly 
levied  from  them.  Of  this  doctrine  we  now  know  what  to  think. 
So  far,  indeed,  as  what  is  taken  from  the  rich  in  taxes,  would,  if  not 
so  taken,  have  been  saved  and  converted  into  capital,  or  even  ex- 
pended in  the  maintenance  and  wages  of  servants  or  of  any  class 
of  unproductive  labourers,  to  that  extent  the  demand  for  labour  is 
no  doubt  diminished,  and  the  poor  injuriously  affected,  by  the 
tax  on  the  rich  ; and  as  these  effects  are  almost  always  produced 
in  a greater  or  less  degree,  it  is  impossible  so  to  tax  the  rich  as 
that  no  portion  whatever  of  the  tax  can  fall  on  the  poor.  But  even 
here  the  question  arises,  whether  the  government,  after  receiving 
the  amount,  will  not  lay  out  as  great  a portion  of  it  in  the  direct 
purchase  of  labour,  as  the  taxpayers  would  have  done.  In  regard 
to  all  that  portion  of  the  tax,  which,  if  not  paid  to  the  government, 
would  have  been  consumed  in  the  form  of  commodities  (or  even 
expended  in  services  if  the  payment  has  been  advanced  by  a 
capitalist),  this,  according  to  the  principles  we  have  investigated, 
falls  definitely  on  the  rich,  and  not  at  all  on  the  poor.  There  is 
exactly  the  same  demand  for  labour,  so  far  as  this  portion  is  con- 
cerned, after  the  tax,  as  before  it.  The  capital  which  hitherto 
employed  the  labourers  of  the  country  remains,  and  is  still  capable 
of  employing  the  same  number.  There  is  the  same  amount  of 
produce  paid  in  wages,  or  allotted  to  defray  the  feeding  and  clothing 
of  labourers. 

If  those  against  whom  I am  now  contending  were  in  the  right, 
it  would  be  impossible  to  tax  anybody  except  the  poor.  If  it  is 
taxing  the  labourers,  to  tax  what  is  laid  out  in  the  produce  of  labour, 
the  labouring  classes  pay  all  the  taxes.  The  same  argument,  however, 
equally  proves,  that  it  is  impossible  to  tax  the  labourers  at  all ; 
since  the  tax,  being  laid  out  either  in  labour  or  in  commodities, 
comes  all  back  to  them  ; so  that  taxation  has  the  singular  property 
of  falling  on  nobody.  On  the  same  showing,  it  would  do  the  labourers 
no  harm  to  take  from  them  all  they  have,  and  distribute  it  among 
the  other  members  of  the  community.  It  would  all  be  “ spent 


90 


BOOK  I.  CHAPTER  V.  § 10 


among  them,”  which  on  this  theory  comes  to  the  same  thing.  The 
error  is  produced  by  not  looking  directly  at  the  reahties  of  the 
phenomena,  but  attending  only  to  the  outward  mechanism  of  paying 
and  spending.  If  we  look  at  the  effects  produced  not  on  the  money, 
which  merely  changes  hands,  but  on  the  commodities  which  are 
used  and  consumed,  we  see  that,  in  consequence  of  the  income-tax, 
the  classes  who  pay  it  do  really  diminish  their  consumption.  Exactly 
so  far  as  they  do  this,  they  are  the  persons  on  whom  the  tax  falls. 
It  is  defrayed  out  of  what  they  would  otherwise  have  used  and 
enjoyed.  So  far,  on  the  other  hand,  as  the  burthen  falls,  not  on 
what  they  would  have  consumed,  but  on  what  they  would  have 
saved  to  maintain  production,  or  spent  in  maintaining  or  paying 
unproductive  labourers,  to  that  extent  the  tax  forms  a deduction 
from  what  would  have  been  used  and  enjoyed  by  the  labouring 
classes.  But  if  the  government,  as  is  probably  the  fact,  expends 
fully  as  much  of  the  amount  as  the  tax-payers  would  have  done 
in  the  direct  employment  of  labour,  as  in  hiring  sailors,  soldiers, 
and  policemen,  or  in  paying  off  debt,  by  which  last  operation  it 
even  increases  capital ; the  labouring  classes  not  only  do  not  lose 
any  employment  by  the  tax,  but  may  possibly  gain  some,  and 
the  whole  of  the  tax  falls  exclusively  where  it  was  intended. 

All  that  portion  of  the  produce  of  the  country  which  any  one, 
not  a labourer,!  actually  and  literally  consumes  for  his  own  use, 
does  not  contribute  in  the  smallest  degree  to  the  maintenance  di 
labour.  No  one  is  benefited  by  mere  consumption,  except  the 
person  who  consumes.  And  a person  cannot  both  consume  his  income 
himself,  and  make  it  over  to  be  consumed  by  others.  Taking  away 
a certain  portion  by  taxation  cannot  deprive  both  him  and  them  of 
it,  but  only  him  or  them.  To  know  which  is  the  sufferer,  we  must 
understand  whose  consumption  will  have  to  be  retrenched  in 
consequence : this,  whoever  it  be,  is  the  person  on  whom  the  tax 
really  falls.^ 

* [*‘  Not  a labourer  ” was  inserted  in  the  3rd  ed.  (1852),] 

* [See  Appendix  F.  Fundamental  Propositions  on  Capital.1 


CHAPTER  VI 


ON  CIRCULATING  AND  FIXED  CAPITAL 

§ 1.  To  complete  our  explanations  on  the  subject  of  capital,  it 
is  necessary  to  say  something  of  the  two  species  into  which  it  is 
usually  divided.  The  distinction  is  very  obvious,  and  though  not 
named,  has  been  often  adverted  to,  in  the  two  preceding  chapters  : 
but  it  is  now  proper  to  define  it  accurately,  and  to  point  out  a few 
of  its  consequences. 

Of  the  capital  engaged  in  the  production  of  any  commodity, 
there  is  a part  which,  after  being  once  used,  exists  no  longer  as 
capital : is  no  longer  capable  of  rendering  service  to  production,  or 
at  least  not  the  same  service,  nor  to  the  same  sort  of  production. 
Such,  for  example,  is  the  portion  of  capital  which  consists  of  materials. 
The  tallow  and  alkali  of  which  soap  is  made,  once  used  in  the  manu- 
facture, are  destroyed  as  alkali  and  tallow  ; and  cannot  be  employed 
any  further  in  the  soap  manufacture,  though  in  their  altered  con- 
dition, as  soap,  they  are  capable  of  being  used  as  a material  or 
an  instrument  in  other  branches  of  manufacture.  In  the  same 
division  must  be  placed  the  portion  of  capital  which  is  paid  as  the 
wages,  or  consumed  as  the  subsistence,  of  labourers.  The  part 
of  the  capital  of  a cotton-spinner  which  he  pays  away  to  his  work- 
people, once  so  paid,  exists  no  longer  as  his  capital,  or  as  a cotton- 
spinner’s  capital : such  portion  of  it  as  the  workmen  consume, 
no  longer  exists  as  capital  at  all : even  if  they  save  any  part,  it 
may  now  be  more  properly  regarded  as  a fresh  capital,  the  result 
of  a second  act  of  accumulation.  Capital  which  in  this  manner 
fulfils  the  whole  of  its  office  in  the  production  in  which  it  is  engaged 
by  a single  use,  is  called  Circulating  Capital.  The  term,  which  is 
not  very  appropriate,  is  derived  from  the  circumstance,  that  this 
portion  of  capital  requires  to  be  constantly  renewed  by  the  sale 
of  the  finished  product,  and  when  renewed  is  perpetually  parted  with 
in  buying  materials  and  paying  wages ; so  that  it  does  its  work, 
not  by  being  kept,  but  by  changing  hands. 


92 


BOOK  I.  CHAPTER  VI.  § 1 


Another  large  portion  of  capital,  however,  consists  in  instruments 
of  production,  of  a more  or  less  permanent  character  ; which  produce 
their  effect  not  by  being  parted  with,  but  by  being  kept ; and  the 
efficacy  of  which  is  not  exhausted  by  a single  use.  To  this  class 
belong  buildings,  machinery,  and  all  or  most  things  known  by 
the  name  of  implements  or  tools.  The  durability  of  some  of  these 
is  considerable,  and  their  function  as  productive  instruments  is 
prolonged  through  many  repetitions  of  the  productive  operation. 
In  this  class  must  likewise  be  included  capital  sunk  (as  the  expression 
is)  in  permanent  improvements  of  land.  So  also  the  capital  expended 
once  for  all,  in  the  commencement  of  an  undertaking,  to  prepare 
the  way  for  subsequent  operations : the  expense  of  opening  a 
mine,  for  example  : of  cutting  canals,  of  making  roads  or  docks. 
Other  examples  might  be  added,  but  these  are  sufficient.  Capital 
which  exists  in  any  of  these  durable  shapes,  and  the  return  to  which 
is  spread  over  a period  of  corresponding  duration,  is  called  Fixed 
Capital. 

Of  fixed  capital,  some  kinds  require  to  be  occasionally  or  periodi- 
cally renewed.  Such  are  all  implements  and  buildings : they 
require,  at  intervals,  partial  renewal  by  means  of  repairs,  and  are 
at  last  entirely  worn  out,  and  cannot  be  of  any  further  service  as 
buildings  and  implements,  but  fall  back  into  the  class  of  materials. 
In  other  cases,  the  capital  does  not,  unless  as  a consequence  of  some 
unusual  accident,  require  entire  renewal : but  there  is  always 
some  outlay  needed,  either  regularly  or  at  least  occasionally,  to  keep 
it  up.  A dock  or  a canal,  once  made,  does  not  require,  like  a 
machine,  to  be  made  again,  unless  purposely  destroyed,  or  unless  an 
earthquake  or  some  similar  catastrophe  has  filled  it  up  : but  regular 
and  frequent  outlays  are  necessary  to  keep  it  in  repair.  The  cost 
of  opening  a mine  needs  not  be  incurred  a second  time  ; but  unless 
some  one  goes  to  the  expense  of  keeping  the  mine  clear  of  water, 
it  is  soon  rendered  useless.  The  most  permanent  of  all  kinds  of 
fixed  capital  is  that  employed  in  giving  increased  productiveness 
to  a natural  agent,  such  as  land.  The  draining  of  marshy  or  in- 
undated tracts  like  the  Bedford  Level,  the  reclaiming  of  land  from 
the  sea,  or  its  protection  by  embankments,  are  improvements 
calculated  for  perpetuity ; but  drains  and  dykes  require  frequent 
repairs.  The  same  character  of  perpetuity  belongs  to  the  improve- 
ment of  land  by  subsoil  draining,  which  adds  so  much  to  th^  pro- 
ductiveness of  the  clay  soils ; or  by  permanent  manures,  that  is, 
by  the  addition  to  the  soil,  not  of  the  substances  which  enter  into 


CIRCULATING  AND  FIXED  CAPITAL 


93 


the  composition  of  vegetables,  and  which  are  therefore  consumed 
by  vegetation,  but  of  those  which  merely  alter  the  relation  of  the  soil 
to  air  and  water  ; as  sand  and  lime  on  the  heavy  soils,  clay  and  marl 
on  the  light.  Even  such  works,  however,  require  some,  though 
it  may  be  very  little,  occasional  outlay  to  maintain  their  full  effect. 

These  improvements,  however,  by  the  very  fact  of  their  deserving 
that  title,  produce  an  increase  of  return,  which,  after  defraying 
all  expenditure  necessary  for  keeping  them  up,  still  leaves  a surplus. 
This  surplus  forms  the  return  to  the  capital  sunk  in  the  first  instance, 
and  that  return  does  not,  as  in  the  case  of  machinery,  terminate 
by  the  wearing  out  of  the  machine,  but  continues  for  ever.  The 
land,  thus  increased  in  productiveness,  bears  a value  in  the  market 
proportional  to  the  increase  : and  hence  it  is  usual  to  consider 
the  capital  which  was  invested,  or  sunk,  in  making  the  improvement, 
as  still  existing  in  the  increased  value  of  the  land.  There  must 
be  no  mistake,  however.  The  capital,  like  all  other  capital,  has 
been  consumed.  It  was  consumed  in  maintaining  the  labourers 
who  executed  the  improvement,  and  in  the  wear  and  tear  of  the 
tools  by  which  they  were  assisted.  But  it  was  consumed  pro- 
ductively, and  has  left  a permanent  result  in  the  improved  pro- 
ductiveness of  an  appropriated  natural  agent,  the  land.  We 
may  call  the  increased  produce  the  joint  result  of  the  land  and  of 
a capital  fixed  in  the  land.  But  as  the  capital,  having  in  reality 
been  consumed,  cannot  be  withdrawn,  its  productiveness  is  thence- 
forth indissolubly  blended  with  that  arising  from  the  original 
qualities  of  the  soil ; and  the  remuneration  for  the  use  of  it  thence- 
forth depends,  not  upon  the  laws  which  govern  the  returns  to  labour 
and  capital,  but  upon  those  which  govern  the  recompense  for 
natural  agents.  What  these  are,  we  shall  see  hereafter.* 

§ 2.  There  is  a great  difference  between  the  effects  of  circulating 
and  those  of  fixed  capital,  on  the  amount  of  the  gross  produce  of  the 
country.  Circulating  capital  being  destroyed  as  such,  or  at  any 
rate  finally  lost  to  the  owner,  by  a single  use ; and  the  product 
resulting  from  that  one  use  being  the  only  source  from  which  the 
owner  can  replace  the  capital,  or  obtain  any  remuneration  for  its 
productive  employment ; the  product  must  of  course  be  sufficient  for 
those  purposes,  or  in  other  words,  the  result  of  a single  use  must 
be  a reproduction  equal  to  the  whole  amount  of  the  circulating 
capital  used,  and  a profit  besides.  This,  however,  is  by  no  means 
♦ Infra,  book  iL  chap.  xvi.  On  Rent. 


04 


BOOK  I.  CHAPTER  VI.  § 2 


necessary  in  the  case  of  fixed  capital.  Since  machinery,  for  examine, 
is  not  wholly  consumed  by  one  use,  it  is  not  necessary  that  it  should 
be  wholly  replaced  from  the  product  of  that  use.  The  machine 
answers  the  purpose  of  its  owner  if  it  brings  in,  during  each  interval 
of  time,  enough  to  cover  the  expense  of  repairs,  and  the  deterioration 
in  value  which  the  machine  has  sustained  during  the  same  time, 
with  a surplus  sufficient  to  yield  the  ordinary  profit  on  the  entire 
value  of  the  machine. 

From  this  it  follows  that  all  increase  of  fixed  capital,  when  taking 
place  at  the  expense  of  circulating,  must  be,  at  least  temporarily, 
prejudicial  to  the  interests  of  the  labourers.  This  is  true,  not  of 
machinery  alone,  but  of  all  improvements  by  which  capital  is  sunk  ; 
that  is,  rendered  permanently  incapable  of  being  applied  to  the 
maintenance  and  remuneration  of  labour.  Suppose  that  a person 
farms  his  own  land,  with  a capital  of  two  thousand  quarters  of  corn, 
employed  in  maintaining  labourers  during  one  year  (for  simplicity 
we  omit  the  consideration  of  seed  and  tools),  whose  labour  pro- 
duces him  annually  two  thousand  four  hundred  quarters,  being  a 
profit  of  twenty  per  cent.  This  profit  we  shall  suppose  that  he 
annually  consumes,  carrying  on  his  operations  from  year  to  year  on 
the  original  capital  of  two  thousand  quarters.  Let  us  now  suppose 
that  by  the  expenditure  of  half  his  capital  he  effects  a permanent 
improvement  of  his  land,  which  is  executed  by  half  his  labourers, 
and  occupies  them  for  a year,  after  which  he  will  only  require, 
for  the  effectual  cultivation  of  his  land,  half  as  many  labourers  as 
before.  The  remainder  of  his  capital  he  employs  as  usual.  In 
the  first  year  there  is  no  difference  in  the  condition  of  the  labourers, 
except  that  part  of  them  have  received  the  same  pay  for  an  opera- 
tion on  the  land,  which  they  previously  obtained  for  ploughing, 
sowing,  and  reaping.  At  the  end  of  the  year,  however,  the  improver 
has  not,  as  before,  a capital  of  two  thousand  quarters  of  corn.  Only 
one  thousand  quarters  of  his  capital  have  been  reproduced  in  the 
usual  way : he  has  now  only  those  thousand  quarters  and  his  im- 
provement. He  wiU  employ,  in  the  next  and  in  each  following 
year,  only  half  the  number  of  labourers,  and  will  divide  among  them 
only  half  the  former  quantity  of  subsistence.  The  loss  will  soon 
be  made  up  to  them  if  the  improved  land,  with  the  diminished 
quantity  of  labour,  produces  two  thousand  four  hundred  quarters 
as  before,  because  so  enormous  an  accession  of  gain  will  probably 
induce  the  improver  to  save  a part,  add  it  to  his  capital,  and  become 
a larger  employer  of  labour.  But  it  is  conceivable  that  this  may  not 


CIRCULATING  AND  FIXED  CAPITAL 


95 


be  the  case  i ; for  (supposing,  as  we  may  do,  that  the  improvement 
will  last  indefinitely,  without  any  outlay  worth  mentioning  to  keep 
it  up)  the  improver  will  have  gained  largely  by  his  improvement 
if  the  land  now  yields,  not  two  thousand  four  hundred,  but  one 
thousand  five  hundred  quarters ; since  this  will  replace  the  one 
thousand  quarters  forming  his  present  circulating  capital,  with  a 
profit  of  twenty-five  per  cent  (instead  of  twenty  as  before)  on  the 
whole  capital,  fixed  and  circulating  together.  The  improvement, 
therefore,  may  be  a very  profitable  one  to  him,  and  yet  very  injurious 
to  the  labourers. 

2 The  supposition,  in  the  terms  in  which  it  has  been  stated,  is 
purely  ideal ; or  at  most  applicable  only  to  such  a case  as  that  of 
the  conversion  of  arable  land  into  pasture,  which,  though  formerly 
a frequent  practice,  is  regarded  [1849]  by  modern  agriculturists 
as  the  reverse  of  an  improvement.*  But  this  does  not  affect  the 
substance  of  the  argument.  Suppose  that  the  improvement  does 
not  operate  in  the  manner  supposed — does  not  enable  a part  of 
the  labour  previously  employed  on  the  land  to  be  dispensed  with — 
but  only  enables  the  same  labour  to  raise  a greater  produce.  Suppose, 
too,  that  the  greater  produce,  which  by  means  of  the  improvement 
can  be  raised  from  the  soil  with  the  same  labour,  is  all  wanted,  and 
will  find  purchasers.  The  improver  will  in  that  case  require  the 
same  number  of  labourers  as  before,  at  the  same  wages.  But  where 
will  he  find  the  means  of  paying  them  ? He  has  no  longer  his 
original  capital  of  two  thousand  quarters  disposable  for  the  purpose. 
One  thousand  of  them  are  lost  and  gone — consumed  in  making  the 
improvement.  If  he  is  to  employ  as  many  labourers  as  before,  and 
pay  them  as  highly,  he  must  borrow,  or  obtain  from  some  other 
source,  a thousand  quarters  to  supply  the  deficit.  But  these 
thousand  quarters  already  maintained,  or  were  destined  to  maintain, 

^ [So  altered  in  2nd  ed.  (1849)  from  the  original : “this  may  not,  and  often 
will  not,  be  the  case.”] 

* [The  first  two  sentences  of  this  paragraph  were  inserted  in  the  2nd  ed. 
(1849),  and  the  subsequent  sentences  slightly  changed  in  form.] 

* [1865]  The  clearing  away  of  the  small  farmers  in  the  North  of  Scotland, 
within  the  present  century,  was,  however,  a case  of  it ; and  Ireland,  since  the 
potato  famine  and  the  repeal  of  the  com  laws,  is  another.  The  remarkable 
decrease  which  has  lately  attracted  notice  in  the  gross  produce  of  Irish  agricul- 
ture,  is,  to  all  appearance,  partly  attributable  to  the  diversion  of  land  from 
maintaining  human  labourers  to  feeding  cattle ; and  it  could  not  have  taken 
place  without  the  removal  of  a large  part  of  the  Irish  population  by  emigration 
or  death.  We  have  thus  two  recent  instances,  in  which  what  was  regarded  as  an 
agricultural  improvement,  has  diminished  the  power  of  the  country  to  support 
its  population.  The  effect,  however,  of  all  the  improvements  due  to  modem 
science  is  to  increase,  or  at  all  events,  »ot  to  diminish,  the  gross  produce. 


96 


BOOK  I.  CHAPTER  VI.  § 2 


an  equivalent  quantity  of  labour.  They  are  not  a fresh  creation ; 
their  destination  is  only  changed  from  one  productive  employment 
to  another  ; and  though  the  agriculturist  has  made  up  the  deficiency 
in  his  own  circulating  capital,  the  breach  in  the  circulating  capital 
of  the  community  remains  unrepaired. 

The  argument  relied  on  by  most  of  those  who  contend  that 
machinery  can  never  be  injurious  to  the  labouring  class,  is,  that  by 
cheapening  production  it  creates  such  an  increased  demand  for  the 
commodity,  as  enables,  ere  long,  a greater  number  of  persons  than 
ever  to  find  employment  in  producing  it.  This  argument  does  not 
seem  to  me  to  have  the  weight  commonly  ascribed  to  it.  The 
fact,  though  too  broadly  stated,  is,  no  doubt,  often  true.  The 
copyists  who  were  thrown  out  of  employment  by  the  invention  of 
printing,  were  doubtless  soon  outnumbered  by  the  compositors  and 
pressmen  who  took  their  place  ; and  the  number  of  labouring  persons 
now  occupied  in  the  cotton  manufacture  is  many  times  greater 
than  were  so  occupied  previously  to  the  inventions  of  Hargreaves 
and  Arkwright,  which  shows  that,  besides  the  enormous  fixed 
capital  now  embarked  in  the  manufacture,  it  also  employs  a far 
larger  circulating  capital  than  at  any  former  time.  But  if  this 
capital  was  drawn  from  other  employments ; if  the  funds  which 
took  the  place  of  the  capital  sunk  in  costly  machinery,  were  supplied 
not  by  any  additional  saving  consequent  on  the  improvements, 
but  by  drafts  on  the  general  capital  of  the  community  ; what  better 
were  the  labouring  classes  for  the  mere  transfer  ? Tn  what  manner 
was  the  loss  they  sustained  by  the  conversion  of  circulating  into  fixed 
capital  made  up  to  them  by  a mere  shifting  of  part  of  the  remainder 
of  the  circulating  capital  from  its  old  employments  to  a new  one  ? 

All  attempts  to  make  out  that  the  labouring  classes  as  a collective 
body  cannot  suffer  temporarily  by  the  introduction  of  machinery,  or 
by  the  sinking  of  capital  in  permanent  improvements,  are,  I conceive, 
necessarily  fallacious.  That  they  would  suffer  in  the  particular 
department  of  industry  to  which  the  change  applies,  is  generally 
admitted,  and  obvious  to  common  sense  ; but  it  is  often  said,  that 
though  employment  is  withdrawn  from  labour  in  one  department, 
an  exactly  equivalent  employment  is  opened  for  it  in  others,  because 
what  the  consumers  save  in  the  increased  cheapness  of  one  particular 
article  enables  them  to  augment  their  consumption  of  others,  thereby 
increasing  the  demand  for  other  kinds  of  labour.  This  is  plausible, 
but,  as  was  shown  in  the  last  chapter,  involves  a fallacy  ; demand 
for  commodities  being  a totally  different  thing  from  demand  for 


CIRCULATING  AND  FIXED  CAPITAL 


97 


labour.  It  is  true,  the  consumers  have  now  additional  means  of 
buying  other  things ; but  this  will  not  create  the  other  things, 
unless  there  is  capital  to  produce  them,  and  the  improvement  has  not 
set  at  liberty  any  capital,  if  even  it  has  not  absorbed  some  from 
other  employments.  The  supposed  increase  of  production  and  of 
employment  for  labour  in  other  departments  therefore  will  not  take 
place ; and  the  increased  demand  for  commodities  by  some  con- 
sumers, will  be  balanced  by  a cessation  of  demand  on  the  part  of 
others,  namely,  the  labourers  who  were  superseded  by  the  improve- 
ment, and  who  will  now  be  maintained,  if  at  all,  by  sharing,  either  in 
the  way  of  competition  or  of  charity,  in  what  was  previously  con- 
sumed by  other  people. 

§ 3.  Nevertheless,  I do  not  believe  that,  as  things  are  actually 
transacted,  improvements  in  production  are  often,  if  ever,  injurious, 
even  temporarily,  to  the  labouring  classes  in  the  aggregate.  They 
would  be  so  if  they  took  place  suddenly  to  a great  amount,  because 
much  of  the  capital  sunk  must  necessarily  in  that  case  be  provided 
from  funds  already  employed  as  circulating  capital.  But  improve- 
ments are  always  introduced  very  gradually,  and  are  seldom  or 
never  made  by  withdrawing  circulating  capital  from  actual  produc- 
tion, but  are  made  by  the  emplo3rment  of  the  annual  increase.  There 
are  few  if  any  examples  of  a great  increase  of  fixed  capital,  at  a time 
and  place  where  circulating  capital  was  not  rapidly  increasing 
likewise.  It  is  not  in  poor  or  backward  countries  that  great  and 
costly  improvements  in  production  are  made.  To  sink  capital  in 
land  for  a permanent  return — to  introduce  expensive  machinery — 
are  acts  involving  immediate  sacrifice  for  distant  objects ; and 
indicate,  in  the  first  place,  tolerably  complete  security  of  property ; 
in  the  second,  considerable  activity  of  industrial  enterprise  ; and  in 
the  third,  a high  standard  of  what  has  been  called  the  “ effective 
desire  of  accumulation  ; ” which  three  things  are  the  elements 
of  a society  rapidly  progressive  in  its  amount  of  capital.  Although, 
therefore,  the  labouring  classes  must  suffer,  not  only  if  the  increase 
of  fixed  capital  takes  place  at  the  expense  of  circulating,  but  even  if 
it  is  so  large  and  rapid  as  to  retard  that  ordinary  increase  to  which 
the  growth  of  population  has  habitually  adapted  itself ; yet,  in 
point  of  fact,  this  is  very  unlikely  to  happen,  since  there  is  probably 
no  country  whose  fixed  capital  increases  in  a ratio  more  than  pro- 
portional to  its  circulating.  If  the  whole  of  the  railways  which, 
duiing  the  speculative  madness  of  1845,  obtained  the  sanction  of 

£ 


BOOK  I.  CHAPTER  VI.  § 3 


Parliament,  had  been  constructed  in  the  times  fixed  for  the  com 
pletion  of  each,  this  improbable  contingency  would,  most  likely, 
have  been  realized ; but  this  very  case  has  afforded  a striking 
example  of  the  difficulties  which  oppose  the  diversion  into  new 
channels,  of  any  considerable  portion  of  the  capital  that  supplies 
the  old  : difficulties  generally  much  more  than  sufficient  to  prevent 
enterprises  that  involve  the  sinking  of  capital  from  extending 
themselves  with  such  rapidity  as  to  impair  the  sources  of  the  existing 
employment  for  labour. 

To  these  considerations  must  be  added,  that  even  if  improve- 
ments did  for  a time  decrease  the  aggregate  produce  and  the  circulat- 
ing capital  of  the  community,  they  would  not  the  less  tend  in  the 
long  run  to  augment  both.  They  increase  the  return  to  capital ; 
and  of  this  increase  the  benefit  must  necessarily  accrue  either  to  the 
capitalist  in  greater  profits,  or  to  the  customer  in  diminished  prices  ; 
affording,  in  either  case,  an  augmented  fund  from  which  accumula- 
tion may  be  made,  while  enlarged  profits  also  hold  out  an  increased 
inducement  to  accumulation.  In  the  case  we  before  selected, 
in  which  the  immediate  result  of  the  improvement  was  to  diminish 
the  gross  produce  from  two  thousand  four  hundred  quarters  to  one 
thousand  five  hundred,  yet  the  profit  of  the  capitalist  being  now 
five  hundred  quarters  instead  of  four  hundred,  the  extra  one  hun- 
dred quarters,  if  regularly  saved,  would  in  a few  years  replace  the 
one  thousand  quarters  subtracted  from  his  circulating  capital. 
Now  the  extension  of  business  which  almost  certainly  follows  in 
any  department  in  which  an  improvement  has  been  made,  affords 
a strong  inducement  to  those  engaged  in  it  to  add  to  their  capital ; 
and  hence,  at  the  slow  pace  at  which  improvements  are  visually 
introduced,  a great  part  of  the  capital  which  the  improvement 
ultimately  absorbs,  is  drawn  from  the  increased  profits  and  increased 
savings  which  it  has  itself  called  forth. 

TMs  tendency  of  improvements  in  production  to  cause  increased 
accumulation,  and  thereby  ultimately  to  increase  the  gross  produce, 
even  if  temporarily  diminishing  it,  will  assume  a still  more  decided 
character  if  it  should  appear  that  there  are  assignable  limits  both  to 
the  accumulation  of  capital,  and  to  the  increase  of  production  from 
the  land,  which  limits  once  attained,  all  further  increase  of  produce 
must  stop ; but  that  improvements  in  production,  whatever  may 
be  their  other  effects,  tend  to  throw  one  or  both  of  these  limits  farther 
off.  Now,  these  are  truths  which  will  appear  in  the  clearest  light  in 
a subsequent  stage  of  our  investigation.  It  will  be  seen,  that  the 


CIRCULATING  AND  FIXED  CAPITAL 


quantity  of  capital  which  will,  or  even  which  can,  be  accumulated 
in  any  country  and  the  amount  of  gross  produce  which  will,  or  even 
which  can,  be  raised,  bear  a proportion  to  the  state  of  the  arts  of 
production  there  existing ; and  that  every  improvement,  even 
if  for  the  time  it  diminish  the  circulating  capital  and  the  gross 
produce,  ultimately  makes  room  for  a larger  amount  of  both,  than 
could  possibly  have  existed  otherwise.  It  is  this  which  is  the  con- 
clusive answer  to  the  objections  against  machinery ; and  the  proof 
thence  arising  of  the  ultimate  benefit  to  labourers  of  mechanical 
inventions,  even  in  the  existing  state  of  society,  will  hereafter  be  seen 
to  be  conclusive.*  But  this  does  not  discharge  governments  from  the 
obligation  of  alleviating,  and  if  possible  preventing,  the  evils  of 
which  this  source  of  ultimate  benefit  is  or  may  be  productive  to  an 
existing  generation.  If  the  sinking  or  fixing  of  capital  in  machinery 
or  useful  works  were  ever  to  proceed  at  such  a pace  as  to  impair 
materially  the  funds  for  the  maintenance  of  labour,  it  would  be 
incumbent  on  legislators  to  take  measures  for  moderating  its  rapidity: 
and  since  improvements  which  do  not  diminish  employment  on  the 
whole,  almost  always  throw  some  particular  class  of  labourers  out  of 
it,  there  cannot  be  a more  legitimate  object  of  the  legislator’s  care 
than  the  interests  of  those  who  are  thus  sacrificed  to  the  gains  of 
their  feUow-citizens  and  of  posterity. 

To  return  to  the  theoretical  distinction  between  fixed  and  cir- 
culating capital.  Since  aU  wealth  which  is  destined  to  be  employed 
for  reproduction  comes  within  the  designation  of  capital,  there  are 
parts  of  capital  which  do  not  agree  with  the  definition  of  either 
species  of  it ; for  instance,  the  stock  of  finished  goods  which  a manu- 
facturer or  dealer  at  any  time  possesses  unsold  in  his  warehouses. 
But  this,  though  capital  as  to  its  destination,  is  not  yet  capital  in 
actual  exercise : it  is  not  engaged  in  production,  but  has  first  to 
be  sold  or  exchanged,  that  is,  converted  into  an  equivalent  value 
of  some  other  commodities ; and  therefore  is  not  yet  either  fixed 
or  circulating  capital ; but  will  become  either  one  or  the  other,  or  be 
eventually  divided  between  them.  With  the  proceeds  of  his  finished 
goods,  a manufacturer  will  partly  pay  his  work-people,  partly 
replenish  his  stock  of  the  materials  of  his  manufacture,  and  partly 
provide  new  buildings  and  machinery,  or  repair  the  old ; but  how 
much  will  be  devoted  to  one  purpose,  and  how  much  to  another, 
depends  on  the  nature  of  the  manufacture,  and  the  requirements  of 
the  particular  moment. 

* Infra,  book  iv.  chap.  v. 


loo 


BOOK  I.  CHAPTER  VI.  § 3 


It  should  be  observed  further,  that  the  portion  of  capital  con- 
sumed in  the  form  of  seed  or  material,  though,  unlike  fixed  capital, 
it  requires  to  be  at  once  replaced  from  the  gross  produce,  stands 
yet  in  the  same  relation  to  the  employment  of  labour  as  fixed 
capital  does.  What  is  expended  in  materials  is  as  much  withdrawn 
from  the  maintenance  and  remuneration  of  labourers,  as  what  is 
fixed  in  machinery  ; and  if  capital  now  expended  in  wages  were 
diverted  to  the  providing  of  materials,  the  effect  on  the  labourers 
would  be  as  prejudicial  as  if  it  were  converted  into  fixed  capital. 
This,  however,  is  a kind  of  change  which  seldom,  if  ever,  takes  place. 
The  tendency  of  improvements  in  production  is  always  to  economize, 
never  to  increase,  the  expenditure  of  seed  or  material  for  a given 
produce;  and  the  interest  of  the  labourers  has  no  detriment  to 
apprehend  from  this  source. 


I 


CHAPTER  VII 


ON  WHAT  DEPENDS  THE  DEGREE  OF  PRODUCTIVENESS 
OP  PRODUCTIVE  AGENTS 

§ 1.  We  have  concluded  our  general  survey  of  the  requisites 
of  production.  We  have  found  that  they  may  be  reduced  to  three  : 
labour,  capital,  and  the  materials  and  motive  forces  afforded  by 
nature.  Of  these,  labour  and  the  raw  material  of  the  globe  are 
primary  and  indispensable.  Natural  motive  powers  may  be  called 
in  to  the  assistance  of  labour,  and  are  a help,  but  not  an  essential, 
of  production.  The  remaining  requisite,  capital,  is  itself  the  product 
of  labour ; its  instrumentality  in  production  is  therefore,  in  reality, 
that  of  labour  in  an  indirect  shape.  It  does  not  the  less  require 
to  be  specified  separately.  A previous  application  of  labour  to 
produce  the  capital  required  for  consumption  during  the  work,  is  no 
less  essential  than  the  application  of  labour  to  the  work  itself.  Of 
capital,  again,  one,  and  by  far  the  largest,  portion,  conduces  to 
production  only  by  sustaining  in  existence  the  labour  which  pro- 
duces : the  remainder,  namely  the  instruments  and  materials, 
contribute  to  it  directly,  in  the  same  manner  with  natural  agents, 
and  the  materials  supplied  by  nature. 

We  now  advance  to  the  second  great  question  in  political  economy ; 
on  what  the  degree  of  productiveness  of  these  agents  depends. 
For  it  is  evident  that  their  productive  efiicacy  varies  greatly  at 
various  times  and  places.  With  the  same  population  and  extent 
of  territory,  some  countries  have  a much  larger  amount  of  production 
than  others,  and  the  same  country  at  one  time  a greater  amount 
than  itself  at  another.  Compare  England  either  with  a similar 
extent  of  territory  in  Russia,  or  with  an  equal  population  of  Russians. 
Compare  England  now  with  England  in  the  Middle  Ages ; Sicily, 
Northern  Africa,  or  Syria  at  present,  with  the  same  countries  at  the 
time  of  their  greatest  prosperity,  before  the  Roman  Conquest.  Some 
-of  the  causes  which  contribute  to  this  difference  of  productiveness 


102  BOOK  I.  CHAPTER  VII.  § 2 

are  obvious ; others  not  so  much  so.  We  proceed  to  specify 
several  of  them. 

§ 2.  The  most  evident  cause  of  superior  productiveness  is  what  are 
called  natural  advantages.  These  are  various.  Fertihty  of  soil  is 
one  of  the  principal.  In  this  there  are  great  varieties,  from  the  deserts 
of  Arabia  to  the  alluvial  plains  of  the  Ganges,  the  Niger,  and  the  Missis- 
sippi. A favourable  cHmate  is  even  more  important  than  a rich  soil. 
There  are  countries  capable  of  being  inhabited,  but  too  cold  to  be 
compatible  with  agriculture.  Their  inhabitants  cannot  pass  beyond 
the  nomadic  state ; they  must  live,  like  the  Laplanders,  by  the 
domestication  of  the  rein-deer,  if  not  by  hunting  or  fishing,  like  the 
miserable  Esquimaux.  There  are  countries  where  oats  will  ripen, 
but  not  wheat,  such  as  the  North  of  Scotland  ; others  where  wheat 
can  be  grown,  but  from  excess  of  moisture  and  want  of  sunshine, 
affords  but  a precarious  crop  ; as  in  parts  of  Ireland.  With  each 
advance  towards  the  south,  or,  in  the  European  temperate  region, 
towards  the  east,  some  new  branch  of  agriculture  becomes  first 
possible,  then  advantageous  ; the  vine,  maize,  silk,  figs,  olives,  rice, 
dates,  successively  present  themselves,  until  we  come  to  the  sugar, 
coffee,  cotton,  spices,  &c.,  of  climates  which  also  afford,  of  the  more 
common  agricultural  products,  and  with  only  a slight  degree  of 
cultivation,  two  or  even  three  harvests  in  a year.  Nor  is  it  in 
agriculture  alone  that  differences  of  climate  are  important.  Their 
influence  is  felt  in  many  other  branches  of  production  : in  the 
durability  of  all  work  which  is  exposed  to  the  air  ; of  buildings,  for 
example.  If  the  temples  of  Karnac  and  Luxor  had  not  been  injured 
by  men,  they  might  have  subsisted  in  their  original  perfection  almost 
for  ever,  for  the  inscriptions  on  some  of  them,  though  anterior  to  all 
authentic  history,  are  fresher  than  is  in  our  chmate  an  inscription 
fifty  years  old : while  at  St.  Petersburg,  the  most  massive  works, 
sohdly  executed  in  granite  hardly  a generation  ago,  are  already, 
as  travellers  tell  us,  almost  in  a state  to  require  reconstruction, 
from  alternate  exposure  to  summer  heat  and  intense  frost.  The 
superiority  of  the  woven  fabrics  of  Southern  Europe  over  those  of 
England  in  the  richness  and  clearness  of  many  of  their  colours,  is 
ascribed  to  the  superior  quality  of  the  atmosphere,  for  which  neither 
the  knowledge  of  chemists  nor  the  skill  of  dyers  has  been  able  to 
provide,  in  our  hazy  and  damp  climate,  a complete  equivalent. 

Another  part  of  the  influence  of  climate  consists  in  lessening 
the  physical  requirements  of  the  producers.  In  hot  regions, 


DEGREES  OF  PRODUCTIVENESS 


103 


mankind  can  exist  in  comfort  with  less  perfect  housing,  less  clothing  ; 
fuel,  that  absolute  necessary  of  hfe  in  cold  chmates,  they  can  almost 
dispense  with,  except  for  industrial  uses.  They  also  require  less 
ahment ; as  experience  had  proved,  long  before  theory  had  accounted 
for  it  by  ascertaining  that  most  of  what  we  consume  as  food  is  not 
required  for  the  actual  nutrition  of  the  organs,  but  for  keeping  up 
the  animal  heat,  and  for  supplying  the  necessary  stimulus  to  the  vital 
functions,  which  in  hot  climates  is  almost  sufficiently  supphed  by 
air  and  sunshine.  Much,  therefore,  of  the  labour  elsewhere  expended 
to  procure  the  mere  necessaries  of  life,  not  being  required,  more 
remains  disposable  for  its  higher  uses  and  its  enjoyments  ; if  the 
character  of  the  inhabitants  does  not  rather  induce  them  to  use 
up  these  advantages,  in  over-population,  or  in  the  indulgence  of 
repose. 

Among  natural  advantages,  besides  soil  and  climate,  must  be 
mentioned  abundance  of  mineral  productions,  in  convenient  situa- 
tions, and  capable  of  being  worked  with  moderate  labour.  Such  are 
the  coal-fields  of  Great  Britain,  which  do  so  much  to  compensate  its 
inhabitants  for  the  disadvantages  of  climate ; and  the  scarcely 
inferior  resource  possessed  by  this  country  and  the  United  States,  in 
a copious  supply  of  an  easily  reduced  iron  ore,  at  no  great  depth 
below  the  earth’s  surface,  and  in  close  proximity  to  coal  deposits 
available  for  working  it.  In  mountain  and  hill  districts,  the  abun- 
dance of  natural  water-power  makes  considerable  amends  for  the 
usually  inferior  fertility  of  those  regions.  But  perhaps  a greater 
advantage  than  all  these  is  a maritime  situation,  especially  when 
accompanied  with  good  natural  harbours ; and,  next  to  it,  great 
navigable  rivers.  These  advantages  consist  indeed  wholly  in  saving 
of  cost  of  carriage.  But  few  who  have  not  considered  the  subject, 
have  any  adequate  notion  how  great  an  extent  of  economical 
advantage  this  comprises ; nor,  without  having  considered  the 
influence  exercised  on  production  by  exchanges,  and  by  what  is 
called  the  division  of  labour,  can  it  be  fully  estimated.  So  important 
is  it,  that  it  often  does  more  than  counterbalance  sterility  of  soil, 
and  almost  every  other  natural  inferiority ; especially  in  that  early 
stage  of  industry  in  which  labour  and  science  have  not  yet  provided 
artificial  means  of  communication  capable  of  rivalling  the  natural. 
In  the  ancient  world,  and  in  the  Middle  Ages,  the  most  prosperous 
communities  were  not  those  which  had  the  largest  territory,  or  the 
most  fertile  soil,  but  rather  those  which  had  been  forced  by  natural 
sterility  to  make  the  utmost  use  of  a convenient  maritime  situation  ; 


104  BOOK  I.  CHAPTER  VII.  § 3 

as  Athens,  Tyre,  Marseilles,  Venice,  the  free  cities  on  the  Baltic,  and 
the  like. 

§ 3.  So  much  for  natural  advantages ; the  value  of  which, 
cceteris  parihus,  is  too  obvious  to  be  ever  underrated.  But  experience 
testifies  that  natural  advantages  scarcely  ever  do  for  a community, 
no  more  than  fortune  and  station  do  for  an  individual,  anything  like 
what  it  lies  in  their  nature,  or  in  their  capacity,  to  do.  Neither  nov/ 
nor  in  former  ages  have  the  nations  possessing  the  best  climate  and 
soil  been  either  the  richest  or  the  most  powerful ; but  (in  so  far  as 
regards  the  mass  of  the  people)  generally  among  the  poorest,  though, 
in  the  midst  of  poverty,  probably  on  the  whole  the  most  enjo3ung. 
Human  life  in  those  countries  can  be  supported  on  so  little,  that  the 
poor  seldom  suffer  from  anxiety,  and  in  climates  in  which  mere 
existence  is  a pleasure,  the  luxury  which  they  prefer  is  that  of  repose. 
Energy,  at  the  call  of  passion,  they  possess  in  abundance,  but  not 
that  which  is  manifested  in  sustained  and.  persevering  labour  : and 
as  they  seldom  concern  themselves  enough  about  remote  objects 
to  establish  good  political  institutions,  the  incentives  to  industry  are 
further  weakened  by  imperfect  protection  of  its  fruits.  Successful 
production,  like  most  other  kinds  of  success,  depends  more  on  the 
qualities  of  the  human  agents,  than  on  the  circumstances  in  which 
they  work  : and  it  is  difficulties,  not  facilities,  that  nourish  bodily 
and  mental  energy.  Accordingly  the  tribes  of  mankind  who  have 
overrun  and  conquered  others,  and  compelled  them  to  labour  for 
their  benefit,  have  been  mostly  reared  amidst  hardship.  They  have 
either  been  bred  in  the  forests  of  northern  climates,  or  the  deficiency 
of  natural  hardships  has  been  supplied,  as  among  the  Greeks  and 
Romans,  by  the  artificial  ones  of  a rigid  military  discipline.  From 
the  time  when  the  circumstances  of  modern  society  permitted  the 
discontinuance  of  that  discipline,  the  South  has  no  longer  produced 
conquering  nations  ; military  vigour,  as  well  as  speculative  thought 
and  industrial  energy,  have  all  had  their  principal  seats  in  the  less 
favoured  North. 

As  the  second,  therefore,  of  the  causes  of  superior  productiveness, 
we  may  rank  the  greater  energy  of  labour.  By  this  is  not  to  be 
understood  occasional,  but  regular  and  habitual  energy.  No  one 
undergoes,  without  murmuring,  a greater  amount  of  occasional 
fatigue  and  hardship,  or  has  his  bodily  powers,  and  such  faculties 
of  mind  as  he  possesses,  kept  longer  at  their  utmost  stretch,  than 
the  North  American  Indian  ; yet  his  indolence  is  proverbial,  when* 


DEGREES  OF  PRODUCTIVENESS 


105 


ever  he  has  a brief  respite  from  the  pressure  of  present  wants. 
Individuals,  or  nations,  do  not  differ  so  much  in  the  efforts  they  are 
able  and  willing  to  make  under  strong  immediate  incentives,  as  in 
their  capacity  of  present  exertion  for  a distant  object ; and  in  the 
thoroughness  of  their  application  to  work  on  ordinary  occasions.^ 
Some  amount  of  these  qualities  is  a necessary  condition  of  any  great 
improvement  among  mankind.  To  civilize  a savage,  he  must  be 
inspired  with  new  wants  and  desires,  even  if  not  of  a very  elevated 
kind,  provided  that  their  gratification  can  be  a motive  to  steady 
and  regular  bodily  and  mental  exertion.  If  the  negroes  of  Jamaica 
and  Demerara,  after  their  emancipation,  had  contented  themselves, 
as  it  was  predicted  they  would  do,  with  the  necessaries  of  life,  and 
abandoned  all  labour  beyond  the  little  which  in  a tropical  climate, 
with  a thin  population  and  abundance  of  the  richest  land,  is  sufficient 
to  support  existence,  they  would  have  sunk  into  a condition  more 
barbarous,  though  less  unhappy,  than  their  previous  state  of  slavery. 

' [From  the  4th  ed.  (1857)  a long  passage  was  omitted  at  this  point.  This 
originally  ran  as  follows  ; 

“ In  this  last  quality  the  English,  and  perhaps  the  Anglo-Americans,  appear 
at  present  to  surpass  every  other  people.  This  efficiency  of  labour  is  connected 
with  their  whole  character ; with  their  defects,  as  much  as  with  their  good 
qualities.  The  majority  of  Englishmen  and  Americans  have  no  life  but  in 
their  work  ; that  alone  stands  between  them  and  ennui.  Either  from  original 
temperament,  climate,  or  want  of  development,  they  are  too  deficient  in  senses 
to  enjoy  mere  existence  in  repose  ; and  scarcely  any  pleasure  or  amusement  is 
pleasure  or  amusement  to  them.  Except,  therefore,  those  who  are  alive  to  some 
of  the  nobler  interests  of  humanity  (a  small  minority  in  all  countries),  they  have 
little  to  distract  their  attention  from  work,  or  to  divide  the  dominion  over  them 
with  the  one  propensity  which  is  the  passion  of  those  who  have  no  other,  and 
the  satisfaction  of  which  comprises  all  that  they  imagine  of  success  in  life — the 
desire  of  growing  richer,  and  getting  on  in  the  world.  This  last  characteristic 
belongs  chiefly  to  those  who  are  in  a condition  superior  to  day  labourers  ; but 
the  absence  of  any  taste  for  amusement,  or  enjoyment  of  repose,  is  common  to 
all  classes.  Whether  from  this  or  any  other  cause,  the  national  steadiness  and 
persistency  of  labour  extends  to  the  most  improvident  of  the  English  working 
classes — those  who  never  think  of  saving,  or  improving  their  condition.  It  has 
become  the  habit  of  the  country ; and  life  in  England  is  more  governed  by 
habit,  and  less  by  personal  inclination  and  will,  than  in  any  other  country,  except 
perhaps  China  or  Japan.  The  effect  is,  that  where  hard  labour  is  the  thing 
required,  there  are  no  labourers  like  the  English  ; though  in  natural  intelligence, 
and  even  in  manual  dexterity,  they  have  many  superiors. 

“ Energy  of  labour,  though  not  an  unqualified  good,  nor  one  which  it  is 
desirable  to  nourish  at  the  expense  of  other  valuable  attributes  of  human  nature, 
is  yet,  in  a certain  measure,  a necessary  condition,”  &c. 

In  the  3rd  ed.  (1852)  the  characterisation  had  been  made  to  apply  to  the 
English  alone,  and  the  passage  began  thus  : “ This  last  quality  is  the  principal 
industrial  excellence  of  the  English  people.”  After  “ a small  minority  in  aU 
countries,”  had  been  inserted  “ and  particularly  so  in  this ; ” and  for  “ no 
labourers  like  the  English  ” had  been  substituted  “ no  better  labourers  than  the 
English.”] 


106 


BOOK  I.  CHAPTER  VII.  § 3 


The  motive  which  was  most  relied  on  for  inducing  them  to  work  was 
their  love  of  fine  clothes  and  personal  ornaments.  No  one  will  stand 
up  for  this  taste  as  worthy  of  being  cultivated,  and  in  most  societies 
its  indulgence  tends  to  impoverish  rather  than  to  enrich  ; but  in  the 
state  of  mind  of  the  negroes  it  might  have  been  the  only  incentive 
that  could  make  them  voluntarily  undergo  systematic  labour,  and 
so  acquire  or  maintain  habits  of  voluntary  industry  which  may  be 
converted  to  more  valuable  ends.  In  England,  it  is  not  the  desire 
of  wealth  that  needs  to  be  taught,  but  the  use  of  wealth,  and  appre- 
ciation of  the  objects  of  desire  which  wealth  cannot  purchase, 
or  for  attaining  which  it  is  not  required.  Every  real  improvement 
in  the  character  of  the  English,  whether  it  consist  in  giving  them 
higher  aspirations,  or  only  a juster  estimate  of  the  value  of  their 
present  objects  of  desire,  must  necessarily  moderate  the  ardour  of 
their  devotion  to  the  pursuit  of  wealth.  There  is  no  need,  however, 
that  it  should  diminish  the  strenuous  and  business-like  apphcation 
to  the  matter  in  hand,  which  is  found  in  the  best  English  workmen, 
and  is  their  most  valuable  quality 

^ [The  three  preceding  sentences  originally  ran  as  follows  : “ As  much  as 
the  industrial  spirit  required  to  be  stimulated  in  their  case,  so  much  does  it 
require  to  be  moderated  in  such  countries  as  England  and  the  United  States. 
There,  it  is  not  the  desire  of  wealth  . . . required.  Every  real  improvement  in 
the  character  of  the  English  or  Americans,  whether  it  consist  in  giving  them 
higher  aspirations,  or  only  more  numerous  and  better  pleasures,  must  neces- 
sarily moderate  the  all- engrossing  torment  of  their  industrialism ; must 
diminish,  therefore,  so  far  as  it  depends  on  that  cause  alone,  the  aggregate 
productiveness  of  their  labour.  There  is  no  need,  however,  that  it  should 
diminish  that  strenuous  and  business-like  application  to  the  matter  in  hand, 
which  is  one  of  their  most  precious  characteristics.” 

In  the  3rd  ed.  (1852)  they  were  modified  to  make  the  description  apply  to 
England  only,  and  “ the  best  English  workmen;”  and  in  the  4th  (1857)  “the 
ardour  of  their  devotion  to  the  pursuit  of  wealth  ” was  substituted  for  “ the  all- 
engrossing  torment  of  their  industrialism.” 

Then  followed  in  the  original  the  following  quotation  and  comments,  omitted 
in  the  3rd  ed. : 

“ ‘ Whoever  ’ (says  Mr.  Laing,  Notes  of  a Traveller,  p.  290)  ‘ looks  into  the 
social  economy  of  an  English  or  Scotch  manufacturing  district,  in  which  the 
population  has  become  thoroughly  imbued  with  the  spirit  of  productiveness, 
will  observe  that  it  is  not  merely  the  expertness,  despatch,  and  skill  of  the  oper- 
ative himself,  that  are  concerned  in  the  prodigious  amount  of  his  production 
in  a given  time,  but  the  labourer  who  wheels  coal  to  his  fire,  the  girl  who  makes 
ready  his  breakfast,  the  whole  population,  in  short,  from  the  potboy  who  brings 
his  beer,  to  the  banker  who  keeps  his  employer’s  cash,  are  inspired  with  the  same 
alert  spirit,  are  in  fact  working  to  his  hand  with  the  same  quickness  and  punc- 
tuality as  he  works  himself.  English  workmen  taken  to  the  Continent  always 
complain  that  they  cannot  get  on  with  their  work  as  at  home,  because  of  the 
slow,  unpunctual,  pipe-in-mouth  working  habits  of  those  who  have  to  work 
to  their  hands,  and  on  whom  their  own  activity  and  productiveness  mainly 
depend,’ 


DEGREES  OF  PRODUCTIVENESS 


107 


The  desirable  medium  is  one  which  mankind  have  not  often 
known  how  to  hit : when  they  labour,  to  do  it  with  all  their  might, 
and  especially  with  all  their  mind  ; but  to  devote  to  labour,  for  mere 
pecuniary  gain,  fewer  hours  in  the  day,  fewer  days  in  the  year,  and 
fewer  years  of  life. 

§ 4.  The  third  element  which  determines  the  productiveness 
of  the  labour  of  a community,  is  the  skill  and  knowledge  therein 
existing ; whether  it  be  the  skill  and  knowledge  of  the  labourers 
themselves,  or  of  those  who  direct  their  labour.  No  illustration  is 
requisite  to  show  how  the  efficacy  of  industry  is  promoted  by  the 
manual  dexterity  of  those  who  perform  mere  routine  processes  ; 
by  the  intelligence  of  those  engaged  in  operations  in  which  the  mind 
has  a considerable  part ; and  by  the  amount  of  knowledge  of 
natural  powers  and  of  the  properties  of  objects,  which  is  turned  to 
the  purposes  of  industry.  That  the  productiveness  of  the  labour  of  a 
people  is  hmited  by  their  knowledge  of  the  arts  of  life,  is  self-evident ; 
and  that  any  progress  in  those  arts,  any  improved  apphcation  of  the 
objects  or  powers  of  nature  to  industrial  uses,  enables  the  same 
quantity  and  intensity  of  labour  to  raise  a greater  produce. 

One  principal  department  of  these  improvements  consists  in  the 
invention  and  use  of  tools  and  machinery.  The  manner  in  which 
these  serve  to  increase  production  and  to  economize  labour,  needs  not 
be  specially  detailed  in  a work  hke  the  present : it  will  be  found 
explained  and  exempHfied,  in  a manner  at  once  scientific  and 
popular,  in  Mr.  Babbage’s  well-known  Economy  of  Machinery  and 
Manufactures.  An  entire  chapter  of  Mr.  Babbage’s  book  is 
composed  of  instances  of  the  efficacy  of  machinery  in  “ exerting 
forces  too  great  for  human  power,  and  executing  operations  too 
delicate  for  human  touch.”  But  to  find  examples  of  work  which 
could  not  be  performed  at  all  by  unassisted  labour,  we  need  not  go 
so  far.  Without  pumps,  worked  by  steam-engines  or  otherwise, 
the  water  which  collects  in  mines  could  not  in  many  situations  be 
got  rid  of  at  all,  and  the  mines,  after  being  worked  to  a little  depth, 

“ Foreigners  are  generally  quite  unaware  that  to  these  qualities  in  English 
industry  the  wealth  and  power  which  they  seek  to  emulate  are  in  reality  owmg, 
and  not  to  the  ‘ ships,  colonies,  and  commerce  ’ which  these  qualities  have 
called  into  being,  and  which,  even  if  annihilated,  would  leave  England  the  richest 
country  in  the  world.  An  Englishman,  of  almost  every  class,  is  the  most 
efficient  of  all  labourers,  because,  to  use  a common  phrase,  his  heart  is  in  hia 
work.  But  it  is  surely  quite  possible  to  put  heart  into  his  work  without  being 
incapable  of  putting  it  into  anything  else.”] 


108 


BOOK  L CHAPTER  VH.  § 6 


must  be  abandoned  : without  ships  or  boats  the  sea  could  never  have 
been  crossed  ; without  tools  of  some  sort,  trees  could  not  be  cut  down, 
nor  rocks  excavated ; a plough,  or  at  least  a hoe,  is  necessary  to  any 
tillage  of  the  ground.  Very  simple  and  rude  instruments,  however, 
are  sufficient  to  render  hterally  possible  most  works  hitherto  exe- 
cuted by  mankind  ; and  subsequent  inventions  have  chiefly  served 
to  enable  the  work  to  be  performed  in  greater  perfection,  and,  above 
all,  with  a greatly  diminished  quantity  of  labour  : the  labour  thus 
saved  becoming  disposable  for  other  employments. 

The  use  of  machinery  is  far  from  being  the  only  mode  in  which 
the  effects  of  knowledge  in  aiding  production  are  exemplified.  In 
agriculture  and  horticulture,  machinery  is  only  now  [1852]  beginning 
to  show  that  it  can  do  anything  of  importance,  beyond  the  invention 
and  progressive  improvement  of  the  plough  and  a few  other  simple 
instruments.  The  greatest  agricultural  inventions  have  consisted 
in  the  direct  apphcation  of  more  judicious  processes  to  the  land  itself, 
and  to  the  plants  growing  on  it : such  as  rotation  of  crops,  to  avoid 
the  necessity  of  leaving  the  land  uncultivated  for  one  season  in  every 
two  or  three ; improved  manures,  to  renovate  its  fertility  when 
exhausted  by  cropping ; ploughing  and  draining  the  subsoil  as  well 
as  the  surface  ; conversion  of  bogs  and  marshes  into  cultivable  land ; 
such  modes  of  pruning,  and  of  training  and  propping  up  plants  and 
trees,  as  experience  has  shown  to  deserve  the  preference  ; in  the  case 
of  the  more  expensive  cultures,  planting  the  roots  or  seeds  further 
apart,  and  more  completely  pulverizing  the  soil  in  which  they  are 
placed,  &c.  In  manufactures  and  commerce,  some  of  the  most 
important  improvements  consist  in  economizing  time  ; in  making  the 
return  follow  more  speedily  upon  the  labour  and  outlay.  There  are 
others  of  which  the  advantage  consists  in  economy  of  material. 

§ 5.  But  the  effects  of  the  increased  knowledge  of  a community 
in  increasing  its  wealth,  need  the  less  illustration  as  they  have 
become  familiar  to  the  most  uneducated,  from  such  conspicuous 
instances  as  railways  and  steam-ships.  A thing  not  yet  so  well 
understood  and  recognised,  is  the  econoioical  value  of  the  general 
diffusion  of  intelligence  among  the  people.  The  number  of  persona 
fitted  to  direct  and  superintend  any  industrial  enterprise,  or  even  to 
execute  any  process  which  cannot  be  reduced  almost  to  an  affair  of 
memory  and  routine,  is  always  far  short  of  the  demand  ; as  is  evident 
from  the  enormous  difference  between  the  salaries  paid  to  such  per- 
sons and  the  wages  of  ordinary  labour.  The  deficiency  of  practical 


DEGREES  OF  PRODUCTIVENESS 


109 


good  sense,  which  renders  the  majority  of  the  labouring  class  such 
bad  calculators — which  makes,  for  instance,  their  domestic  economy 
so  improvident,  lax,  and  irregular — must  disqualify  them  for  any 
but  a low  grade  of  intelligent  labour,  and  render  their  industry  far 
less  productive  than  with  equal  energy  it  otherwise  might  be.  The 
importance,  even  in  this  limited  aspect,  of  popular  education,  is 
well  worthy  of  the  attention  of  politicians,  especially  in  England ; 
since  competent  observers,  accustomed  to  employ  labourers  of  vari- 
ous nations,  testify  that  in  the  workman  of  other  countries  they 
often  find  great  intelligence  wholly  apart  from  instruction,  but  that 
if  an  English  labourer  is  anything  but  a hewer  of  wood  and  a drawer 
of  water,  he  is  indebted  for  it  to  education,  which  in  his  case  is  almost 
always  self-education.  Mr.  Escher,  of  Zurich  (an  engineer  and  cotton 
manufacturer  employing  nearly  two  thousand  working  men  of  many 
different  nations),  in  his  evidence  annexed  to  the  Keport  of  the  Poor 
Law  Commissioners,  in  1840,  on  the  training  of  pauper  children, 
gives  a character  of  English  as  contrasted  with  Continental  workmen, 
which  all  persons  of  similar  experience  will,  I believe,  confirm. 

“ The  Italians’  quickness  of  perception  is  shown  in  rapidly 
comprehending  any  new  descriptions  of  labour  put  into  their  hands, 
in  a power  of  quickly  comprehending  the  meaning  of  their  employer, 
of  adapting  themselves  to  new  circumstances,  much  beyond  what 
any  other  classes  have.  The  French  workmen  have  the  like  natural 
characteristics,  only  in  a somewhat  lower  degree.  The  English, 
Swiss,  German,  and  Dutch  workmen,  we  find,  have  all  much  slower 
natural  comprehension.  As  workmen  on?y,  the  preference  is  un- 
doubtedly due  to  the  English ; because,  as  we  find  them,  they  are 
all  trained  to  special  branches,  on  which  they  have  had  compara- 
tively superior  training,  and  have  concentrated  all  their  thoughts. 
As  men  of  business  or  of  general  usefulness,  and  as  men  with  whom 
an  employer  would  best  like  to  be  surrounded,  I should,  however, 
decidedly  prefer  the  Saxons  and  the  Swiss,  but  more  especially 
the  Saxons,  because  they  have  had  a very  careful  general  education, 
which  has  extended  their  capacities  beyond  any  special  employment, 
and  rendered  them  fit  to  take  up,  after  a short  preparation,  any 
employment  to  which  they  may  be  called.  If  I have  an  English 
workman  engaged  in  the  erection  of  a steam-engine,  he  will  under- 
stand that,  and  nothing  else  ; and  for  other  circumstances  or  othei 
branches  of  mechanics,  however  closely  allied,  he  will  be  com- 
paratively helpless  to  adapt  himself  to  all  the  circumstances  that 
may  arise,  to  make  arrangements  for  them,  and  give  sound  advice 


110 


BOOK  I.  CHAPTER  VH.  § 5 


or  write  clear  statements  and  letters  on  his  work  in  the  various 
related  branches  of  mechanics.” 

On  the  connexion  between  mental  cultivation  and  moral  trust- 
worthiness in  the  labouring  class,  the  same  witness  says,  “ The 
better  educated  workmen,  we  find,  are  distinguished  by  superior 
moral  habits  in  every  respect.  In  the  first  place,  they  are  entirely 
sober ; they  are  discreet  in  their  enjoyments,  which  are  of  a more 
rational  and  refined  kind  ; they  have  a taste  for  much  better  society, 
which  they  approach  respectfully,  and  consequently  find  much 
readier  admittance  to  it ; they  cultivate  music  ; they  read ; they 
enjoy  the  pleasures  of  scenery,  and  make  parties  for  excursions 
into  the  country  ; they  are  economical,  and  their  economy  extends 
beyond  their  own  purse  to  the  stock  of  their  master ; they  are, 
consequently,  honest  and  trustworthy.”  And  in  answer  to  a question 
respecting  the  English  workmen,  “ Whilst  in  respect  to  the  work 
to  which  they  have  been  specially  trained  they  are  the  most  skilful, 
they  are  in  conduct  the  most  disorderly,  debauched,  and  unruly, 
and  least  respectable  and  trustworthy  of  any  nation  whatsoever 
whom  we  have  employed ; and  in  saying  this,  I express  the  ex- 
perience of  every  manufacturer  on  the  Continent  to  whom  I have 
spoken,  and  especially  of  the  Enghsh  manufacturers,  who  make 
the  loudest  complaints.  These  characteristics  of  depravity  do  not 
apply  to  the  Enghsh  \^orkmen  who  have  received  an  education, 
but  attach  to  the  others  in  the  degree  in  which  they  are  in  want  of 
it.  When  the  uneducated  English  workmen  are  released  from  the 
bonds  of  iron  discipline  in  which  they  have  been  restrained  by  their 
employers  in  England,  and  are  treated  with  the  urbanity  and 
friendly  feeling  which  the  more  educated  workmen  on  the  Continent 
expect  and  receive  from  their  employers,  they,  the  English  workmen, 
completely  lose  their  balance  : they  do  not  understand  their  position, 
and  after  a certain  time  become  totally  unmanageable  and  useless.”  * 
This  result  of  observation  is  borne  out  by  experience  in  England 
itself.  As  soon  as  any  idea  of  equality  enters  the  mind  of  an  un- 
educated Enghsh  working  man,  his  head  is  turned  by  it.^  When 
he  ceases  to  be  servile,  he  becomes  insolent. 

The  moral  quahties  of  the  labourers  are  fully  as  important  to 
the  efficiency  and  worth  of  their  labour,  as  the  intehectual.  In- 
dependently of  the  effects  of  intemperance  upon  their  bodily  and 

• The  whole  evidence  of  this  intelligent  and  experienced  employer  of  labour 
is  deserving  of  attention  ; as  well  as  much  testimony  on  similar  points  by  other 
witnesses,  contained  in  the  same  volume. 

* [This  comment  was  added  in  the  3rd  ed.  (1852).] 


DEGREES  OF  PRODUCTIVENESS 


111 


mental  faculties,  and  of  flighty,  unsteady  habits  upon  the  energy 
and  contmuity  of  their  work  (points  so  easily  understood  as  not 
to  require  being  insisted  upon),  it  is  well  worthy  of  meditation, 
how  much  of  the  aggregate  effect  of  their  labour  depends  on  their 
trustworthiness.  All  the  labour  now  expended  in  watching  that 
they  fulfil  their  engagement,  or  in  verifying  that  they  have  fulfilled 
it,  is  so  much  withdrawn  from  the  real  business  of  production,  to 
be  devoted  to  a subsidiary  function  rendered  needful  not  by  the 
necessity  of  things,  but  by  the  dishonesty  of  men.  Nor  are  the 
greatest  outward  precautions  more  than  very  imperfectly  efilcacious, 
where,  as  is  now  almost  invariably  the  case  with  hired  labourers, 
the  slightest  relaxation  of  vigilance  is  an  opportunity  eagerly 
seized  for  eluding  performance  of  their  contract.^  The  advantage 
to  mankind  of  being  able  to  trust  one  another,  penetrates  into 
every  crevice  and  cranny  of  human  life  : the  economical  is  perhaps 
the  smallest  part  of  it,  yet  even  this  is  incalculable.  To  consider 
only  the  most  obvious  part  of  the  waste  of  wealth  occasioned  to 
society  by  human  improbity ; there  is  in  all  rich  communities 
a predatory  population,  who  live  by  pillaging  or  overreaching 
other  people ; their  numbers  cannot  be  authentically  ascertained, 
but  on  the  lowest  estimate,  in  a country  like  England,  it  is  very 
large.  The  support  of  these  persons  is  a direct  burthen  on  the 
national  industry.  The  police,  and  the  whole  apparatus  of  punish- 
ment, and  of  criminal  and  partly  of  civil  justice,  are  a second  burthen 
rendered  necessary  by  the  first.  The  exorbitantly-paid  profession 
of  lawyers,  so  far  as  their  work  is  not  created  by  defects  in  the  law, 
of  their  own  contriving,  are  required  and  supported  principally 
by  the  dishonesty  of  mankind.  As  the  standard  of  integrity  in  a 
community  rises  higher,  all  these  expenses  become  less.  But  this 
positive  saving  would  be  far  outweighed  by  the  immense  increase 
in  the  produce  of  all  kinds  of  labour,  and  saving  of  time  and  expendi- 
ture, which  would  be  obtained  if  the  labourers  honestly  performed 
what  they  undertake  ; and  by  the  increased  spirit,  the  feeling  of 
power  and  confidence,  with  which  works  of  all  sorts  would  be  planned 
and  carried  on  by  those  who  felt  that  all  whose  aid  was  required 
would  do  their  part  faithfully  according  to  their  contracts.  Conjoint 
action  is  possible  just  in  proportion  as  human  beings  can  rely  on 
each  other.  There  are  countries  in  Europe,  of  first-rate  industrial 

^ [This  statement  took  the  place  in  the  3rd  ed.  (1852)  of  the  sentence : 
“ Nor  are  the  greatest  outward  precautions  comparable  in  efficacy  to  the 
monitor  within.”] 


112 


BOOR  L CHAPTER  VIL  § 5 


capabilities,  where  the  most  serious  impediment  to  conducting 
business  concerns  on  a large  scale  is  the  rarity  of  persons  who 
are  supposed  fit  to  be  trusted  with  the  receipt  and  expenditure 
of  large  sums  of  money.  There  are  nations  whose  commodities 
are  looked  shily  upon  by  merchants,  because  they  cannot  depend  on 
finding  the  quality  of  the  article  conformable  to  that  of  the  sample. 
Such  short-sighted  frauds  are  far  from  unexampled  in  Enghsh  exports. 
Every  one  has  heard  of  “ devil’s  dust : ” and  among  other  instances 
given  by  Mr.  Babbage,  is  one  in  which  a branch  of  export  trade 
was  for  a long  time  actually  stopped  by  the  forgeries  and  frauds 
which  had  occurred  in  it.  On  the  other  hand,  the  substantial 
advantage  derived  in  business  transactions  from  proved  trust- 
worthiness, is  not  less  remarkably  exemphfied  in  the  same  work. 
“ At  one  of  our  largest  towns,  sales  and  purchases  on  a very  extensive 
scale  are  made  daily  in  the  course  of  business  without  any  of  the 
parties  ever  exchanging  a written  document.”  Spread  over  a year’s 
transactions,  how  great  a return,  in  saving  of  time,  trouble,  and 
expense,  is  brought  in  to  the  producers  and  dealers  of  such  a town 
from  their  own  integrity.  “ The  influence  of  established  character 
in  producing  confidence  operated  in  a very  remarkable  manner 
at  the  time  of  the  exclusion  of  British  manufactures  from  the 
Continent  during  the  last  war.  One  of  our  largest  establishments 
had  been  in  the  habit  of  doing  extensive  business  with  a house 
in  the  centre  of  Germany ; but  on  the  closing  of  the  Continental 
ports  against  our  manufactures,  heavy  penalties  were  inflicted 
on  all  those  who  contravened  the  Berlin  and  Milan  decrees.  The 
English  manufacturer  continued,  nevertheless,  to  receive  orders, 
with  directions  how  to  consign  them,  and  appointments  for  the 
time  and  mode  of  payment,  in  letters,  the  handwriting  of  which 
was  known  to  him,  but  which  were  never  signed  except  by  the 
Christian  name  of  one  of  the  firm,  and  even  in  some  instances  they 
were  without  any  signature  at  all.  These  orders  were  executed,  and 
in  no  instance  was  there  the  least  irregularity  in  the  payments.”  * 

* Some  minor  instances  noticed  by  Mr.  Babbage  may  be  cited  in  further 
illustration  of  the  waste  occasioned  to  society  through  the  inability  of  its 
members  to  trust  one  another. 

“ The  cost  to  the  purchaser  is  the  price  he  pays  for  any  article,  added  to 
the  cost  of  verifying  the  fact  of  its  having  that  degree  of  goodness  for  which 
he  contracts.  In  some  cases  the  goodness  of  the  article  is  evident  on  mere 
inspection  ; and  in  those  cases  there  is  not  much  difference  of  price  at  different 
shops.  The  goodness  of  loaf  sugar,  for  instance,  can  be  discerned  almost  at  a 
glance ; and  the  consequence  is,  that  the  price  is  so  uniform,  and  the  profit 
upon  it  so  small,  that  no  grocer  is  at  all  anxious  to  sell  it ; whilst  on  the  other 


DEGREES  OF  PRODUCTIVENESS 


113 


§ 6.  Among  the  secondary  causes  which  determine  the  pro- 
ductiveness of  productive  agents,  the  most  important  is  Security. 
By  security  I mean  the  completeness  of  the  protection  which  society 
affords  to  its  members.  This  consists  of  protection  hy  the  govern- 
ment, and  protection  against  the  government.  The  latter  is  the 
more  important.  Where  a person  known  to  possess  anything 
worth  taking  away,  can  expect  nothing  but  to  have  it  torn  from 
him,  with  every  circumstance  of  tyrannical  violence,  by  the  agents 
of  a rapacious  government,  it  is  not  likely  that  many  will  exert 
themselves  to  produce  much  more  than  necessaries.  This  is  the 
acknowledged  explanation  of  the  poverty  of  many  fertile  tracts 
of  Asia,  which  were  once  prosperous  and  populous.  From  this 
to  the  degree  of  security  enjoyed  in  the  best  governed  parts  of 
Europe,  there  are  numerous  gradations.  In  many  provinces  of 
France  before  the  Revolution,  a vicious  system  of  taxation  on 
the  land,  and  still  more  the  absence  of  redress  against  the  arbitrary 
exactions  which  were  made  under  colour  of  the  taxes,  rendered  it 
the  interest  of  every  cultivator  to  appear  poor,  and  therefore  to 
cultivate  badly.  The  only  insecurity  which  is  altogether  paralysing 

hand,  tea,  of  which  it  is  exceedingly  difficult  to  judge,  and  which  can  be 
adulterated  by  mixture  so  as  to  deceive  the  skill  even  of  a practised  eye,  has  a 
great  variety  of  different  prices,  and  is  that  article  which  every  grocer  is  most 
anxious  to  sell  to  his  customers.  The  difficulty  and  expense  of  verification  are 
in  some  instances  so  great,  as  to  justify  the  deviation  from  well-established 
principles.  Thus,  it  is  a general  maxim  that  Government  can  purchase  any 
article  at  a cheaper  rate  than  that  at  which  they  can  manufacture  it  themselves. 
But  it  has,  nevertheless,  been  considered  more  economical  to  build  extensive 
flour- mills  (such  as  those  at  Deptford),  and  to  grind  their  own  corn,  than  to 
verify  each  sack  of  purchased  flour,  and  to  employ  persons  in  devising  methods 
of  detecting  the  new  modes  of  adulteration  which  might  be  continually  resorted 
to.”  A similar  want  of  confidence  might  deprive  a nation,  such  as  the  United 
States,  of  a large  export  trade  in  flour. 

Again : “ Some  years  since,  a mode  of  preparing  old  clover  and  trefoil  seeds 
by  a process  called  doctoring  became  so  prevalent  as  to  excite  the  attention  of 
the  House  of  Commons.  It  appeared  in  evidence  before  a Committee,  that  the 
old  seed  of  the  white  clover  was  doctored  by  first  wetting  it  slightly,  and  then 
drying  it  by  the  fumes  of  burning  sulphur ; and  that  the  red  clover  seed  had 
its  colour  improved  by  shaking  it  in  a sack  with  a small  quantity  of  indigo  ; but 
this  being  detected  after  a time,  the  doctors  then  used  a preparation  of  logwood, 
fined  by  a little  copperas,  and  sometimes  by  verdigris  ; thus  at  once  improving 
the  appearance  of  the  old  seed,  and  diminishing,  if  not  destro3dng,  its  vegetative 
power,  already  enfeebled  by  age.  Supposing  no  injury  had  resulted  to  good 
seed  so  prepared,  it  was  proved  that,  from  the  improved  appearance,  the 
market  price  would  be  enhanced  by  this  process  from  five  to  twenty- five 
shillings  a hundred- weight.  But  the  greatest  evil  arose  from  the  circumstances 
of  these  processes  rendering  old  and  worthless  seed  equal  in  appearance  to  the 
best.  One  witness  had  tried  some  doctored  seed,  and  found  that  not  above  one 
grain  in  a hundred  grew,  and  that  those  which  did  vegetate  died  away 
afterwards  ; whilst  about  eighty  or  ninety  per  cent,  of  good  seed  usually  grows. 


114 


BOOK  I.  CHAPTER  VII.  § 6 


to  the  active  energies  of  producers,  is  that  arising  from  the  govern- 
ment, or  from  persons  invested  with  its  authority.  Against  all 
other  depredators  there  is  a hope  of  defending  oneself.  Greece 
and  the  Greek  colonies  in  the  ancient  world,  Flanders  and  Italy 
in  the  Middle  Ages,  by  no  means  enjoyed  what  any  one  with  modern 
ideas  would  call  security  : the  state  of  society  was  most  unsettled 
and  turbulent ; person  and  property  were  exposed  to  a thousand 
dangers.  But  they  were  free  countries ; they  were  in  general 
neither  arbitrarily  oppressed  nor  systematically  plundered  by 
their  governments.  Against  other  enemies  the  individual  energy 
which  their  institutions  called  forth,  enabled  them  to  make  successful 
resistance : their  labour,  therefore,  was  eminently  productive,  and 
their  riches,  while  they  remained  free,  were  constantly  on  the  increase. 
The  Koman  despotism,  putting  an  end  to  wars  and  internal  conflicts 
throughout  the  empire,  relieved  the  subject  population  from  much  of 
the  former  insecurity  : but  because  it  left  them  under  the  grinding 
yoke  of  its  own  rapacity  they  became  enervated  and  impoverished, 
until  they  were  an  easy  prey  to  barbarous  but  free  invaders.  They 
would  neither  fight  nor  labour,  because  they  were  no  longer  suffered 
to  enjoy  that  for  which  they  fought  and  laboured. 

The  seed  so  treated  was  sold  to  retail  dealers  in  the  country,  who  of  course 
endeavoured  to  purchase  at  the  cheapest  rate,  and  from  them  it  got  into  the 
hands  of  the  farmers,  neither  of  these  classes  being  capable  of  distinguishing 
the  fraudulent  from  the  genuine  seed.  Many  cultivators  in  consequence 
diminished  their  consumption  of  the  articles,  and  others  were  obliged  to  pay  a 
higher  price  to  those  who  had  skill  to  distinguish  the  mixed  seed,  and  who  had 
integrity  and  character  to  prevent  them  from  dealing  in  it.” 

The  same  writer  states  that  Irish  flax,  though  in  natural  quality  inferior  to 
none,  sells,  or  did  lately  sell,  in  the  market  at  a penny  to  twopence  per  pound 
less  than  foreign  or  British  flax ; part  of  the  difference  arising  from  negligence 
in  its  preparation,  but  part  from  the  cause  mentioned  in  the  evidence  of  Mr. 
Corry,  many  years  Secretary  to  the  Irish  Linen  Board : “ The  owners  of  the 
flax,  who  are  almost  always  people  in  the  lower  classes  of  life,  believe  that  they 
can  best  advance  their  own  interests  by  imposing  on  the  buyers.  Flax  being 
sold  by  weight,  various  expedients  are  used  to  increase  it ; and  every  expedient 
is  injurious,  particularly  the  damping  of  it ; a very  common  practice,  which 
makes  the  flax  afterwards  heat.  The  inside  of  every  bundle  (and  the  bundles 
all  vary  in  bulk)  is  often  full  of  pebbles,  or  dirt  of  various  kinds,  to  increase  the 
weight.  In  this  state  it  is  purchased  and  exported  to  Great  Britain.” 

It  was  given  in  evidence  before  a Committee  of  the  House  of  Commons 
that  the  lace  trade  at  Nottingham  had  greatly  fallen  off,  from  the  making  of 
fraudulent  and  bad  articles : that  **  a kind  of  lace  called  single-press  was  manu- 
factured,” (I  still  quote  Mr.  Babbage,)  “ which  although  good  to  the  eye, 
became  nearly  spoiled  in  washing  by  the  slipping  of  the  threads ; that  not  one 
person  in  a thousand  could  distinguish  the  differed  ;e  between  single-press  and 
double-press  lace ; that  even  workmen  and  manufacturers  were  obhged  to 
employ  a magnifying-glass  for  that  purpose ; and  that  in  another  similar  article, 
called  warp-lace,  such  aid  was  essential  ” 


DEGREES  OF  PRODUCTIVENESS 


116 


Mucli  of  the  security  of  person  and  property  in  modern  nations 
is  the  effect  of  manners  and  opinion  rather  than  of  law.  There  are, 
or  lately  were,  countries  in  Europe  where  the  monarch  was  nominally 
absolute,  but  where,  from  the  restraints  imposed  by  established 
usage,  no  subject  felt  practically  in  the  smallest  danger  of  having 
his  possessions  arbitrarily  seized  or  a contribution  levied  on  them 
by  the  government.  There  must,  however,  be  in  such  governments 
much  petty  plunder  and  other  tyranny  by  subordinate  agents,  for 
which  redress  is  not  obtained,  owing  to  the  want  of  publicity  which 
is  the  ordinary  character  of  absolute  governments.  In  England, 
the  public  are  tolerably  well  protected,  both  by  institutions  and 
manners,  against  the  agents  of  government ; but,  for  the  security 
they  enjoy  against  other  evil-doers,  they  are  [1848]  very  little 
indebted  to  their  institutions.  The  laws  cannot  be  said  to  afford 
protection  to  property,  when  they  afford  it  only  at  such  a cost  as 
renders  submission  to  injury  in  general  the  better  calculation. 
The  security  of  property  in  England  is  owing  (except  as  regards 
open  violence)  to  opinion,  and  the  fear  of  exposure,  much  more  than 
to  the  direct  operation  of  the  law  and  the  courts  of  justice. 

Independently  of  all  imperfection  in  the  bulwarks  which  society 
purposely  throws  round  what  it  recognises  as  property,  there 
are  various  other  modes  in  which  defective  institutions  impede  the 
employment  of  the  productive  resources  of  a country  to  the  best 
advantage.  We  shall  have  occasion  for  noticing  many  of  these 
in  the  progress  of  our  subject.  It  is  sufficient  here  to  remark,  that 
the  efi&ciency  of  industry  may  be  expected  to  be  great,  in  proportion 
as  the  fruits  of  industry  are  insured  to  the  person  exerting  it : and 
that  all  social  arrangements  are  conducive  to  useful  exertion, 
according  as  they  provide  that  the  reward  of  every  one  for  his  labour 
shall  be  proportioned  as  much  as  possible  to  the  benefit  which  it 
produces.  All  laws  or  usages  which  favour  one  class  or  sort  of 
persons  to  the  disadvantage  of  others  ; which  chain  up  the  efforts  of 
any  part  of  the  community  in  pursuit  of  their  own  good,  or  stand 
between  those  efforts  and  their  natural  fruits — are  (independently 
of  all  other  grounds  of  condemnation)  violations  of  the  fundamental 
principles  of  economical  policy ; tending  to  make  the  aggregate 
productive  powers  of  the  community  productive  in  a less  degree  than 
they  would  otherwise  be. 


CHAPTER  VIII 


OF  CO-OPERATION,  OR  THE  COMBINATION  OP  LABOUR 

§ 1.  In  the  enumeration  of  the  circumstances  which  promote 
the  productiveness  of  labour,  we  have  left  one  untouched,  which, 
because  of  its  importance,  and  of  the  many  topics  of  discussion 
which  it  involves,  requires  to  be  treated  apart.  This  is  co-operation, 
or  the  combined  action  of  numbers.  Of  this  great  aid  to  production, 
a single  department,  known  by  the  name  of  Division  of  Labour, 
has  engaged  a large  share  of  the  attention  of  political  economists ; 
most  deservedly  indeed,  but  to  the  exclusion  of  other  cases  and 
exemplifications  of  the  same  comprehensive  law.  Mr.  Wakefield 
was,  I believe,  the  first  to  point  out,  that  a part  of  the  subject  had, 
with  injurious  effect,  been  mistaken  for  the  whole ; that  a more 
fundamental  principle  lies  beneath  that  of  the  division  of  labour, 
and  comprehends  it. 

Co-operation,  he  observes,*  is  “ of  two  distinct  kinds : first, 
such  co-operation  as  takes  place  when  several  persons  help  each 
other  in  the  same  employment ; secondly,  such  co-operation  as 
takes  place  when  several  persons  help  each  other  in  different  em- 
ployments. These  may  be  termed  Simple  Co-operation  and  Complex 
Co-operation. 

“ The  advantage  of  simple  co-operation  is  illustrated  by  the 
case  of  two  greyhounds  running  together,  which,  it  is  said,  will  kill 
more  hares  than  four  greyhounds  running  separately.  In  a vast 
number  of  simple  operations  performed  by  human  exertion,  it  is 
quite  obvious  that  two  men  working  together  will  do  more  than 
four,  or  four  times  four  men,  each  of  whom  should  work  alone.  In 
the  lifting  of  heavy  weights,  for  example,  in  the  felling  of  trees, 
in  the  sawing  of  timber,  in  the  gathering  of  much  hay  or  corn  during 
a short  period  of  fine  weather,  in  draining  a large  extent  of  land 
during  the  short  season  when  such  a work  may  be  properly  cou- 

♦ to  Wakefield’s  edition  of  Adam  Smith,  vol.  i.  p.  26. 


COMBINATION  OF  LABOUR 


117 


ducted,  in  the  pulling  of  ropes  on  board  ship,  in  the  rowing  of 
large  boats,  in  some  mining  operations,  in  the  erection  of  a scaffolding 
for  building,  and  in  the  breaking  of  stones  for  the  repair  of  a road, 
so  that  the  whole  of  the  road  shall  always  be  kept  in  good  order  : in 
all  these  simple  operations,  and  thousands  more,  it  is  absolutely  neces- 
sary that  many  persons  should  work  together,  at  the  same  time,  in 
the  same  place,  and  in  the  same  way.  The  savages  of  New  Holland 
never  help  each  other,  even  in  the  most  simple  operations  ; and 
their  condition  is  hardly  superior,  in  some  respects  it  is  inferior,  to 
that  of  the  wild  animals  which  they  now  and  then  catch.  Let  any 
one  imagine  that  the  labourers  of  England  should  suddenly  desist 
from  helping  each  other  in  simple  employments,  and  he  will  see 
at  once  the  prodigious  advantages  of  simple  co-operation.  In  a 
countless  number  of  employments,  the  produce  of  labour  is,  up  to 
a certain  point,  in  proportion  to  such  mutual  assistance  amongst 
the  workmen.  This  is  the  first  step  in  social  improvement.”  The 
second  is,  when  “ one  body  of  men  having  combined  their  labour  to 
raise  more  food  than  they  require,  another  body  of  men  are  induced 
to  combine  their  labour  for  the  purpose  of  producing  more  clothes 
than  they  require,  and  with  those  surplus  clothes  buying  the  surplus 
food  of  the  other  body  of  labourers  ; while,  if  both  bodies  together 
have  produced  more  food  and  clothes  than  they  both  require,  both 
bodies  obtain,  by  means  of  exchange,  a proper  capital  for  setting 
more  labourers  to  work  in  their  respective  occupations.”  To  simple 
co-operation  is  thus  superadded  what  Mr.  Wakefield  terms  Complex 
Co-operation.  The  one  is  the  combination  of  several  labourers  to 
help  each  other  in  the  same  set  of  operations  ; the  other  is  the  com- 
bination of  several  labourers  to  help  one  another  by  a division  of 
operations. 

There  is  “ an  important  distinction  between  simple  and  complex 
co-operation.  Of  the  former,  one  is  always  conscious  at  the  time  of 
practising  it : it  is  obvious  to  the  most  ignorant  and  vulgar  eye. 
Of  the  latter,  but  a very  few  of  the  vast  numbers  who  practise  it  are 
in  any  degree  conscious.  The  cause  of  this  distinction  is  easily 
seen.  When  several  men  are  employed  in  lifting  the  same  weight, 
or  pulling  the  same  rope,  at  the  same  time,  and  in  the  same  place, 
there  can  be  no  sort  of  doubt  that  they  co-operate  with  each  other ; 
the  fact  is  impressed  on  the  mind  by  the  mere  sense  of  sight ; but 
when  several  men,  or  bodies  of  men,  are  employed  at  different  times 
and  places,  and  in  different  pursuits,  their  co-operation  with  each 
other,  though  it  may  be  quite  as  certain,  is  not  so  readily  perceived 


118 


BOOK  I.  CHAPTER  Vm.  § 2 


as  in  the  other  case : in  order  to  perceive  it,  a complex  operation 
of  the  mind  is  required.” 

In  the  present  state  of  society  the  breeding  and  feeding  of  sheep 
is  the  occupation  of  one  set  of  people,  dressing  the  wool  to  prepare 
it  for  the  spinner  is  that  of  another,  spinning  it  into  thread  of  a third, 
weaving  the  thread  into  broadcloth  of  a fourth,  dyeing  the  cloth  of  a 
fifth,  making  it  into  a coat  of  a sixth,  without  counting  the  multitude 
of  carriers,  merchants,  factors,  and  retailers,  put  in  requisition  at 
the  successive  stages  of  this  progress.  All  these  persons,  without 
knowledge  of  one  another  or  previous  understanding,  co-operate  in 
the  production  of  the  ultimate  result,  a coat.  But  these  are  far 
from  being  all  who  co-operate  in  it ; for  each  of  these  persons 
requires  food,  and  many  other  articles  of  consumption,  and  unless 
he  could  have  relied  that  other  people  would  produce  these  for  him, 
he  could  not  have  devoted  his  whole  time  to  one  step  in  the  succession 
of  operations  which  produces  one  single  commodity,  a coat.  Every 
person  who  took  part  in  producing  food  or  erecting  houses  for  this 
series  of  producers,  has,  however  unconsciously  on  his  part,  com- 
bined his  labours  with  theirs.  It  is  by  a real,  though  unexpressed, 
concert,  “ that  the  body  who  raise  more  food  than  they  want,  can 
exchange  with  the  body  who  raise  more  clothes  than  they  want ; 
and  if  the  two  bodies  were  separated,  either  by  distance  or  dis- 
inclination— unless  the  two  bodies  should  virtually  form  themselves 
into  one,  for  the  common  object  of  raising  enough  food  and  clothes 
for  the  whole — they  could  not  divide  into  two  distinct  parts  the 
whole  operation  of  producing  a sufficient  quantity  of  food  and 
clothes.” 

§ 2.  The  influence  exercised  on  production  by  the  separation 
of  employments,  is  more  fundamental  than,  from  the  mode  in  which 
the  subject  is  usually  treated,  a reader  might  be  induced  to  suppose. 
It  is  not  merely  that  when  the  production  of  different  things  becomes 
the  sole  or  principal  occupation  of  different  persons,  a much  greater 
quantity  of  each  kind  of  article  is  produced.  The  truth  is  much 
beyond  this.  Without  some  separation  of  employments,  very  few 
things  would  be  produced  at  all. 

Suppose  a set  of  persons,  or  a number  of  families,  all  employed 
precisely  in  the  same  manner ; each  family  settled  on  a piece  of  its 
own  land,  on  which  it  grows  by  its  labour  the  food  required  for  its 
own  sustenance,  and  as  there  are  no  persons  to  buy  any  surplus 
produce  where  all  are  producers,  each  family  has  to  produce  within 


COMBINATION  OF  LABOUR 


119 


itself  whatever  other  articles  it  consumes.  In  such  circumstances, 
if  the  soil  was  tolerably  fertile,  and  population  did  not  tread  too 
closely  on  the  heels  of  subsistence,  there  would  be,  no  doubt,  some 
kind  of  domestic  manufactures  ; clothing  for  the  family  might  per- 
haps be  spun  and  woven  within  it,  by  the  labour  probably  of  the 
women  (a  first  step  in  the  separation  of  employments)  ; and  a 
dwelling  of  some  sort  would  be  erected  and  kept  in  repair  by  their 
united  labour.  But  beyond  simple  food  (precarious,  too,  from  the 
variations  of  the  seasons),  coarse  clothing,  and  very  imperfect  lodging, 
it  would  be  scarcely  possible  that  the  family  should  produce  anything 
more.  They  would,  in  general,  require  their  utmost  exertions  to 
accomplish  so  much.  Their  power  even  of  extracting  food  from 
the  soil  would  be  kept  within  narrow  limits  by  the  quality  of  their 
fools,  which  would  necessarily  be  of  the  most  wretched  description. 
To  do  almost  anything  in  the  way  of  producing  for  themselves 
articles  of  convenience  or  luxury,  would  require  too  much  time, 
and,  in  many  cases,  their  presence  in  a different  place.  Very  few 
kinds  of  industry,  therefore,  would  exist ; and  that  which  did  exist, 
namely  the  production  of  necessaries,  would  be  extremely  inefficient, 
not  solely  from  imperfect  implements,  but  because,  when  the  ground 
and  the  domestic  industry  fed  by  it  had  been  made  to  supply  the 
necessaries  of  a single  family  in  tolerable  abundance,  there  would 
be  little  motive,  while  the  numbers  of  the  family  remained  the  same, 
to  make  either  the  land  or  the  labour  produce  more. 

But  suppose  an  event  to  occur,  which  would  amount  to  a revolu- 
tion in  the  circumstances  of  this  little  settlement.  Suppose  that  a 
company  of  artificers,  provided  with  tools,  and  with  food  sufficient 
to  maintain  them  for  a year,  arrive  in  the  country  and  establish 
themselves  in  the  midst  of  the  population.  These  new  settlers 
occupy  themselves  in  producing  articles  of  use  or  ornament  adapted 
to  the  taste  of  a simple  people ; and  before  their  food  is  exhausted 
they  have  produced  these  in  considerable  quantity,  and  are  ready  to 
exchange  them  for  more  food.  The  economical  position  of  the  landed 
population  is  now  most  materially  altered.  They  have  an  oppor- 
tunity given  them  of  acquiring  comforts  and  luxuries.  Things 
which,  while  they  depended  solely  on  their  own  labour,  they  never 
could  have  obtained,  because  they  could  not  have  produced,  are 
no^  accessible  to  them  if  they  can  succeed  in  producing  an  additional 
quantity  of  food  and  necessaries.  They  are  thus  incited  to  increase 
the  productiveness  of  their  industry.  Among  the  conveniences  for 
the  first  time  made  accessible  to  them,  better  tools  are  probably 


120 


BOOK  I.  CHAPTER  Vlll.  § 3 


one  : and  apart  from  this,  they  have  a motive  to  labour  more 
assiduously,  and  to  adopt  contrivances  for  making  their  labour 
more  effectual.  By  these  means  they  will  generally  succeed  in 
compelling  their  land  to  produce,  not  only  food  for  themselves, 
but  a surplus  for  the  new  comers,  wherewith  to  buy  from  them 
the  products  of  their  industry.  The  new  settlers  constitute  what  is 
called  a marlcet  for  surplus  agricultural  produce  : and  their  arrival 
has  enriched  the  settlement  not  only  by  the  manufactured  article 
which  they  produce,  but  by  the  food  which  would  not  have  been 
produced  unless  they  had  been  there  to  consume  it. 

There  is  no  inconsistency  between  this  doctrine,  and  the  pro- 
position we  before  maintained,  that  a market  for  commodities  does 
not  constitute  employment  for  labour.*  The  labour  of  the  agricul- 
turists was  abeady  provided  with  employment ; they  are  not 
indebted  to  the  demand  of  the  new  comers  for  being  able  to  maintain 
themselves.  What  that  demand  does  for  them  is,  to  call  their  labour 
into  increased  vigour  and  efficiency ; to  stimulate  them,  by  new 
motives,  to  new  exertions.  Neither  do  the  new  comers  owe  their 
maintenance  and  employment  to  the  demand  of  the  agriculturists : 
with  a year’s  subsistence  in  store,  they  could  have  settled  side  by 
side  with  the  former  inhabitants,  and  produced  a similar  scanty 
stock  of  food  and  necessaries.  Nevertheless  we  see  of  what  supreme 
importance  to  the  productiveness  of  the  labour  of  producers,  is  the 
existence  of  other  producers  within  reach,  employed  in  a different 
kind  of  industry.  The  power  of  exchanging  the  products  of  one 
kind  of  labour  for  those  of  another,  is  a condition,  but  for  which, 
there  would  almost  always  be  a smaller  quantity  of  labour  altogether. 
When  a new  market  is  opened  for  any  product  of  industry,  and  a 
greater  quantity  of  the  article  is  consequently  produced,  the  increased 
production  is  not  always  obtained  at  the  expense  of  some  other 
product ; it  is  often  a new  creation,  the  result  of  labour  which  would 
otherwise  have  remained  unexerted ; or  of  assistance  rendered  to 
labour  by  improvements  or  by  modes  of  co-operation  to  which  re- 
course would  not  have  been  had  if  an  inducement  had  not  been 
offered  for  raising  a larger  produce. 

§ 3.  From  these  considerations  it  appears  that  a country 
will  seldom  have  a productive  agriculture,  unless  it  has  a large  town 
population,  or  the  only  available  substitute,  a large  export  trade 
in  agricultural  produce  to  supply  a population  elsewhere.  I use 
• Supra,  pp.  79-90. 


COMBINATION  OF  LABOUR 


121 


the  phrase  town  population  for  shortness,  to  imply  a population 
non-agricultural ; which  will  generally  be  collected  in  towns  or 
large  villages,  for  the  sake  of  combination  of  labour.  The  applica- 
tion of  this  truth  by  Mr.  Wakefield  to  the  theory  of  colonization  has 
excited  mueh  attention,  and  is  doubtless  destined  to  excite  much 
more.  It  is  one  of  those  great  practical  discoveries,  which,  once 
made,  appears  so  obvious  that  the  merit  of  making  them  seems  less 
than  it  is.  Mr.  Wakefield  was  the  first  to  point  out  that  the  mode  of 
planting  new  settlements,  then  commonly  practised — setting  down  a 
number  of  families  side  by  side,  each  on  its  piece  of  land,  all  employing 
themselves  in  exactly  the  same  manner, — though  in  favourable 
circumstances  it  may  assure  to  those  families  a rude  abundance  of 
mere  necessaries,  can  never  be  other  than  unfavourable  to  great 
production  or  rapid  growth  : and  his  system  consists  of  arrange- 
ments for  securing  that  every  colony  shall  have  from  the  first  a 
town  population  bearing  due  proportion  to  its  agricultural,  and  that 
the  cultivators  of  the  soil  shall  not  be  so  widely  scattered  as  to  be 
deprived  by  distance  of  the  benefit  of  that  town  population  as  a 
market  for  their  produce.  The  principle  on  which  the  scheme  is 
founded,  does  not  depend  on  any  theory  respecting  the  superior 
productiveness  of  land  held  in  large  portions,  and  cultivated  by  hired 
labour.  Supposing  it  true  that  land  yields  the  greatest  produce  when 
divided  into  small  properties  and  cultivated  by  peasant  proprietors, 
a town  population  will  be  just  as  necessary  to  induce  those  proprietors 
to  raise  that  larger  produce  : and  if  they  were  too  far  from  the 
nearest  seat  of  non-agricultural  industry  to  use  it  as  a market  for 
disposing  of  their  surplus,  and  thereby  supplying  their  other  wants, 
neither  that  surplus  nor  any  equivalent  for  it  would,  generally 
speaking,  be  produced. 

It  is,  above  all,  the  deficiency  of  town  population  which  limits 
[1848]  the  productiveness  of  the  industry  of  a country  like  India. 
The  agriculture  of  India  is  conducted  entirely  on  the  system  of  small 
holdings.  There  is,  however,  a considerable  amount  of  combination 
of  labour.  The  village  institutions  and  customs,  which  are  the  real 
framework  of  Indian  society,  make  provision  for  joint  action  in  the 
cases  in  which  it  is  seen  to  be  necessary  ; or  where  they  fail  to  do  so, 
the  government  (when  tolerably  well  administered)  steps  in,  and  by 
an  outlay  from  the  revenue,  executes  by  combined  labour  the  tanks, 
embankments,  and  works  of  irrigation,  which  are  indispensable. 
The  implements  and  processes  of  agriculture  are  however  so  virretched, 
that  the  produce  of  the  soil,  in  spite  of  great  natural  fertility  and  a 


122 


BOOK  I.  CHAPTER  VIII.  § 4 


climate  highly  favourable  to  vegetation,  is  miserably  small : and  the 
land  might  be  made  to  yield  food  in  abundance  for  many  more  than 
the  present  number  of  inhabitants,  without  departing  from  the 
system  of  small  holdings.  But  to  this  the  stimulus  is  wanting, 
which  a large  town  population,  connected  with  the  rural  districts 
by  easy  and  unexpensive  means  of  communication,  would  afiord. 
That  town  population,  again,  does  not  grow  up,  because  the  few 
wants  and  unaspiring  spirit  of  the  cultivators  (joined  until  lately 
with  great  insecurity  of  property,  from  military  and  fiscal  rapacity) 
prevent  them  from  attempting  to  become  consumers  of  town  pro- 
duce. In  these  circumstances  the  best  chance  of  an  early  develop- 
ment of  the  productive  resources  of  India,  consists  in  the  rapid  ^ 
‘growth  of  its  export  of  agricultural  produce  (cotton,  indigo,  sugar, 
coffee,  &c.)  to  the  markets  of  Europe.  The  producers  of  these 
articles  are  consumers  of  food  supplied  by  their  fellow-agriculturists 
in  India ; and  the  market  thus  opened  for  surplus  food  will,  if 
accompanied  by  good  government,  raise  up  by  degrees  more  extended 
wants  and  desires,  directed  either  towards  European  commodities, 
or  towards  things  which  will  require  for  their  production  in  India 
a larger  manufacturing  population. 

§ 4.  Thus  far  of  the  separation  of  employments,  a form  of  the 
combination  of  labour  without  which  there  cannot  be  the  first 
rudiments  of  industrial  civilization.  But  when  this  separation  is 
thoroughly  established ; when  it  has  become  the  general  practice 
for  each  producer  to  supply  many  others  with  one  commodity,  and 
to  be  supplied  by  others  with  most  of  the  things  which  he  consumes  ; 
reasons  not  less  real,  though  less  imperative,  invite  to  a further 
extension  of  the  same  principle.  It  is  found  that  the  productive 
power  of  labour  is  increased  by  carrying  the  separation  further  and 
further  ; by  breaking  down  more  and  more  every  process  of  industry 
into  parts,  so  that  each  labourer  shall  confine  himself  to  an  ever 
smaller  number  of  simple  operations.  And  thus,  in  time,  arise 
those  remarkable  cases  of  what  is  called  the  division  of  labour,  with 
which  all  readers  on  subjects  of  this  nature  are  familiar.  Adam 
Smith’s  illustration  from  pin-making,  though  so  well  known,  is  so 
much  to  the  point,  that  I will  venture  once  more  to  transcribe  it. 
“ The  business  of  making  a pin  is  divided  into  about  eighteen  distinct 
operations.  One  man  draws  out  the  wire,  another  straights  it,  a 
third  cuts  it,  a fourth  points  it,  a fifth  grinds  it  at  the  top  for  receiving 
^ [“  Now  ” was  omitted  before  “ rapid  ” in  the  3rd  ed.  n8.52).l 


COMBINATION  OF  LABOUR 


123 


the  head;  to  make  the  head  requires  two  or  three  distinct  operations; 
to  put  it  on,  is  a peculiar  business ; to  whiten  the  pins  is  another ; it 
is  even  a trade  by  itself  to  put  them  into  the  paper.  ...  I have 
seen  a small  manufactory  where  ten  men  only  were  employed,  and 
where  some  of  them,  consequently,  performed  two  or  three 
distinct  operations.  But  though  they  were  very  poor,  and  therefore 
but  indifferently  accommodated  with  the  necessary  machinery, 
they  could,  when  they  exerted  themselves,  make  among  them 
about  twelve  pounds  of  pins  in  a day.  There  are  in  a pound  up- 
wards of  four  thousand  pins  of  a middling  size.  Those  ten  persons, 
therefore,  could  make  among  them  upwards  of  forty-eight  thousand 
pins  in  a day.  Each  person,  therefore,  making  a tenth  part  of 
forty-eight  thousand  pins,  might  be  considered  as  making  four 
thousand  eight  hundred  pins  in  a day.  But  if  they  had  all  wrought 
separately  and  independently,  and  without  any  of  them  having 
been  educated  to  this  peculiar  business,  they  certainly  could  not 
each  of  them  have  made  twenty,  perhaps  not  one  pin  in  a day.*’ 

M.  Say  furnishes  a still  stronger  example  of  the  effects  of  division 
of  labour — from  a not  very  important  branch  of  industry  certainly, 
the  manufacture  of  playing  cards.  “ It  is  said  by  those  engaged  in 
the  business,  that  each  card,  that  is,  a piece  of  pasteboard  of  the  size 
of  the  hand,  before  being  ready  for  sale,  does  not  undergo  fewer 
than  seventy  operations,  every  one  of  which  might  be  the  occupation 
of  a distinct  class  of  workmen.  And  if  there  are  not  seventy  classes 
of  work-people  in  each  card  manufactory,  it  is  because  the  division 
of  labour  is  not  carried  so  far  as  it  might  be  ; because  the  same  work- 
man is  charged  with  two,  three,  or  four  distinct  operations.  The 
influence  of  this  distribution  of  employment  is  immense.  I have  seen 
a card  manufactory  where  thirty  workmen  produced  daily  fifteen 
thousand  five  hundred  cards,  being  above  five  hundred  cards  for 
each  labourer  ; and  it  may  be  presumed  that  if  each  of  these  workmen 
were  obliged  to  perform  all  the  operations  himself,  even  supposing 
him  a practised  hand,  he  would  not  perhaps  complete  two  cards  in  a 
day  : and  the  thirty  workmen,  instead  of  fifteen  thousand  five  hun- 
dred cards,  would  make  only  sixty.”  * 

In  watchmaking,  as  Mr.  Babbage  observes,  “it  was  stated  in 
evidence  before  a Committee  of  the  House  of  Commons,  that  there 

* Say,  Cours  (T Economic  Politique  Pratique,  vol.  i.  p.  340. 

It  is  a remarkable  proof  of  the  economy  of  labour  occasioned  by  this 
minute  division  of  occupations,  that  an  article,  the  production  of  which  is  the 
result  of  such  a multitude  of  manual  operations,  can  be  sold  for  a trifling 
sum. 


124 


BOOK  I.  CHAPTER  VlII.  § 6 


are  a hundred  aiid  two  distinct  branches  of  this  art,  to  each  of 
which  a boy  may  be  put  apprentice  ; and  that  he  only  learns  his 
master’s  department,  and  is  unable,  after  his  apprenticeship  has 
expired,  without  subsequent  instruction,  to  work  at  any  other  branch. 
The  watch-finisher,  whose  business  it  is  to  put  together  the  scattered 
parts,  is  the  only  one,  out  of  the  hundred  and  two  persons,  who  can 
work  in  any  other  department  than  his  own.”  * 

§ 5.  The  causes  of  the  increased  efficiency  given  to  labour 
by  the  division  of  employments  are  some  of  them  too  familiar  to 
require  specification  ; but  it  is  worth  while  to  attempt  a complete 
enumeration  of  them.  By  Adam  Smith  they  are  reduced  to  three. 
“ First,  the  increase  of  dexterity  in  every  particular  workman ; 
secondly,  the  saving  of  the  time  which  is  commonly  lost  in  passing 
from  one  species  of  work  to  another  ; and  lastly,  the  invention  of  a 
great  number  of  machines  which  facilitate  and  abridge  labour,  and 
enable  one  man  to  do  the  work  of  many.” 

Of  these,  the  increase  of  dexterity  of  the  individual  workman  is 
the  most  obvious  and  universal.  It  does  not  follow  that  because  a 
thing  has  been  done  oftener  it  will  be  done  better.  That  depends- 
on  the  intelligence  of  the  workman,  and  on  the  degree  in  which  his 
mind  works  along  with  his  hands.  But  it  will  be  done  more  easily.- 
The  organs  themselves  acquire  greater  power  : the  muscles  employed* 
grow  stronger  by  frequent  exercise,  the  sinews  more  pliant,  and  the* 
mental  powers  more  efficient,  and  less  sensible  of  fatigue.  What 
can  be  done  easily  has  at  least  a better  chance  of  being  done  well,, 
and  is  sure  to  be  done  more  expeditiously.  What  was  at  first  done 
slowly  comes  to  be  done  quickly ; what  was  at  first  done  slowly 
with  accuracy  is  at  last  done  quickly  with  equal  accuracy. 
This  is  as  true  of  mental  operations  as  of  bodily.  Even  a child, 
after  much  practice,  sums  up  a column  of  figures  with  a rapidity 
which  resembles  intuition.  The  act  of  speaking  any  language, 
of  reading  fluently,  of  playing  music  at  sight,  are  cases  as  remarkable 
as  they  are  familiar.  Among  bodily  acts,  dancing,  gymnastic 
exercises,  ease  and  brilliancy  of  execution  on  a musical  instrument, 
are  examples  of  the  rapidity  and  facility  acquired  by  repetition.  In 
simpler  manual  operations  the  effect  is  of  course  still  sooner  pro- 
duced. “ The  rapidity,”  Adam  Smith  observes,  “ with  which  some 
of  the  operations  of  certain  manufactures  are  performed,  exceeds 
what  the  human  hand  could,  by  those  who  had  never  seen  them,  be 
* Economy  of  Machinery  and  ManufactureSy  3rd  edition,  p.  201. 


COMBINATION  OF  LABOUR 


126 


Supposed  capable  of  acquiring.”  * This  skill  is,  naturally,  attained 
after  shorter  practice,  in  proportion  as  the  division  of  labour  is  more 
minute ; and  will  not  be  attained  in  the  same  degree  at  all,  if  the 
workman  has  a greater  variety  of  operations  to  execute  than  allows 
of  a sufficiently  frequent  repetition  of  each.  The  advantage  is  not 
confined  to  the  greater  efficiency  ultimately  attained,  but  includes 
also  the  diminished  loss  of  time,  and  waste  of  material,  in  learning 
the  art.  “ A certain  quantity  of  material,”  says  Mr.  Babbage,| 
“ will  in  all  cases  be  consumed  unprofitably,  or  spoiled,  by  every 
person  who  learns  an  art ; and  as  he  applies  himself  to  each  new 
process,  he  will  waste  some  of  the  raw  material,  or  of  the  partly 
manufactured  commodity.  But  if  each  man  commit  this  waste 
in  acquiring  successively  every  process,  the  quantity  of  waste  will 
be  much  greater  than  if  each  person  confine  his  attention  to  one 
process.”  And  in  general  each  will  be  much  sooner  qualified  to 
execute  his  one  process,  if  he  be  not  distracted  w'hile  learning  it, 
by  the  necessity  of  learning  others. 

The  second  advantage  enumerated  by  Adam  Smith  as  arising 
from  the  division  of  labour,  is  one  on  which  I cannot  help  thinking 
that  more  stress  is  laid  by  him  and  others  than  it  deserves.  To 
do  full  justice  to  his  opinion,  I will  quote  his  own  exposition  of  it. 
“ The  advantage  which  is  gained  by  saving  the  time  commonly  lost 
in  passing  from  one  sort  of  work  to  another,  is  much  greater  than  we 
should  at  first  view  be  apt  to  imagine  it.  It  is  impossible  to  pass 
very  quickly  from  one  kind  of  work  to  another,  that  is  carried  on  in 
a different  place,  and  with  quite  different  tools.  A country  weaver, 
who  cultivates  a small  farm,  must  lose  a good  deal  of  time  in  passing 
from  his  loom  to  the  field,  and  from  the  field  to  his  loom.  When  the 
two  trades  can  be  carried  on  in  the  same  workhouse,  the  loss  of  time 
is  no  doubt  much  less.  It  is  even  in  this  case,  however,  very  con- 
siderable. A man  commonly  saunters  a little  in  turning  his  hand 

* “ In  astronomical  observations,  the  senses  of  the  operator  are  rendered 
so  acute  by  habit,  that  he  can  estimate  differences  of  time  to  the  tenth  of  a 
second ; and  adjust  his  measuring  instrument  to  graduations  of  which  five 
thousand  occupy  only  an  inch.  It  is  the  same  throughout  the  commonest 
processes  of  manufacture.  A child  who  fastens  on  the  heads  of  pins  will 
repeat  an  operation  requiring  several  distinct  motions  of  the  muscles  one 
hundred  times  a minute  for  several  successive  hours.  In  a recent  Manchester 
paper  it  was  stated  that  a peculiar  sort  of  twist  or  ‘ gimp,’  which  cost  three 
shillings  making  when  first  introduced,  was  now  manufactured  for  one  penny  ; 
and  this  not,  as  usually,  by  the  invention  of  a new  machine,  but  solely  through 
the  increased  dexterity  of  the  workman.” — Edinburgh  Review  for  January 
1849,  p.  81. 

t Page  171. 


126 


BOOK  I.  CHAPTER  VIII.  § 6 


from  one  sort  of  employment  to  another.  When  he  first  begins  the 
new  work,  he  is  seldom  very  keen  and  hearty  ; his  mind,  as  they  say, 
does  not  go  to  it,  and  for  some  time  he  rather  trifles  than  applies 
to  good  purpose.  The  habit  of  sauntering  and  of  indolent  careless 
application,  which  is  naturally,  or  rather  necessarily  acquired  by 
every  country  workman  who  is  obliged  to  change  his  work  and  his 
tools  every  half  hour,  and  to  apply  his  hand  in  twenty  different  ways 
almost  every  day  of  his  life,  renders  him  almost  always  slothful 
and  lazy,  and  incapable  of  any  vigorous  application  even  on  the 
most  pressing  occasions.”  This  is  surely  a most  exaggerated  descrip- 
tion of  the  inefficiency  of  country  labour,  where  it  has  any  adequate 
motive  to  exertion.  Few  workmen  change  their  work  and  their 
tools  oftener  than  a gardener ; is  he  usually  incapable  of  vigorous 
apphcation  ? Many  of  the  higher  description  of  artisans  have  to 
perform  a great  multiplicity  of  operations  with  a variety  of  tools. 
They  do  not  execute  each  of  these  with  the  rapidity  with  which  a 
factory  workman  performs  his  single  operation ; but  they  are, 
except  in  a merely  manual  sense,  more  skilful  labourers,  and  in  all 
senses  whatever  more  energetic. 

Mr.  Babbage,  following  in  the  track  of  Adam  Smith,  says, 
“ When  the  human  hand,  or  the  human  head,  has  been  for  some  time 
occupied  in  any  kind  of  work,  it  cannot  instantly  change  its  employ- 
ment with  full  effect.  The  muscles  of  the  limbs  employed  have 
acquired  a flexibihty  during  their  exertion,  and  those  not  in  action 
a stiffness  during  rest,  which  renders  every  change  slow  and  unequal 
in  the  commencement.  Long  habit  also  produces  in  the  muscles 
exercised  a capacity  for  enduring  fatigue  to  a much  greater  degree 
than  they  could  support  under  other  circumstances.  A similar 
result  seems  to  take  place  in  any  change  of  mental  exertion ; the 
attention  bestowed  on  the  subject  not  being  so  perfect  at  first 
as  it  becomes  after  some  exercise.  The  employment  of  different 
tools  in  the  successive  processes  is  another  cause  of  the  loss  of  time 
in  changing  from  one  operation  to  another.  If  these  tools  are 
simple  and  the  change  is  not  frequent,  the  loss  of  time  is  not  consider- 
able ; but  in  many  processes  of  the  arts,  the  tools  are  of  great 
dehcacy,  requiring  accurate  adjustment  every  time  they  are  used ; 
and  in  many  cases,  the  time  employed  in  adjusting  bears  a large 
proportion  to  that  employed  in  using  the  tool.  The  sliding-rest, 
the  dividing  and  the  drilling  engine  are  of  this  kind  : and  hence, 
in  manufactories  of  sufficient  extent,  it  is  found  to  be  good  economy 
to  keep  one  machine  constantly  employed  in  one  kind  of  work : 


COMBINATION  OF  LABOUR 


127 


one  lathe,  for  example,  having  a screw  motion  to  its  sliding-rest 
along  the  whole  length  of  its  bed,  is  kept  constantly  making  cylinders; 
another,  having  a motion  for  equalizing  the  velocity  of  the  work  at 
the  point  at  which  it  passes  the  tool,  is  kept  for  facing  surfaces ; 
whilst  a third  is  constantly  employed  in  cutting  wheels.” 

I am  very  far  from  implying  that  these  different  considerations 
are  of  no  weight ; but  I think  there  are  counter-considerations 
which  are  overlooked.  If  one  kind  of  muscular  or  mental  labour 
is  different  from  another,  for  that  very  reason  it  is  to  some  extent 
a rest  from  that  other ; and  if  the  greatest  vigour  is  not  at  once 
obtained  in  the  second  occupation,  neither  could  the  first  have  been 
indefinitely  prolonged  without  some  relaxation  of  energy.  It  is  a 
matter  of  common  experience  that  a change  of  occupation  will  often 
afford  relief  where  complete  repose  would  otherwise  be  necessary, 
and  that  a person  can  work  many  more  hours  without  fatigue  at  a 
succession  of  occupations,  than  if  confined  during  the  whole  time  to 
one.  Different  occupations  employ  different  muscles,  of  different 
energies  of  the  mind,  some  of  which  rest  and  are  refreshed  while 
others  work.  Bodily  labour  itself  rests  from  mental,  and  conversely. 
The  variety  itself  has  an  invigorating  effect  on  what,  for  want  of  a 
more  philosophical  appellation,  we  must  term  the  animal  spirits ; 
so  important  to  the  efficiency  of  all  work  not  mechanical,  and  not 
unimportant  even  to  that.  The  comparative  weight  due  to  these 
' considerations  is  different  with  different  individuals  ; some  are  more 
fitted  than  others  for  persistency  in  one  occupation,  and  less  fit  for 
change  ; they  require  longer  to  get  the  steam  up  (to  use  a metaphor 
now  common) ; the  irksomeness  of  setting  to  work  lasts  longer, 
and  it  requires  more  time  to  bring  their  faculties  into  full  play,  and 
therefore  When  this  is  once  done,  they  do  not  like  to  leave  off,  but  go 
on  long  without  intermission,  even  to  the  injury  of  their  health. 
Temperament  has  something  to  do  with  these  differences.  There  are 
people  whose  faculties  seem  by  nature  to  come  slowly  into  action, 
and  to  accomplish  little  until  they  have  been  a long  time  employed. 
Others,  again,  get  into  action  rapidly,  but  cannot,  without  exhaustion, 
contmue  long.  In  this,  however,  as  in  most  other  things,  though 
natural  differences  are  something,  habit  is  much  more.  The  habit 
of  passing  rapidly  from  one  occupation  to  another  may  be  acquired, 
like  other  habits,  by  early  cultivation  ; and  when  it  is  acquired,  there 
is  none  of  the  sauntering  which  Adam  Smith  speaks  of,  after  each 
change  ; no  want  of  energy  and  interest,  but  the  workman  comes  to 
each  part  of  his  occupation  with  a freshness  and  a spirit  which  he 


128 


BOOK  I.  CHAPTER  VIIL  § 5 


does  not  retain  if  he  persists  in  any  one  part  (unless  in  case  of 
unusual  excitement)  beyond  the  length  of  time  to  which  he  is  accus- 
tomed. Women  are  usually  (at  least  in  their  present  social  circum- 
stances) of  far  greater  versatility  than  men  ; and  the  present  topic 
is  an  instance  among  multitudes,  how  tittle  the  ideas  and  experience 
of  women  have  yet  counted  for,  in  forming  the  opinions  of  mankind. 
There  are  few  women  who  would  not  reject  the  idea  that  work  is 
made  vigorous  by  being  protracted,  and  is  inefficient  for  some  time 
after  changing  to  a new  thing.  Even  in  this  case,  habit,  I beheve, 
much  more  than  nature,  is  the  cause  of  the  difference.  The  occupa- 
tions of  nine  out  of  every  ten  men  are  special,  those  of  nine  out  of 
every  ten  women  general,  embracing  a multitude  of  details  each  of 
which  requires  very  little  time.  Women  are  in  the  constant  practice 
of  passing  quickly  from  one  manual,  and  still  more  from  one  mental 
operation  to  another,  which  therefore  rarely  costs  them  either  effort 
or  loss  of  time,  while  a man’s  occupation  generally  consists  in  work- 
ing steadily  for  a long  time  at  one  thing,  or  one  very  hmited  class 
of  things.  But  the  situations  are  sometimes  reversed,  and  with 
them  the  characters.  Women  are  not  found  less  efficient  than  men 
for  the  uniformity  of  factory  work,  or  they  would  not  so  generally 
be  employed  for  it ; and  a man  who  has  cultivated  the  habit  of 
turning  his  hand  to  many  things,  far  from  being  the  slothful  and  lazy 
person  described  by  Adam  Smith,  is  usually  remarkably  lively  and 
active.  It  is  true,  however,  that  change  of  occupation  may  be  too 
frequent  even  for  the  most  versatile.  Incessant  variety  is  even  more 
fatiguing  than  perpetual  sameness. 

The  third  advantage  attributed  by  Adam  Smith  to  the  division 
of  labour,  is,  to  a certain  extent,  real.  Inventions  tending  to  save 
labour  in  a particular  operation,  are  more  likely  to  occur  to  any  one 
in  proportion  as  his  thoughts  are  intensely  directed  to  that  occupa- 
tion, and  continually  employed  upon  it.  A person  is  not  so  likely 
to  make  practical  improvements  in  one  department  of  things,  whose 
attention  is  very  much  diverted  to  others.  But,  in  this,  much  more 
depends  on  general  intelligence  and  habitual  activity  of  mind,  than 
on  exclusiveness  of  occupation  ; and  if  that  exclusiveness  is  carried 
to  a degree  unfavourable  to  the  cultivation  of  intelligence,  there  will 
be  more  lost  in  this  kind  of  advantage,  than  gained.  We  may  add, 
that  whatever  may  be  the  cause  of  making  inventions,  when  they  are 
once  made,  the  increased  efficiency  of  labour  is  owing  to  the  invention 
itself,  and  not  to  the  division  of  labour. 

The  greatest  advantage  (next  to  the  dexterity  of  the  workmen) 


COMBINATION  OF  LABOUR 


129 


derived  from  the  minute  division  of  labour  which  takes  place  in 
modern  manufacturing  industry,  is  one  not  mentioned  by  Adam 
Smith,  but  to  which  attention  has  been  drawn  by  Mr.  Babbage ; 
the  more  economical  distribution  of  labour,  by  classing  the  work- 
people according  to  their  capacity.  Different  parts  of  the  same 
series  of  operations  require  unequal  degrees  of  skill  and  bodily 
strength ; and  those  who  have  skill  enough  for  the  most  difficult, 
or  strength  enough  for  the  hardest  parts  of  the  labour,  are  made 
much  more  useful  by  being  employed  solely  in  them  ; the  operations 
which  everybody  is  capable  of,  being  left  to  those  who  are  fit  for  no 
others.  Production  is  most  efficient  when  the  precise  quantity  of 
skill  and  strength,  which  is  required  for  each  part  of  the  process,  is 
employed  in  it,  and  no  more.  The  operation  of  pin-making  requires, 
it  seems,  in  its  different  parts,  such  different  degrees  of  skill,  that  the 
wages  earned  by  the  persons  employed  vary  from  fourpence  half- 
penny a day  to  six  shillings  ; and  if  the  workman  who  is  paid  at  that 
highest  rate  had  to  perform  the  whole  process,  he  would  be  working 
a part  of  his  time  with  a waste  per  day  equivalent  to  the  difference 
between  six  shillings  and  fourpence  halfpenny.  Without  reference 
to  the  loss  sustained  in  quantity  of  work  done,  and  supposing  even 
that  he  could  make  a pound  of  pins  in  the  same  time  in  which  ten 
workmen  combining  their  labour  can  make  ten  pounds,  Mr.  Bab- 
bage computes  that  they  would  cost,  in  making,  three  times  and 
chree-quarters  as  much  as  they  now  do  by  means  of  the  division  of 
labour.  In  needle-making,  he  adds,  the  difference  would  be  still 
greater,  for  in  that,  the  scale  of  remuneration  for  different  parts  of 
the  process  varies  from  sixpence  to  twenty  shillings  a day. 

To  the  advantage  which  consists  in  extracting  the  greatest 
possible  amount  of  utility  from  skill,  may  be  added  the  analogous 
one,  of  extracting  the  utmost  possible  utility  from  tools.  “ If  any 
man,”  says  an  able  writer,*  “ had  all  the  tools  which  many  different 
occupations  require,  at  least  three-fourths  of  them  would  constantly 
be  idle  and  useless.  It  were  clearly  then  better,  were  any  society 
to  exist  where  each  man  had  all  these  tools,  and  alternately  carried 
on  each  of  these  occupations,  that  the  members  of  it  should,  if 
possible,  divide  them  amongst  them,  each  restricting  himself  to 
some  particular  employment.  The  advantages  of  the  change  to 
the  whole  community,  and  therefore  to  every  individual  in  it,  are 

♦ StcUement  of  some  New  Principles  on  the  subject  of  Political  Economy, 
by  John  Rae  (Boston,  U.S.),  p.  164.  {Sociological  Theory  of  Capital  (1906), 
p.  102.  See  infra,  p.  165  n.] 


130 


BOOK  I.  CHAPTER  VIII.  § 6 


great.  In  the  first  place,  the  various  implements  being  in  constant 
employment,  yield  a better  return  for  what  has  been  laid  out  in 
procuring  them.  In  consequence  their  owners  can  afford  to  have 
them  of  better  quality  and  more  complete  construction.  The  result 
of  both  events  is,  that  a larger  provision  is  made  for  the  future  wants 
of  the  whole  society.’* 

§ 6.  The  division  of  labour,  as  all  writers  on  the  subject  have 
remarked,  is  limited  by  the  extent  of  the  market.  If,  by  the  separa- 
tion of  pin-making  into  ten  distinct  employments,  forty-eight 
thousand  pins  can  be  made  in  a day,  this  separation  will  only 
be  advisable  if  the  number  of  accessible  consumers  is  such  as  tc 
require,  every  day,  something  like  forty-eight  thousand  pins.  If 
there  is  only  a demand  for  twenty-four  thousand,  the  division  of 
labour  can  only  be  advantageously  carried  to  the  extent  which 
will  every  day  produce  that  smaller  number.  This,  therefore,  is 
a further  mode  in  which  an  accession  of  demand  for  a commodity 
tends  to  increase  the  efficiency  of  the  labour  employed  in  its  pro- 
duction. The  extent  of  the  market  may  be  limited  by  several 
causes  : too  small  a population  ; the  population  too  scattered  and 
distant  to  be  easily  accessible ; deficiency  of  roads  and  water  carriage ; 
or,  finally,  the  population  too  poor,  that  is,  their  collective  labour 
too  little  effective,  to  admit  of  their  being  large  consumers.  In- 
dolence, want  of  skill,  and  want  of  combination  of  labour,  among 
those  who  would  otherwise  be  buyers  of  a commodity,  limit,  there- 
fore, the  practical  amount  of  combination  of  labour  among  its 
producers.  In  an  early  stage  of  civilization,  when  the  demand 
of  any  particular  locality  was  necessarily  small,  industry  only 
flourished  among  those  who,  by  their  command  of  the  sea-coast 
or  of  a navigable  river,  could  have  the  whole  world,  or  all  that 
part  of  it  which  lay  on  coasts  or  navigable  rivers,  as  a market 
for  their  productions.  The  increase  of  the  general  riches  of  the 
world,  when  accompanied  with  freedom  of  commercial  intercourse, 
improvements  in  navigation,  and  inland  communication  by  roads, 
canals,  or  railways,  tends  to  give  increased  productiveness  to  the 
labour  of  every  nation  in  particular,  by  enabling  each  locality  to 
supply  with  its  special  products  so  much  larger  a market,  that  a 
great  extension  of  the  division  of  labour  in  their  production  is  an 
ordinary  consequence. 

The  division  of  labour  is  also  limited,  in  many  cases,  by  the 
nature  of  the  employment.  Agriculture,  for  example,  is  not 


COMBINATION  OF  LABOUR 


131 


Busceptible  of  so  great  a division  of  occupations  as  many  branches 
of  manufactures,  because  its  different  operations  cannot  possibly 
be  simultaneous.  One  man  cannot  be  always  ploughing,  another 
sowing,  and  another  reaping.  A workman  who  only  practised  one 
agricultural  operation  would  be  idle  eleven  months  of  the  year. 
The  same  person  may  perform  them  all  in  succession,  and  have, 
in  most  climates,  a considerable  amount  of  unoccupied  time.  To 
execute  a great  agricultural  improvement,  it  is  often  necessary  that 
many  labourers  should  work  together  ; but  in  general,  except  the  few 
whose  business  is  superintendence,  they  all  work  in  the  same  manner. 
A canal  or  a railway  embankment  cannot  be  made  without  a com- 
bination of  many  labourers ; but  they  are  all  excavators,  except 
the  engineers  and  a few  clerks.^ 

^ [See  Appendix  G.  Division  and  Combination  of  Labour. 


CHAPTER  IX 


OP  PRODUCTION  ON  A LARGE,  AND  PRODUCTION  ON 
A SMALL  SCALE 

§ 1.  From  the  importance  of  combination  of  labour,  it  is  an 
obvious  conclusion,  that  there  are  many  cases  in  which  production 
is  made  much  more  effective  by  being  conducted  on  a large  scale. 
Whenever  it  is  essential  to  the  greatest  efficiency  of  labour  that 
many  labourers  should  combine,  even  though  only  in  the  way  of 
Simple  Co-operation,  the  scale  of  the  enterprise  must  be  such  as 
to  bring  many  labourers  together,  and  the  capital  must  be  large 
enough  to  maintain  them.  Still  .more  needful  is  this  when  the 
nature  of  the  employment  allows,  and  the  extent  of  the  possible 
market  encourages,  a considerable  division  of  labour.  The  larger 
the  enterprise,  the  farther  the  division  of  labour  may  be  carried. 
This  is  one  of  the  principal  causes  of  large  manufactories.  Even 
when  no  additional  subdivision  of  the  work  would  follow  an  enlarge- 
ment of  the  operations,  there  will  be  good  economy  in  enlarging 
them  to  the  point  at  which  every  person  to  whom  it  is  convenient 
to  assign  a special  occupation,  will  have  full  employment  in  that 
occupation.  This  point  is  well  illustrated  by  Mr.  Babbage.* 

“ If  machines  be  kept  working  through  the  twenty-four  hours 
(which  is  evidently  the  only  economical  mode  of  employing  them,) 
“ it  is  necessary  that  some  person  shall  attend  to  admit  the  workmen 
at  the  time  they  relieve  each  other ; and  whether  the  porter  or 
other  person  so  employed  admit  one  person  or  twenty,  his  rest 
will  be  equally  disturbed.  It  will  also  be  necessary  occasionally 
to  adjust  or  repair  the  machine  ; and  this  can  be  done  much  better 
by  a workman  accustomed  to  machine-making,  than  by  the  person 
who  uses  it.  Now,  since  the  good  performance  and  the  duration 
of  machines  depend,  to  a very  great  extent,  upon  correcting  every 
shake  or  imperfection  in  their  parts  as  soon  as  they  appear,  the 
* Page  214  et  seqq. 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  133 


prompt  attention  of  a workman  resident  on  the  spot  will  con- 
siderably reduce  the  expenditure  arising  from  the  wear  and  tear 
of  the  machinery.  But  in  the  case  of  a single  lace-frame,  or  a single 
loom,  this  would  be  too  expensive  a plan.  Here  then  arises  another 
circumstance  which  tends  to  enlarge  the  extent  of  a factory.  It 
ought  to  consist  of  such  a number  of  machines  as  shall  occupy  the 
whole  time  of  one  workman  in  keeping  them  in  order  : if  extended 
beyond  that  number,  the  same  principle  of  economy  would  point 
out  the  necessity  of  doubling  or  tripling  the  number  of  machines,  in 
order  to  employ  the  whole  time  of  two  or  three  skilful  workmen. 

“ When  one  portion  of  the  workman’s  labour  consists  in  the 
exertion  of  mere  physical  force,  as  in  weaving,  and  in  many  similar 
arts,  it  will  soon  occur  to  the  manufacturer,  that  if  that  part  were 
executed  by  a steam-engine,  the  same  man  might,  in  the  case  of 
weaving,  attend  to  two  or  more  looms  at  once  : and,  since  we  already 
suppose  that  one  or  more  operative  engineers  have  been  employed, 
the  number  of  looms  may  be  so  arranged  that  their  time  shall  be 
fulljr  occupied  in  keeping  the  steam-engine  and  the  looms  in  order. 

* Pursuing  the  same  principles,  the  manufactory  becomes 
gradually  so  enlarged,  that  the  expense  of  lighting  during  the 
night  amounts  to  a considerable  sum  : and  as  there  are  already 
attached  to  the  establishment  persons  who  are  up  all  night,  and 
can  therefore  constantly  attend  to  it,  and  also  engineers  to  make 
and  keep  in  repair  any  machinery,  the  addition  of  an  apparatus 
for  making  gas  to  light  the  factory  leads  to  a new  extension,  at 
the  same  time  that  it  contributes,  by  diminishing  the  expense 
of  lighting,  and  the  risk  of  accidents  from  fire,  to  reduce  the  cost 
of  manufacturing. 

“ Long  before  a factory  has  reached  this  extent,  it  will  have 
been  found  necessary  to  establish  an  accountant’s  department,  with 
clerks  to  pay  the  workmen,  and  to  see  that  they  arrive  at  their 
stated  times  ; and  this  department  must  be  in  communication 
with  the  agents  who  purchase  the  raw  produce,  and  with  those 
who  sell  the  manufactured  article.”  It  will  cost  these  clerks  and 
accountants  little  more  time  and  trouble  to  pay  a large  number  of 
workmen  than  a small  number ; to  check  the  accounts  of  large 
transactions,  than  of  small.  If  the  business  doubled  itself,  it 
would  probably  be  necessary  to  increase,  but  certainly  not  to 
double,  the  number  either  of  accountants,  or  of  buying  and  selling 
agents.  Every  increase  of  business  would  enable  the  whole  to 
be  carried  on  with  a proportionately  smaller  amount  of  labour. 


134 


BOOK  I.  CHAPTER  IX.  § 1 


As  a general  rule,  the  expenses  of  a business  do  not  increase 
by  any  means  proportionally  to  the  quantity  of  business.  Let 
us  take  as  an  example,  a set  of  operations  which  we  are  accustomed 
to  see  carried  on  by  one  great  establishment,  that  of  the  Post  Office. 
Suppose  that  the  business,  let  us  say  only  of  the  London  letter-post, 
instead  of  being  centralized  in  a single  concern,  were  divided  among 
five  or  six  competing  companies.  Each  of  these  would  be  obliged 
to  maintain  almost  as  large  an  establishment  as  is  now  sufficient 
for  the  whole.  Since  each  must  arrange  for  receiving  and  delivering 
letters  in  all  parts  of  the  town,  each  must  send  letter-carriers  into 
every  street,  and  almost  every  alley,  and  this  too  as  many  times 
in  the  day  as  is  now  done  by  the  Post  Office,  if  the  service  is 
to  be  as  well  performed.  Each  must  have  an  office  for  receiving 
letters  in  every  neighbourhood,  with  all  subsidiary  arrangements  for 
collecting  the  letters  from  the  different  offices  and  re-distributing 
them.  To  this  must  be  added  the  much  greater  number  of  superior 
officers  who  would  be  required  to  check  and  control  the  subordinates, 
implying  not  only  a greater  cost  in  salaries  for  such  responsible 
officers,  but  the  necessity,  perhaps,  of  being  satisfied  in  many 
instances  with  an  inferior  standard  of  quahfication,  and  so  failing 
in  the  object. 

Whether  or  not  the  advantages  obtained  by  operating  on  a 
large  scale  preponderate  in  any  particular  case  over  the  more 
watchful  attention,  and  greater  regard  to  minor  gains  and  losses, 
usually  found  in  small  establishments,  can  be  ascertained,  in  a 
state  of  free  competition,  by  an  unfailing  test.  Wherever  there 
are  large  and  small  establishments  in  the  same  business,  that  one 
of  the  two  which  in  existing  circumstances  carries  on  the  production 
at  greatest  advantage  will  be  able  to  undersell  the  other.  The 
power  of  permanently  underselling  can  only,'  generally  speaking, 
be  derived  from  increased  efiectiveness  of  labour ; and  this,  when 
obtained  by  a more  extended  division  of  employment,  or  by  a 
classification  tending  to  a better  economy  of  skill,  always  implies  a 
greater  produce  from  the  same  labour,  and  not  merely  the  same 
produce  from  less  labour  : it  increases  not  the  surplus  only,  but 
the  gross  produce  of  industry.  If  an  increased  quantity  of  the 
particular  article  is  not  required,  and  part  of  the  labourers  in  con- 
sequence lose  their  employment,  the  capital  which  maintained 
and  employed  them  is  also  set  at  liberty  ; and  the  general  produce 
of  the  country  is  increased  by  some  other  application  of  their 
labour. 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  136 


Another  of  the  causes  of  large  manufactories,  however,  is  the 
introduction  of  processes  requiring  expensive  machinery.  Expensive 
machinery  supposes  a large  capital ; and  is  not  resorted  to  except 
with  the  intention  of  producing,  and  the  hope  of  selling,  as  much 
of  the  article  as  comes  up  to  the  full  powers  of  the  machine.  For 
both  these  reasons,  wherever  costly  machinery  is  used,  the  large 
system  of  production  is  inevitable.  But  the  power  of  underselling 
is  not  in  this  case  so  unerring  a test  as  in  the  former,  of  the  beneficial 
effect  on  the  total  production  of  the  community.  The  power  of 
underselling  does  not  depend  on  the  absolute  increase  of  produce, 
but  on  its  bearing  an  increased  proportion  to  the  expenses  ; which, 
as  was  shown  in  a former  chapter,*  it  may  do,  consistently  with  even 
a diminution  of  the  gross  annual  produce.  By  the  adoption  of 
machinery,  a circulating  capital,  which  was  perpetually  consumed 
and  reproduced,  has  been  converted  into  a fixed  capital,  requiring 
only  a small  annual  expense  to  keep  it  up  : and  a much  smaller 
produce  will  suffice  for  merely  covering  that  expense,  and  replacing 
the  remaining  circulating  capital  of  the  producer.  The  machinery 
therefore  might  answer  perfectly  well  to  the  manufacturer,  and 
enable  him  to  undersell  his  competitors,  though  the  effect  on  the 
production  of  the  country  might  be  not  an  increase  but  a diminution. 
It  is  true,  the  article  will  be  sold  cheaper,  and  therefore,  of  that 
single  article,  there  will  probably  be  not  a smaller,  but  a greater 
quantity  sold ; since  the  loss  to  the  community  collectively  has 
fallen  upon  the  work-people,  and  they  are  not  the  principal  customers, 
if  customers  at  all,  of  most  branches  of  manufacture.  But  though 
that  particular  branch  of  industry  may  extend  itself,  it  will  be 
by  replenishing  its  diminished  circulating  capital  from  that  of  the 
community  generally ; and  if  the  labourers  employed  in  that 
department  escape  loss  of  employment,  it  is  because  the  loss  will 
spread  itself  over  the  labouring  people  at  large.  If  any  of  them 
are  reduced  to  the  condition  of  unproductive  labourers,  supported 
by  voluntary  or  legal  charity,  the  gross  produce  of  the  country 
is  to  that  extent  permanently  diminished,  until  the  ordinary  progress 
of  accumulation  makes  it  up  ; but  if  the  condition  of  the  labouring 
classes  enables  them  to  bear  a temporary  reduction  of  wages,  and 
the  superseded  labourers  become  absorbed  in  other  employments, 
their  labour  is  still  productive,  and  the  breach  in  the  gross  produce  of 
the  community  is  repaired,  though  not  the  detriment  to  the  labourers. 
I have  restated  this  exposition,  which  has  already  been  made  in  a 
* Supra,  chap.  vi. 


136 


BOOK  I.  CHAPTER  IX.  § 1 


former  place,  to  impress  more  strongly  the  truth,  that  a mode  of 
production  does  not  of  necessity  increase  the  productive  effect  of 
the  collective  labour  of  a community,  because  it  enables  a particular 
commodity  to  be  sold  cheaper.  The  one  consequence  generally 
accompanies  the  other,  but  not  necessarily.  I will  not  here  repeat 
the  reasons  I formerly  gave,  nor  anticipate  those  which  will  be  given 
more  fully  hereafter,  for  deeming  the  exception  to  be  rather  a 
case  abstractedly  possible,  than  one  which  is  frequently  realized  in 
fact. 

A considerable  part  of  the  saving  of  labour  effected  by  substituting 
the  large  system  of  production  for  the  small,  is  the  saving  in  the 
labour  of  the  capitalists  themselves.  If  a hundred  producers  with 
small  capitals  carry  on  separately  the  same  business,  the  super- 
intendence of  each  concern  will  probably  require  the  whole  attention 
of  the  person  conducting  it,  sufficiently  at  least  to  hinder  his  time 
or  thoughts  from  being  disposable  for  anything  else  : while  a 
single  manufacturer  possessing  a capital  equal  to  the  sum  of  theirs, 
with  ten  or  a dozen  clerks,  could  conduct  the  whole  of  their  amount 
of  business,  and  have  leisure  too  for  other  occupations.  The 
small  capitalist,  it  is  true,  generally  combines  with  the  business 
of  direction  some  portion  of  the  details,  which  the  other  leaves  to 
his  subordinates : the  small  farmer  follows  his  own  plough,  the 
small  tradesman  serves  in  his  own  shop,  the  small  weaver  plies 
his  own  loom.  But  in  this  very  union  of  functions  there  is,  in 
a great  proportion  of  cases,  a want  of  economy.  The  principal 
in  the  concern  is  either  wasting,  in  the  routine  of  a business,  qualities 
suitable  for  the  direction  of  it,  or  he  is  only  fit  for  the  former,  and 
then  the  latter  will  be  ill  done.  I must  observe,  however,  that  I 
do  not  attach,  to  this  saving  of  labour,  the  importance  often  ascribed 
to  it.  There  is  undoubtedly  much  more  labour  expended  in  the 
superintendence  of  many  small  capitals  than  in  that  of  one  large 
capital.  For  this  labour  however  the  small  producers  have  generally 
a full  compensation,  in  the  feehng  of  being  their  own  masters,  and 
not  servants  of  an  employer.  It  may  be  said,  that  if  they  value 
this  independence  they  will  submit  to  pay  a price  for  it,  and  to 
sell  at  the  reduced  rates  occasioned  by  the  competition  of  the 
great  dealer  or  manufacturer.  But  they  cannot  always  do  this 
and  continue  to  gain  a living.  They  thus  gradually  disappear  from 
society.  After  having  consumed  their  little  capital  in  prolonging 
the  unsuccessful  struggle,  they  either  sink  into  the  condition  of 
hired  labourers,  or  become  dependent  on  others  for  support. 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  137 


§ 2.  Production  on  a large  scale  is  greatly  promoted  by  the 
practice  of  forming  a large  capital  by  the  combination  of  many  small 
contributions  ; or,  in  other  words,  by  the  formation  of  joint  stock 
companies.  The  advantages  of  the  joint  stock  principle  are  numerous 
and  important. 

In  the  first  place,  many  undertakings  require  an  amount  of 
capital  beyond  the  means  of  the  richest  individual  or  private  partner- 
ship. No  individual  could  have  made  a railway  from  London  to 
Liverpool  ; it  is  doubtful  if  any  individual  could  even  work  the 
traffic  on  it,  now  when  it  is  made.  The  government  indeed  could 
have  done  both  ; and  in  countries  where  the  practice  of  co-operation 
is  only  in  the  earlier  stages  of  its  growth,  the  government  can  alone 
be  looked  to  for  any  of  the  works  for  which  a great  combination 
of  means  is  requisite ; because  it  can  obtain  those  means  by  com- 
pulsory taxation,  and  is  already  accustomed  to  the  conduct  of 
large  operations.  For  reasons,  however,  which  are  tolerably  well 
known,  and  of  which  we  shall  treat  fully  hereafter,  government 
agency  for  the  conduct  of  industrial  operations  is  generally  one  of 
the  least  eligible  of  resources,  when  any  other  is  available. 

Next,  there  are  undertakings  which  individuals  are  not  abso- 
lutely incapable  of  performing,  but  which  they  cannot  perform 
on  the  scale  and  with  the  continuity  which  are  ever  more  and  more 
required  by  the  exigencies  of  a society  in  an  advancing  state.  Indi- 
viduals are  quite  capable  of  despatching  ships  from  England  to 
any  or  every  part  of  the  world,  to  carry  passengers  and  letters  ; 
the  thing  was  done  before  joint  stock  companies  for  the  purpose 
were  heard  of.  But  when,  from  the  increase  of  population  and 
transactions,  as  well  as  of  means  of  payment,  the  public  will  no 
longer  content  themselves  with  occasional  opportunities,  but 
require  the  certainty  that  packets  shall  start  regularly,  for  some 
places  once  or  even  twice  a day,  for  others  once  a week,  for  others 
that  a steam  ship  of  great  size  and  expensive  construction  shall 
depart  on  fixed  days  twice  in  each  month,  it  is  evident  that  to  afford 
an  assurance  of  keeping  up  with  punctuality  such  a circle  of  costly 
operations,  requires  a much  larger  capital  and  a much  larger  staff 
of  quahfied  subordinates  than  can  be  commanded  by  an  individual 
capitalist.  There  are  other  cases,  again,  in  which  though  the 
business  might  be  perfectly  well  transacted  with  small  or  moderate 
capitals,  the  guarantee  of  a great  subscribed  stock  is  necessary 
or  desirable  as  a security  to  the  pubhc  for  the  fulfilment  of  pecuniary 
engagements.  This  is  especially  the  case  when  the  nature  of  the 


138 


BOOK  I.  CHAPTER  IX.  § 2 


business  requires  that  numbers  of  persons  should  be  willing  to  trust 
the  concern  with  their  money : as  in  the  business  of  banking,  and 
that  of  insurance : to  both  of  which  the  joint  stock  principle  is 
eminently  adapted.  It  is  an  instance  of  the  folly  and  jobbery  of 
the  rulers  of  mankind,  that  until  a late  period  the  joint  stock  prin- 
ciple, as  a general  resort,  was  in  this  country  interdicted  by  law 
to  these  two  modes  of  business ; to  banking  altogether,  and  to 
insurance  in  the  department  of  sea  risks ; in  order  to  bestow  a 
lucrative  monopoly  on  particular  establishments  which  the  govern- 
ment was  pleased  exceptionally  to  license,  namely  the  Bank  of 
England,  and  two  insurance  companies,  the  London  and  the  Royal 
Exchange. 

^ Another  advantage  of  joint  stock  or  associated  management,  is 
its  incident  of  publicity.  This  is  not  an  invariable,  but  it  is  a natural 
consequence  of  the  joiut  stock  principle,  and  might  be,  as  in  some 
important  cases  it  already  is,  compulsory.  In  banking,  insurance, 
and  other  businesses  which  depend  wholly  on  confidence,  publicity 
is  a still  more  important  element  of  success  than  a large  subscribed 
capital.  A heavy  loss  occurring  in  a private  bank  may  be  kept  secret ; 
even  though  it  were  of  such  magnitude  as  to  cause  the  ruin  of  the 
concern,  the  banker  may  still  carry  it  on  for  years,  trying  to  retrieve 
its  position,  only  to  fall  in  the  end  with  a greater  crash : but  this 
cannot  so  easily  happen  in  the  case  of  a joint  stock  company, 
whose  accounts  are  published  periodically.  The  accoimts,  even  if 
cooked,  still  exercise  some  check  ; and  the  suspicions  of  shareholders, 
breaking  out  at  the  general  meetings,  put  the  public  on  their  guard. 

These  are  some  of  the  advantages  of  joint  stock  over  iudividual 
management.  But  if  we  look  to  the  other  side  of  the  question,  we 
shall  find  that  individual  management  has  also  very  great  advan- 
tages over  joint  stock.  The  chief  of  these  is  the  much  keener  interest 
of  the  managers  in  the  success  of  the  undertaking. 

The  administration  of  a joint  stock  association  is,  in  the  main, 
administration  by  hired  servants.  Even  the  committee,  or  board 
of  directors,  who  are  supposed  to  superintend  the  management, 
and  who  do  really  appoint  and  remove  the  managers,  have  no 
pecuniary  interest  in  the  good  working  of  the  concern  beyond 
the  shares  they  individually  hold,  which  are  always  a very  small 
part  of  the  capital  of  the  association,  and  in  general  but  a small 
part  of  the  fortunes  of  the  directors  themselves  ; and  the  part 
they  take  in  the  management  usually  divides  their  time  with  many 
1 [This  paragraph  was  added  in  the  6th  ed.  (1866).] 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  139 


other  occupations,  of  as  great  or  greater  importance  to  their  own 
interest ; the  business  being  the  principal  concern  of  no  one  except 
those  who  are  hired  to  carry  it  on.  But  experience  shows,  and 
proverbs,  the  expression  of  popular  experience,  attest,  how  inferior 
is  the  quality  of  hired  servants,  compared  with  the  ministration 
of  those  personally  interested  in  the  work,  and  how  indispensable, 
when  hired  service  must  be  employed,  is  “ the  master’s  eye  ” to  watch 
over  it. 

The  successful  conduct  of  an  industrial  enterprise  requires  two 
quite  distinct  quahfications  : fidehty,  and  zeal.  The  fidehty  of  the 
hired  managers  of  a concern  it  is  possible  to  secure.  When  their 
work  admits  of  being  reduced  to  a definite  set  of  rules,  the  violation 
of  these  is  a matter  on  which  conscience  cannot  easily  bhnd  itself, 
and  on  which  responsibility  may  be  enforced  by  the  loss  of  employ- 
ment. But  to  carry  on  a great  business  successfully,  requires  a 
hundred  things  which,  as  they  cannot  be  defined  beforehand,  it  is 
impossible  to  convert  into  distinct  and  positive  obligations.  First 
and  principally,  it  requires  that  the  directing  mind  should  be  inces- 
santly occupied  with  the  subject ; should  be  continually  laying 
schemes  by  which  greater  profit  may  be  obtained,  or  expense  saved. 
This  intensity  of  interest  in  the  subject  it  is  seldom  to  be  expected 
that  any  one  should  feel,  who  is  conducting  a business  as  the  hired 
servant  and  for  the  profit  of  another.  There  are  experiments  in 
human  affairs  which  are  conclusive  on  the  point.  Look  at  the  whole 
class  of  rulers,  and  ministers  of  state.  The  work  they  are  entrusted 
with,  is  among  the  most  interesting  and  exciting  of  all  occupations  ; 
the  personal  share  which  they  themselves  reap  of  the  national  bene- 
fits or  misfortunes  which  befal  the  state  under  their  rule,  is  far  from 
trifiing,  and  the  rewards  and  punishments  which  they  may  expect 
from  public  estimation  are  of  the  plain  and  palpable  kind  which  are 
most  keenly  felt  and  most  widely  appreciated.  Yet  how  rare  a thing 
is  it  to  find  a statesman  in  whom  mental  indolence  is  not  stronger 
than  all  these  inducements.  How  infinitesimal  is  the  proportion 
who  trouble  themselves  to  form,  or  even  to  attend  to,  plans  of  public 
improvement,  unless  when  it  is  made  still  more  troublesome  to  them 
to  remain  inactive ; or  who  have  any  other  real  desire  than  that  of 
rubbing  on,  so  as  to  escape  general  blame.  On  a smaller  scale, 
all  who  have  ever  employed  hired  labour  have  had  ample  experience 
of  the  efforts  made  to  give  as  little  labour  in  exchange  for  the  wages, 
as  is  compatible  with  not  being  turned  off.  The  imiversal  neglect 
by  domestic  servants  of  their  employer’s  interests,  wherever  these  are 


140 


BOOK  I.  CHAPTER  IX.  § 2 


not  protected  by  some  fixed  rule,  is  matter  of  common  remark ; 
unless  where  long  continuance  in  the  same  service,  and  reciprocal  good 
ofiices,  have  produced  either  personal  attachment,  or  some  feeling  of 
a common  interest. 

Another  of  the  disadvantages  of  joint  stock  concerns,  which  is 
in  some  degree  common  to  all  concerns  on  a large  scale,  is  disregard 
of  small  gains  and  small  savings.  In  the  management  of  a great 
capital  and  great  transactions,  especially  when  the  managers  have 
not  much  interest  in  it  of  their  own,  small  sums  are  apt  to  be  counted 
for  next  to  nothing ; they  never  seem  worth  the  care  and  trouble 
which  it  costs  to  attend  to  them,  and  the  credit  of  hberality  and 
openhandedness  is  cheaply  bought  by  a disregard  of  such  trifling 
considerations.  But  small  profits  and  small  expenses  often  repeated 
amount  to  great  gains  and  losses : and  of  this  a large  capitalist  is 
often  a sufficiently  good  calculator  to  be  practically  aware  ; and  to 
arrange  his  business  on  a system  which,  if  enforced  by  a sufficiently 
vigilant  superintendence,  precludes  the  possibility  of  the  habitual 
waste  otherwise  incident  to  a great  business.  But  the  managers  of 
a joint  stock  concern  seldom  devote  themselves  sufficiently  to  the 
work,  to  enforce  unremittingly,  even  if  introduced,  through  every 
detail  of  the  business,  a really  economical  system. 

From  considerations  of  this  nature,  Adam  Smith  was  led  to 
enunciate  as  a principle,  that  joint  stock  companies  could  never  be 
expected  to  maintain  themselves  without  an  exclusive  privilege, 
except  in  branches  of  business  which,  like  banking,  insurance,  and 
some  others,  admit  of  being,  in  a considerable  degree,  reduced  to 
fixed  rules.  This,  however,  is  one  of  those  over-statements  of  a 
true  principle,  often  met  with  in  Adam  Smith.  In  his  days'there 
were  few  instances  of  joint  stock  companies  which  had  been  perman- 
ently successful  without  a monopoly,  except  the  class  of  cases  which 
he  referred  to  ; but  since  his  time  there  have  been  many  ; and  the 
regular  increase  both  of  the  spirit  of  combination  and  of  the  ability 
to  combine  will  doubtless  produce  many  more.  Adam  Smith  fixed 
his  observation  too  exclusively  on  the  superior  energy  and  more 
unremitting  attention  brought  to  a business  in  which  the  whole 
stake  and  the  whole  gain  belong  to  the  persons  conducting  it ; and 
he  overlooked  various  countervailing  considerations  which  go  a 
great  way  towards  neutralizing  even  that  great  point  of  superiority. 

Of  these  one  of  the  most  important  is  that  which  relates  to  the 
intellectual  and  active  qualifications  of  the  directing  head.  The 
stimulus  of  individual  interest  is  some  security  for  exertion,  but 


PRODUCTION  ON  A L.\RGE  AND  ON  A SMALL  SCALE  141 


exertion  is  of  little  avail  if  the  intelligence  exerted  is  of  an  inferior 
order,  which  it  must  necessarily  be  in  the  majority  of  concerns 
carried  on  by  the  persons  chiefly  interested  in  them.  Where  the 
concern  is  large,  and  cm  afford  a remuneration  sufficient  to  attract 
a class  of  candidates  superior  to  the  common  average,  it  is  possible 
to  select  for  the  general  management,  and  for  all  the  skilled  employ- 
ments of  a subordinate  kind,  persons  of  a degree  of  acquirement 
and  cultivated  intelligence  which  more  than  compensates  for  their 
inferior  interest  in  the  result.  Their  greater  perspicacity  enables 
them,  with  even  a part  of  their  minds,  to  see  probabilities  of  advan- 
tage which  never  occur  to  the  ordinary  run  of  men  by  the  continued 
exertion  of  the  whole  of  theirs ; and  their  superior  knowledge, 
and  habitual  rectitude  of  perception  and  of  judgment,  guard  them 
against  blunders,  the  fear  of  which  would  prevent  the  others 
from  hazarding  their  interests  in  any  attempt  out  of  the  ordinary 
routine. 

It  must  be  further  remarked,  that  it  is  not  a necessary  conse- 
quence of  joint  stock  management,  that  the  persons  employed, 
whether  in  superior  or  in  subordinate  offices,  should  be  paid  wholly 
by  fixed  salaries.  There  are  modes  of  connecting  more  or  less 
intimately  the  interest  of  the  employes  with  the  pecuniary  success 
of  the  concern.  There  is  a long  series  of  intermediate  positions, 
between  working  wholly  on  one’s  own  account,  and  working  by  the 
day,  week,  or  year  for  an  invariable  payment.  Even  in  the  case  of 
ordinary  unskilled  labour,  there  is  such  a thing  as  task-work,  or 
working  by  the  piece  : and  the  superior  efficiency  of  this  is  so  well 
known,  that  judicious  employers  always  resort  to  it  when  the  work 
admits  of  being  put  out  in  definite  portions,  without  the  necessity 
of  too  troublesome  a surveillance  to  guard  against  inferiority  in  the 
execution.  In  the  case  of  the  managers  of  joint  stock  companies, 
and  of  the  superintending  and  controlling  officers  in  many  private 
establishments,  it  is  a common  enough  practice  to  connect  their 
pecuniary  interest  with  the  interest  of  their  employers,  by  giving 
them  part  of  their  remuneration  in  the  form  of  a percentage  on  the 
profits.  The  personal  interest  thus  given  to  hired  servants  is  not 
comparable  in  intensity  to  that  of  the  owner  of  the  capital ; but  it  is 
sufficient  to  be  a very  material  stimulus  to  zeal  and  carefulness,  and, 
when  added  to  the  advantage  of  superior  intelligence,  often  raises 
the  quahty  of  the  service  much  above  that  which  the  generahty 
of  masters  are  capable  of  rendering  to  themselves.  The  ulterior 
extensions  of  which  this  principle  of  remuneration  is  susceptible. 


142 


BOOK  I.  CHAPTER  IX.  § 3 


being  of  great  social  as  well  as  economical  importance,  will  be  more 
particularly  adverted  to  in  a subsequent  stage  of  tlie  present  inquiry. 

As  I have  already  remarked  of  large  establishments  generally, 
when  compared  with  small  ones,  whenever  competition  is  free  its 
results  will  show  whether  individual  or  joint  stock  agency  is  best 
adapted  to  the  particular  case,  since  that  which  is  most  efficient  and 
most  economical  will  always  in  the  end  succeed  in  underselling  the 
other, 

§ 3.  The  possibility  of  substituting  the  large  system  of  produc- 
tion for  the  small,  depends,  of  course,  in  the  first  place,  on  the  extent 
of  the  market.  The  large  system  can  only  be  advantageous  when  a 
large  amount  of  business  is  to  be  done  : it  implies,  therefore,  either 
a populous  and  flourishing  community,  or  a great  opening  for 
exportation.  Again,  this  as  well  as  every  other  change  in  the  system 
of  production  is  greatly  favoured  by  a progressive  condition  of 
capital.  It  is  chiefly  when  the  capital  of  a country  is  receiving  a 
great  annual  increase,  that  there  is  a large  amount  of  capital  seeking 
for  investment : and  a new  enterprise  is  much  sooner  and  more 
easily  entered  upon  by  new  capital,  than  by  withdrawing  capital 
from  existing  employments.  The  change  is  also  much  facihtated 
by  the  existence  of  large  capitals  in  few  hands.  It  is  true  that  the 
same  amount  of  capital  can  be  raised  by  bringing  together  many  small 
sums.  But  this  (besides  that  it  is  not  equally  well  suited  to  all 
branches  of  industry)  supposes  a much  greater  degree  of  commercial 
confidence  and  enterprise  diffused  through  the  community,  and 
belongs  altogether  to  a more  advanced  stage  of  industrial  progress. 

In  the  countries  in  which  there  are  the  largest  markets,  the 
widest  diffusion  of  commercial  confidence  and  enterprise,  the  greatest 
annual  increase  of  capital,  and  the  greatest  number  of  large  capitals 
owned  by  individuals,  there  is  a tendency  to  substitute  more  and 
more,  in  one  branch  of  industry  after  another,  large  establishments 
for  small  ones.  In  England,  the  chief  type  of  all  these  character- 
istics, there  is  a perpetual  growth  not  only  of  large  manufacturing 
establishments,  but  also,  wherever  a sufficient  number  of  purchasers 
are  assembled,  of  shops  and  warehouses  for  conducting  retail 
business  on  a large  scale.  These  are  almost  always  able  to  undersell 
the  smaller  tradesmen,  partly,  it  is  understood,  by  means  of  division 
of  labour,  and  the  economy  occasioned  by  limiting  the  employment 
of  skilled  agency  to  cases  where  skill  is  required ; and  partly,  no 
doubt,  by  the  saving  of  labour  arising  from  the  great  scale  of  the 


PROBUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  143 


transactions  ; aa  it  costs  no  more  time,  and  not  much  more  exertion 
of  mind,  to  make  a large  purchase,  for  example,  than  a small  one, 
and  very  much  less  than  to  make  a number  of  small  ones. 

With  a view  merely  to  production,  and  to  the  greatest  efficiency 
of  labour,  this  change  ia  wholly  beneficial.  In  some  cases  it  is 
attended  with  drawbacks,  rather  social  than  economical,  the  nature 
of  which  has  been  already  hinted  at.  But  whatever  disadvantages 
may  be  supposed  to  attend  on  the  change  from  a small  to  a large 
system  of  production,  they  are  not  applicable  to  the  change  from  a 
large  to  a still  larger.  When,  in  any  employment,  the  regime  of 
independent  small  producers  has  either  never  been  possible,  or  has 
been  superseded,  and  the  system  of  many  work-people  under  one 
management  has  become  fully  established,  from  that  time  any 
further  enlargement  in  the  scale  of  production  is  generally  an 
unqualified  benefit.  It  is  obvious,  for  example,  how  great  an 
economy  of  labour  would  be  obtained  if  London  were  supplied  by 
a single  gas  or  water  company  instead  of  the  existing  plurality. 
While  there  are  even  as  many  as  two,  this  implies  double  estab- 
lishments of  all  sorts,  when  one  only,  with  a small  increase,  could 
probably  perform  the  whole  operation  equally  well ; double  sets 
of  machinery  and  works,  when  the  whole  of  the  gas  or  water 
required  could  generally  be  produced  by  one  set  only  ; even  double 
sets  of  pipes,  if  the  companies  did  not  prevent  this  needless  expense 
by  agreeing  upon  a division  of  the  territory.  Were  there  only  one 
establishment,  it  could  make  lower  charges,  consistently  with  obtain- 
ing the  rate  of  profit  now  realized.  But  would  it  do  so  ? Even  if  it 
did  not,  the  community  in  the  aggregate  would  still  be  a gainer : 
since  the  shareholders  are  a part  of  the  community,  and  they  would 
obtain  higher  profits  while  the  consumers  paid  only  the  same. 
It  is,  however,  an  error  to  suppose  that  the  prices  are  ever  perman- 
ently kept  down  by  the  competition  of  these  companies.  Where 
competitors  are  so  few,  they  always  end  by  agreeing  not  to  compete. 
They  may  run  a race  of  cheapness  to  ruin  a new  candidate,  but  as 
soon  as  he  has  established  his  footing  they  come  to  terms  with  him. 
When,  therefore,  a business  of  real  public  importance  can  only  be 
carried  on  advantageously  upon  so  large  a scale  as  to  render  the 
liberty  of  competition  almost  illusory,  it  is  an  unthrifty  dispensation 
of  the  public  resources  that  several  costly  sets  of  arrangements 
should  be  kept  up  for  the  purpose  of  rendering  to  the  community 
this  one  service.  It  is  much  better  to  treat  it  at  once  as  a public 
fimction ; and  if  it  be  not  such  as  the  government  itself  could 


144 


BOOK  I.  CHAPTER  IX,  § 4 


beneficially  undertake,  it  should  be  made  over  entire  to  the  company 
or  association  which  will  perform  it  on  the  best  terms  for  the  public. 
In  the  case  of  railways,  for  example,  no  one  can  desire  to  see  the 
enormous  waste  of  capital  and  land  (not  to  speak  of  increased  nuis- 
ance) involved  in  the  construction  of  a second  railway  to  connect  the 
same  places  already  united  by  an  existing  one  ; while  the  two  would 
not  do  the  work  better  than  it  could  be  done  by  one,  and  after  a 
short  time  would  probably  be  amalgamated.  Only  one  such  line 
ought  to  be  permitted,  but  the  control  over  that  line  never  ought  to 
be  parted  with  by  the  State,  unless  on  a temporary  concession,  as 
in  France  ; and  the  vested  right  which  Parliament  has  allowed  to  be. 
acquired  by  the  existing  companies,  like  all  other  proprietary  rights 
which  are  opposed  to  public  utility,  is  morally  valid  only  as  a claim 
to  compensation, 

§ 4.  The  question  between  the  large  and  the  small  systems 
of  production  as  applied  to  agriculture — between  large  and  small 
farming,  the  grande  and  the  petite  culture — stands,  in  many  respects, 
on  different  grounds  from  the  general  question  between  great  and 
small  industrial  estabhshments.  In  its  social  aspect,  and  as  an 
element  in  the  Distribution  of  Wealth,  this  question  will  occupy  us 
hereafter  : but  even  as  a question  of  production,  the  superiority 
of  the  large  system  in  agriculture  is  by  no  means  so  clearly  estab- 
lished as  in  manufactures. 

I have  already  remarked,  that  the  operations  of  agriculture 
are  little  susceptible  of  benefit  from  the  division  of  labour.  There 
is  but  little  separation  of  employments  even  on  the  largest  farm. 
The  same  persons  may  not  in  general  attend  to  the  live  stock,  to  the 
marketing,  and  to  the  cultivation  of  the  soil ; but  much  beyond  that 
primary  and  simple  classification  the  subdivision  is  not  carried. 
The  combination  of  labour  of  which  agriculture  is  susceptible, 
is  chiefly  that  which  Mr.  Wakefield  terms  Simple  Co-operation ; 
several  persons  helping  one  another  in  the  same  work,  at  the  same 
time  and  place.  But  I confess  it  seems  to  me  that  this  able  writer 
attributes  more  importance  to  that  kind  of  co-operation,  in  reference 
to  agriculture  properly  so  called,  than  it  deserves.  None  of  the 
common  farming  operations  require  much  of  it.  There  is  no  particu- 
lar advantage  in  setting  a great  number  of  people  to  work  together  in 
ploughing  or  digging  or  sowing  the  same  field,  or  even  in  mowing  or 
reaping  it  unless  time  presses.  A single  family  can  generally  supply 
ftll  the  combination  of  labour  necessary  for  these  purposes.  And 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  146 


in  the  works  in  which  an  union  of  many  efforts  is  really  needed, 
there  is  seldom  found  any  impracticability  in  obtaining  it  where 
farms  are  small. 

The  waste  of  productive  power  by  subdivision  of  the  land  often 
amounts  to  a great  evil,  but  this  applies  chiefly  to  a subdivision 
BO  minute,  that  the  cultivators  have  not  enough  land  to  occupy 
their  time.  Up  to  that  point  the  same  principles  which  recommend 
large  manufactories  are  applicable  to  agriculture.  For  the  greatest 
productive  efficiency,  it  is  generally  desirable  (though  even  this 
proposition  must  be  received  with  qualifications)  that  no  family  who 
have  any  land,  should  have  less  than  they  could  cultivate,  or  than 
will  fully  employ  their  cattle  and  tools.  These,  however,  are  not 
the  dimensions  of  large  farms,  but  of  what  are  reckoned  in  England 
very  small  ones.  The  large  farmer  has  some  advantage  in  the 
article  of  buildings.  It  does  not  cost  so  much  to  house  a great 
number  of  cattle  in  one  building,  as  to  lodge  them  equally  well  in 
several  buildings.  There  is  also  some  advantage  in  implements. 
A small  farmer  is  not  so  likely  to  possess  expensive  instruments. 
But  the  principal  agricultural  implements,  even  when  of  the  best 
construction,  are  not  expensive.  It  may  not  answer  to  a small 
farmer  to  own  a threshing  machine,  for  the  small  quantity  of  corn 
he  has  to  thresh  ; but  there  is  no  reason  why  such  a machine  should 
not  in  every  neighbourhood  be  owned  in  common,  or  provided 
by  some  person  to  whom  the  others  pay  a consideration  for  its  use  ; 
especially  as,  when  worked  by  steam,  they  are  so  constructed  as  to 
be  moveable.*  ^ The  large  farmer  can  make  some  saving  in  cost  of 
carriage.  There  is  nearly  as  much  trouble  in  carrying  a small 
portion  of  produce  to  market,  as  a much  greater  produce  ; in  bringing 
home  a small,  as  a much  larger  quantity  of  manures,  and  articles  of 
daily  consumption.  There  is  also  the  greater  cheapness  of  buying 
things  in  large  quantities.  These  various  advantages  must  count 
for  something,  but  it  does  not  seem  that  they  ought  to  count  for 
very  much.  In  England,  for  some  generations,  there  has  been 
little  experience  of  small  farms ; but  in  Ireland  the  experience 
has  been  ample,  not  merely  under  the  worst  but  under  the  best 

♦ [1852]  The  observations  in  the  text  may  hereafter  require  some  degree 
of  modification  from  inventions  such  as  the  steam  plough  and  the  reaping 
machine.  The  effect,  however,  of  these  improvements  on  the  relative  advan- 
tages of  large  and  small  farms,  will  not  depend  on  the  efficiency  of  the  instru- 
ments, but  on  their  costliness.  I see  no  reason  to  expect  that  this  will  be  such 
as  to  make  them  inaccessible  to  small  farmers,  or  combinations  of  small  farmers. 

^ [This  reference  to  steam  threshing  machines  was  inserted  in  the  5th  ed. 
(1862) ; and  “ until  lately  ” in  the  reference  to  Ireland,  infra,  p.  149.] 


146 


BOOK  1.  CHAPTER  IX.  § 4 


management ; and  the  highest  Irish  authorities  may  be  cited  in 
opposition  to  the  opinion  which  on  this  subject  commonly  prevails 
in  England.  Mr.  Blacker,  for  example,  one  of  the  most  experienced 
agriculturists  and  successful  improvers  in  the  north  of  Ireland,  whose 
experience  was  chiefly  in  the  best  cultivated,  which  are  also  the  most 
minutely  divided,  parts  of  the  country,  was  of  opinion,  that  tenants 
holding  farms  not  exceeding  from  five  to  eight  or  ten  acres  could  live 
comfortably  and  pay  as  high  a rent  as  any  large  farmer  whatever. 

I am  firmly  persuaded,”  (he  says,*)  “ that  the  small  farmer  who 
holds  his  own  plough  and  digs  his  own  ground,  if  he  follows  a proper 
rotation  of  crops,  and  feeds  his  cattle  in  the  house,  can  undersell 
the  large  farmer,  or  in  other  words  can  pay  a rent  which  the  other 
cannot  afiord ; and  in  this  I am  confirmed  by  the  opinion  of  many 
practical  men  who  have  well  considered  the  subject.  . . The 
English  farmer  of  700  to  800  acres  is  a kind  of  man  approaching  to 
what  is  known  by  the  name  of  a gentleman  farmer.  He  must  have 
his  horse  to  ride,  and  his  gig,  and  perhaps  an  overseer  to  attend  to 
his  labourers ; he  certainly  cannot  superintend  himself  the  labour 
going  on  in  a farm  of  800  acres.”  After  a few  other  remarks,  he 
adds,  “ Besides  all  these  drawbacks,  which  the  small  farmer  knows 
little  about,  there  is  the  great  expense  of  carting  out  the  manure 
from  the  homestead  to  such  a great  distance,  and  again  carting 
home  the  crop.  A single  horse  will  consume  the  produce  of  more 
land  than  would  feed  a small  farmer  and  his  wife  and  two  children. 
And  what  is  more  than  all,  the  large  farmer  says  to  his  labourers,  go 
to  your  work  ; but  when  the  small  farmer  has  occasion  to  hire  them, 
he  says,  come  ; the  intelligent  reader  will,  I dare  say,  understand 
the  difference.” 

One  of  the  objections  most  urged  against  small  farms  is,  that 
they  do  not  and  cannot  maintain,  proportionally  to  their  extent, 
so  great  a number  of  cattle  as  large  farms,  and  that  this  occasions 
such  a deficiency  of  manure,  that  a soil  much  subdivided  must 
always  be  impoverished.  It  will  be  found,  however,  that  sub- 
division only  produces  this  effect  when  it  throws  the  land  into  the 
hands  of  cultivators  so  poor  as  not  to  possess  the  amount  of  live 
stock  suitable  to  the  size  of  their  farms.  A small  farm  and  a badly 
stocked  farm  are  not  synonymous.  To  make  the  comparison  fairly, 
we  must  suppose  the  same  amount  of  capital  which  is  possessed 
by  the  large  farmers  to  be  disseminated  among  the  small  ones. 

* Prize  Essay  on  The  Management  of  Landed  PropeHy  in  Ireland,  bv 
William  Blacker  (1837),  p.  23. 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  UT 


WLen  this  condition,  or  even  any  approach  to  it,  exists,  and  when 
stall  feeding  is  practised  (and  stall  feeding  now  begins  to  be  con- 
sidered good  economy  even  on  large  farms),  experience,  far  from 
bearing  out  the  assertion  that  small  farming  is  unfavourable  to  the 
multiplication  of  cattle,  conclusively  establishes  the  very  reverse. 
The  abundance  of  cattle,  and  copious  use  of  manure,  on  the  small 
farms  of  Flanders,  are  the  most  striking  features  in  that  Flemish 
agriculture  which  is  the  admiration  of  all  competent  judges,  whether 
in  England  or  on  the  Continent.* 

* **  The  number  of  beasts  fed  on  a farm  of  which  the  whole  is  arable  land,” 
(says  the  elaborate  and  intelligent  treatise  on  Flemish  Husbandry,  from  personal 
observation  and  the  best  sources,  published  in  the  Library  of  the  Society  for  the 
Diffusion  of  Useful  Knowledge,)  ” is  surprising  to  those  who  are  not  acquainted 
with  the  mode  in  which  the  food  is  prepared  for  the  cattle.  A beast  for  every 
three  acres  of  land  is  a common  proportion,  and  in  very  small  occupations, 
where  much  spade  husbandry  is  used,  the  proportion  is  still  greater.  After 
comparing  the  accounts  given  in  a variety  of  places  and  situations  of  the 
average  quantity  of  milk  which  a cow  gives  when  fed  in  the  stall,  the  result  is, 
that  it  greatly  exceeds  that  of  our  best  dairy  farms,  and  the  quantity  of  butter 
made  from  a given  quantity  of  milk  is  also  greater.  It  appears  astonishing 
that  the  occupier  of  only  ten  or  twelve  acres  of  light  arable  land  should  be  able 
to  maintain  four  or  five  cows,  but  the  fact  is  notorious  in  theWaes  country.” 
(pp.  59,  60.) 

This  subject  is  treated  very  intelligently  in  the  work  of  M.  Passy,  Dea 
Systemes  de  Culture  et  de  leur  Influence  sur  V Economie  Sociale,  one  of  the 
most  impartial  discussions,  as  between  the  two  systems,  which  has  yet  appeared 
in  France. 

“ Without  doubt  it  is  England  that,  on  an  equal  surface,  feeds  the  greatest 
number  of  animals  ; Holland  and  some  parts  of  Lombardy  can  alone  vie  with 
her  in  this  respect : but  is  this  a consequence  of  the  mode  of  cultivation,  and 
have  not  climate  and  local  situation  a share  in  producing  it  ? Of  this  I think 
there  can  be  no  doubt.  In  fact,  whatever  may  have  been  said,  wherever  large 
and  small  cultivation  meet  in  the  same  place,  the  latter,  though  it  cannot 
support  as  many  sheep,  possesses,  all  things  considered,  the  greatest  quantity 
of  manure-producing  animals. 

“ In  Belgium,  for  example,  the  two  provinces  of  smallest  farms  are  Antwerp 
and  East  Flanders,  and  they  possess  on  an  average  for  every  100  hectares 
(250  acres)  of  cultivated  land,  74  horned  cattle  and  14  sheep.  The  two  pro- 
vinces where  we  find  the  large  farms  are  Namur  and  Hainaut,  and  they  average, 
for  every  100  hectares  of  cultivated  ground,  only  30  horned  cattle  and  45  sheep. 
Reckoning,  as  is  the  custom,  ten  sheep  as  equal  to  one  head  of  horned  cattle, 
we  find  in  the  first  case,  the  equivalent  of  76  beasts  to  maintain  the  fecundity 
of  the  soil ; in  the  latter  case  less  than  35,  a difference  which  must  be  called 
enormous.  (See  the  statistical  documents  published  by  the  Minister  of  the 
Interior.)  The  abundance  of  animals,  in  the  parts  of  Belgium  which  are  most 
subdivided,  is  nearly  as  great  as  in  England.  Calculating  the  number  in  Eng- 
land in  proportion  only  to  the  cultivated  ground,  there  are  for  each  100  hectares, 
65  horned  cattle  and  nearly  260  sheep,  together  equal  to  91  of  the  former, 
being  only  an  excess  of  15.  It  should  besides  be  remembered,  that  in  Belgium 
stall  feeding  being  continued  nearly  the  whole  year,  hardly  any  of  the  manure 
is  lost,  while  in  England  grazing  in  the  open  fields  diminishes  considerably 
the  quantity  which  can  be  completely  utilized. 


148 


BOOK  I.  CHAPTER  IX.  § 4 


Tlie  disadvantage,  when  disadvantage  there  is,  of  small  or  rather 
of  peasant  farming,  as  compared  with  capitalist  farming,  must 
chiefly  consist  in  inferiority  of  skill  and  knowledge ; but  it  is  not 
true,  as  a general  fact,  that  such  inferiority  exists.  Countries 
of  small  farms  and  peasant  farming,  Flanders  and  Italy,  had  a good 
agriculture  many  generations  before  England,  and  theirs  is  still 
[1848],  as  a whole,  probably  the  best  agriculture  in  the  world.  The 
empirical  skill,  which  is  the  effect  of  daily  and  close  observation, 

“ Again,  in  the  Department  of  the  Nord,  the  arrondissements  which  have  the 
smallest  farms  support  the  greatest  quantity  of  animals.  While  the  arrondisse- 
ments of  Lille  and  Hazebrouck,  besides  a greater  number  of  horses,  maintain 
the  equivalent  of  52  and  46  head  of  homed  cattle,  those  of  Dunkirk  and  Avesnes, 
where  the  farms  are  larger,  produce  the  equivalent  of  only  44  and  40  head. 
(See  the  statistics  of  France  published  by  the  Minister  of  Commerce.) 

“ A similar  examination  extended  to  other  portions  of  France  would  yield 
similar  results.  In  the  immediate  neighbourhood  of  towns,  no  doubt,  the  small 
farmers,  having  no  difficulty  in  purchasing  manure,  do  not  maintain  animals  : 
but,  as  a general  rule,  the  kind  of  cultivation  which  takes  most  out  of  the  ground 
must  be  that  which  is  obliged  to  be  most  active  in  renewing  its  fertility.  Assur- 
edly the  small  farms  cannot  have  numerous  flocks  of  sheep,  and  this  is  an 
inconvenience ; but  they  support  more  horned  cattle  than  the  large  farms. 
To  do  so  is  a necessity  they  cannot  escape  from,  in  any  country  where  the 
demands  of  consumers  require  their  existence : if  they  could  not  fulfil  this 
condition,  they  must  perish. 

“ The  following  are  particulars,  the  exactness  of  which  is  fully  attested  by 
the  excellence  of  the  work  from  which  I extract  them,  the  statistics  of  the 
commune  of  Vensat  (department  of  Puy  de  Dome),  lately  published  by  Dr. 
Jusseraud,  mayor  of  the  commune.  They  are  the  more  valuable,  as  they 
throw  full  light  on  the  nature  of  the  changes  which  the  extension  of  small 
farming  has,  in  that  district,  produced  in  the  number  and  kind  of  animals 
by  whose  manure  the  productiveness  of  the  soil  is  kept  up  and  increased.  The 
commune  consists  of  1612  hectares,  divided  into  4600  parcelles,  owned  by  691 
proprietors,  and  of  this  extent  1466  hectares  are  under  cultivation.  In  1790, 
seventeen  farms  occupied  two-thirds  of  the  whole,  and  twenty  others  the 
remainder.  Since  then  the  land  has  been  much  divided,  and  the  subdivision 
is  now  extreme.  What  has  been  the  effect  on  the  quantity  of  cattle  ? A 
considerable  increase.  In  1790  there  were  only  about  300  homed  cattle,  and 
from  1800  to  2000  sheep  ; there  are  now  676  of  the  former  and  only  533  of  the 
latter.  Thus  1300  sheep  have  been  replaced  by  376  oxen  and  cows,  and  (all 
things  taken  into  account)  the  quantity  of  manure  has  increased  in  the  ratio 
of  490  to  729,  or  more  than  48  per  cent,  not  to  mention  that  the  animals  being 
now  stronger  and  better  fed,  yield  a much  greater  contribution  than  formerly 
to  the  fertilization  of  the  ground. 

“Such  is  the  testimony  of  facts  on  the  point.  It  is  not  true,  then,  that 
small  farming  feeds  fewer  animals  than  large ; on  the  contrary,  local  circum- 
stances being  the  same,  it  feeds  a greater  number  : and  this  is  only  what  might 
have  been  presumed ; for,  requiring  more  from  the  soil,  it  is  obliged  to  take 
greater  pains  for  keeping  up  its  productiveness.  All  the  other  reproaches  cast 
upon  small  farming,  when  collated  one  by  one  with  facts  justly  appreciated, 
will  be  seen  to  be  no  better  founded,  and  to  have  been  made  only  because  the 
countries  compared  with  one  another  were  differently  situated  in  respect  to  the 
general  causes  of  agricultural  prosperity.”  (pp.  116-120.) 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  149 


peasant  farmers  often  possess  in  an  eminent  degree.  The  traditional 
knowledge,  for  example,  of  the  culture  of  the  vine,  possessed  by  the 
peasantry  of  the  countries  where  the  best  wines  are  produced,  is 
extraordinary.  There  is  no  doubt  an  absence  of  science,  or  at  least 
of  theory  ; and  to  some  extent  a deficiency  of  the  spirit  of  improve- 
ment, so  far  as  relates  to  the  introduction  of  new  processes.  There 
is  also  a want  of  means  to  make  experiments,  which  can  seldom  be 
made  with  advantage  except  by  rich  proprietors  or  capitalists. 
As  for  those  systematic  improvements  which  operate  on  a large  tract 
of  country  at  once  (such  as  great  works  of  draining  or  irrigation) 
or  which  for  any  other  reasons  do  really  require  large  numbers  of 
workmen  combining  their  labour,  these  are  not  in  general  to  be 
expected  from  small  farmers,  or  even  small  proprietors,  though 
combination  among  them  for  such  purposes  is  by  no  means  unex- 
ampled, and  will  become  more  common  as  their  intelligence  is  more 
developed. 

Against  these  disadvantages  is  to  be  placed,  where  the  tenure  of 
land  is  of  the  requisite  kind,  an  ardour  of  industry  absolutely 
unexampled  in  any  other  condition  of  agriculture.  This  is  a subject 
on  which  the  testimony  of  competent  witnesses  is  unanimous. 
The  working  of  the  fetite  culture  cannot  be  fairly  judged  where  the 
small  cultivator  is  merely  a tenant,  and  not  even  a tenant  on  fixed 
conditions,  but  (as  until  lately  in  Ireland)  at  a nominal  rent  greater 
than  can  be  paid,  and  therefore  practically  at  a varying  rent  always 
amounting  to  the  utmost  that  can  be  paid.  To  understand  the 
subject,  it  must  be  studied  where  the  cultivator  is  the  proprietor, 
or  at  least  a metayer  with  a permanent  tenure ; where  the  labour 
he  exerts  to  increase  the  produce  and  value  of  the  land  avails  wholly, 
or  at  least  partly,  to  his  own  benefit  and  that  of  his  descendants.  In 
another  division  of  our  subject,  we  shall  discuss  at  some  length 
the  important  subject  of  tenures  of  land,  and  I defer  till  then  any 
citation  of  evidence  on  the  marvellous  industry  of  peasant  proprietors. 
It  may  sufiice  here  to  appeal  to  the  immense  amount  of  gross  pro- 
duce which,  even  without  a permanent  tenure,  English  labourers 
generally  obtain  from  their  little  allotments ; a produce  beyond 
comparison  greater  than  a large  farmer  extracts,  or  would  find 
it  his  interest  to  extract,  from  the  same  piece  of  land. 

And  this  I take  to  be  the  true  reason  why  large  cultivation  is 
generally  most  advantageous  as  a mere  investment  for  profit.  Land 
occupied  by  a large  farmer  is  not,  in  one  sense  of  the  word,  farmed 
so  highly.  There  is  not  nearly  so  much  labour-  expended  on  it.  This 


160 


BOOK  I.  CHAPTER  IX.  § 4 


is  not  on  account  of  any  economy  arising  from  combination  of 
labour,  but  because,  by  employing  less,  a greater  return  is  obtained  in 
proportion  to  the  outlay.  It  does  not  answer  to  any  one  to  pay 
others  for  exerting  all  the  labour  which  the  peasant,  or  even  the 
allotment-holder,  gladly  undergoes  when  the  fruits  are  to  be  wholly 
reaped  by  himself.  This  labour,  however,  is  not  unproductive  : it 
all  adds  to  the  gross  produce.  With  anything  hke  equality  of  skill 
and  knowledge,  the  large  farmer  does  not  obtain  nearly  so  much 
from  the  soil  as  the  small  proprietor,  or  the  small  farmer  with 
adequate  motives  to  exertion : but  though  his  returns  are  less, 
the  labour  is  less  in  a still  greater  degree,  and  as  whatever  labour 
he  employs  must  be  paid  for,  it  does  not  suit  his  purpose  to  employ 
more. 

But  although  the  gross  produce  of  the  land  is  greatest,  cceteris 
paribus,  under  small  cultivation,  and  although,  therefore,  a country 
is  able  on  that  system  to  support  a larger  aggregate  population,  it  is 
generally  assumed  by  Enghsh  writers  that  what  is  termed  the  net 
produce,  that  is,  the  surplus  after  feeding  the  cultivators,  must  be 
smaller ; that  therefore,  the  population  disposable  for  all  other 
purposes,  for  manufactures,  for  commerce  and  navigation,  for  national 
defence,  for  the  promotion  of  knowledge,  for  the  liberal  professions, 
for  the  various  functions  of  government,  for  the  arts  and  literature, 
all  of  which  are  dependent  on  this  surplus  for  their  existence  as 
occupations,  must  be  less  numerous  ; and  that  the  nation,  therefore 
(waiving  all  question  as  to  the  condition  of  the  actual  cultivators), 
must  be  inferior  in  the  principal  elements  of  national  power,  and 
in  many  of  those  of  general  well-being.  This,  however,  has  been 
taken  for  granted  much  too  readily.  Undoubtedly  the  non-agricul- 
tural  population  will  bear  a less  ratio  to  the  agricultural,  under 
small  than  under  large  cultivation.  But  that  it  will  be  less  numerous 
absolutely,  is  by  no  means  a consequence.  If  the  total  population, 
agricultural  and  non-agricultural,  is  greater,  the  non-agricultural 
portion  may  be  more  numerous  in  itself,  and  may  yet  be  a smaller 
proportion  of  the  whole.  If  the  gross  produce  is  larger,  the  net  pro- 
duce may  be  larger,  and  yet  bear  a smaller  ratio  to  the  gross  produce. 
Yet  even  Mr.  Wakefield  sometimes  appears  to  confound  these  distinct 
ideas.  In  France  it  is  computed  [1848]  that  two-thirds  of  the  whole 
population  are  agriculturaL  In  England,  at  most,  one-third.  Hence 
Mr.  Wakefield  infers,  that  “ as  in  France  only  three  people  are 
supported  by  the  labour  of  two  cultivators,  while  in  England  the 
labour  of  two  cultivators  supports  six  people,  English  agriculture  is 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  161 


twice  as  productive  as  French  agriculture,”  owing  to  the  superior 
efficiency  of  large  farming  through  combination  of  labour.  But 
in  the  first  place,  the  facts  themselves  are  overstated.  The  labour 
of  two  persons  in  England  does  not  quite  support  six  people,  for 
there  is  not  a little  [1848]  food  imported  from  foreign  countries, 
and  from  Ireland.  In  France,  too,  the  labour  of  two  cultivators 
does  much  more  than  supply  the  food  of  three  persons.  It  provides 
the  three  persons,  and  occasionally  foreigners,  with  flax,  hemp,  and  to 
a certain  extent  with  silk,  oils,  tobacco,  and  lattesrly  sugar,  which  in 
England  are  wholly  obtained  from  abroad ; nearly  all  the  timber 
used  in  France  is  of  home  growth,  nearly  all  which  is  used  in  England 
is  imported ; the  principal  fuel  of  France  is  [1848]  procured  and 
brought  to  market  by  persons  reckoned  among  agriculturists,  in 
England  by  persons  not  so  reckoned.  I do  not  take  into  calculation 
hides  and  wool,  these  products  being  common  to  both  countries, 
nor  wine  or  brandy  produced  for  home  consumption,  since  England 
has  a corresponding  production  of  beer  and  spirits ; but  England 
has  [1848]  no  material  export  of  either  article,  and  a great  importa- 
tion of  the  last,  while  France  supplies  wines  and  spirits  to  the  whole 
world.  I say  nothing  of  fruit,  eggs,  and  such  minor  articles  of 
agricultural  produce,  in  which  the  export  trade  of  France  is  [1865] 
enormous.  But  not  to  lay  undue  stress  on  these  abatements,  we 
will  take  the  statement  as  it  stands.  Suppose  that  two  persons,  in 
England,  do  bond  fide  produce  the  food  of  six,  while  in  France,  for 
the  same  purpose,  the  labour  of  four  is  requisite.  Does  it  follow 
that  England  must  have  a larger  surplus  for  the  support  of  a non- 
agricultural  population  ? No ; but  merely  that  she  can  devote 
two-thirds  of  her  whole  produce  to  the  purpose,  instead  of  one-third. 
Suppose  the  produce  to  be  twice  as  great,  and  the  one-third  will 
amount  to  as  much  as  two-thirds.  The  fact  might  be,  that  owing 
to  the  greater  quantity  of  labour  employed  on  the  French  system, 
the  same  land  would  produce  food  for  twelve  persons  which  on  the 
English  system  would  only  produce  it  for  six  ; and  if  this  were  so, 
which  would  be  quite  consistent  with  the  conditions  of  the  hypothesis, 
then  although  the  food  for  twelve  was  produced  by  the  labour  of 
eight,  while  the  six  were  fed  by  the  labour  of  only  two,  there  would 
be  the  same  number  of  hands  disposable  for  other  employment  in 
the  one  country  as  in  the  other.  I am  not  contending  that  the 
fact  is  so.  I know  that  the  gross  produce  per  acre  in  France  as  a 
whole  (though  not  in  its  most  improved  districts)  averages  much  less 
than  in  England,  and  that,  in  proportion  to  the  extent  and  fertility 


152 


BOOK  I.  CHAPTER  IK.  § 4 


of  the  two  countries,  England  has,  in  the  sense  we  are  now  speaking 
of,  much  the  largest  disposable  population.  But  the  disproportion 
certainly  is  not  to  be  measured  by  Mr.  Wakefield’s  simple  criterion. 
As  well  might  it  be  said  that  agricultural  labour  in  the  United  States, 
where,  by  a late  census  (1840),  four  families  in  every  five  appeared  to 
be  engaged  in  agriculture,  must  be  still  more  inefficient  than  in 
France. 

The  inferiority  of  French  cultivation  (which,  taking  the  country 
as  a whole,  must  be  allowed  to  be  real,  though  much  exaggerated) 
is  probably  more  owing  to  the  lower  general  average  of  industrial 
skill  and  energy  in  that  country,  than  to  any  special  cause ; and 
even  if  partly  the  effect  of  minute  subdivision,  it  does  not  prove 
that  small  farming  is  disadvantageous,  but  only  (what  is  undoubtedly 
the  fact)  that  farms  in  France  are  very  frequently  too  small,  and, 
what  is  worse,  broken  up  into  an  almost  incredible  number  of 
patches  or  parcelles,  most  inconveniently  dispersed  and  parted  from 
one  another. 

As  a question,  not  of  gross,  but  of  net  produce,  the  comparative 
merits  of  the  grande  and  the  petite  culture,  especially  when  the  small 
farmer  is  also  the  proprietor,  cannot  be  looked  upon  as  decided. 
It  is  a question  on  which  good  judges  at  present  differ.  The  current 
of  English  opinion  is  [1848]  in  favour  of  large  farms : on  the  Con- 
tinent, the  weight  of  authority  seems  to  be  on  the  other  side. 
Professor  Kau,  of  Heidelberg,  the  author  of  one  of  the  most 
comprehensive  and  elaborate  of  extant  treatises  on  political  economy, 
and  who  has  that  large  acquaintance  with  facts  and  authorities  on 
his  own  subject,  which  generally  characterises  his  countrymen, 
lays  it  down  as  a settled  truth,  that  small  or  moderate-sized  farms 
yield  not  only  a larger  gross  but  a larger  net  produce  : though,  he 
adds,  it  is  desirable  there  should  be  some  great  proprietors,  to  lead 
the  way  in  new  improvements.*  The  most  apparently  impartial 
and  discriminating  judgment  that  I have  met  with  is  that  of  M, 
Passy,  who  (always  speaking  with  reference  to  net  produce)  gives 
his  verdict  in  favour  of  large  farms  for  grain  and  forage ; but,  for 
the  kinds  of  culture  which  require  much  labour  and  attention, 
places  the  advantage  wholly  on  the  side  of  small  cultivation  ; 
including  in  this  description,  not  only  the  vine  and  the  olive, 
where  a considerable  amount  of  care  and  labour  must  be  bestowed 
on  each  individual  plant,  but  also  roots,  leguminous  plants,  and 

♦ See  pp.  352  and  353  of  a French  translation  published  at  Brussels  in 
1839,  by  M.  Fred,  de  Kemmeter,  of  Ghent. 


PRODUCTION  ON  A LARGE  AND  ON  A SMALL  SCALE  153 


those  which  furnish  the  materials  of  manufactures.  The  small  size, 
and  consequent  multiplication,  of  farms,  according  to  all  authorities, 
are  extremely  favourable  to  the  abundance  of  many  minor  products 
of  agriculture.* 

It  is  evident  that  every  labourer  who  extracts  from  the  land 
more  than  his  own  food,  and  that  of  any  family  he  may  have, 
increases  the  means  of  supporting  a non-agricultural  population. 
Even  if  his  surplus  is  no  more  than  enough  to  buy  clothes,  the 
labourers  who  make  the  clothes  are  a non-agricultural  population, 
enabled  to  exist  by  food  which  he  produces.  Every  agricultural 
family,  therefore,  which  produces  its  own  necessaries,  adds  to  the 
net  produce  of  agriculture ; and  so  does  every  person  born  on  the 
land,  who  by  employing  himself  on  it,  adds  more  to  its  gross  pro- 
duce than  the  mere  food  which  he  eats.  It  is  questionable  whether, 
even  in  the  most  subdivided  districts  of  Europe  which  are  cultivated 
by  the  proprietors,  the  multiplication  of  hands  on  the  soil  has  ap- 
proached, or  tends  to  approach,  within  a great  distance  of  this  limit. 
In  France,  though  the  subdivision  is  confessedly  too  great,  there  is 
proof  positive  that  it  is  far  from  having  reached  the  point  at  which 
it  would  begin  to  diminish  the  power  of  supporting  a non-agricultural 
population.  This  is  demonstrated  by  the  great  increase  of  the 
towns  ; which  have  of  late  [1848]  increased  in  a much  greater  ratio 
than  the  population  generally,]*  showing  (unless  the  condition  of  the 
town  labourers  is  becaming  rapidly  deteriorated,  which  there  is  no 
reason  to  believe)  that  even  by  the  unfair  and  inapplicable  test  of 
proportions,  the  productiveness  of  agriculture  must  be  on  the  increase. 
This,  too,  concurrently  with  the  amplest  evidence  that  in  the  more 
improved  districts  of  France,  and  in  some  which,  until  lately,  were 
among  the  unimproved,  there  is  a considerably  increased  consumption 
of  country  produce  by  the  country  population  itself. 

1 Impressed  with  the  conviction  that,  of  all  faults  which  can 
be  committed  by  a scientific  writer  on  political  and  social  subjects, 
exaggeration,  and  assertion  beyond  the  evidence,  most  require  to  be 
guarded  against,  I limited  myself  in  the  early  editions  of  this  work 

* “ In  the  department  of  the  Nord,”  says  M.  Passy,  “ a farm  of  20  hectares 
(50  acres)  produces  in  calves,  dairy  produce,  poultry,  and  eggs,  a value  of  some- 
times 1000  francs  (£40)  a year : which,  deducting  expenses,  is  an  addition  to  the 
net  produce  of  15  to  20  francs  per  hectare.”  Des  Systemes  de  Culture^  p.  114. 

t [1857]  During  the  interval  between  the  census  of  1851  and  that  of  1856,  the 
increase  of  the  population  of  Paris  alone  exceeded  the  aggregate  increase  of  all 
France  : while  nearly  all  the  other  large  towns  likewise  showed  an  increase. 

^ [This  and  the  following  paragraph  were  addetl  in  the  5th  ed.  (1862).] 


154 


BOOK  I.  CHAPTER  IX.  § 4 


to  the  foregoing  very  moderate  statements.  I Kttle  knew  how  much 
stronger  my  language  might  have  been  without  exceeding  the  truth, 
and  how  much  the  actual  progress  of  French  agriculture  surpassed 
anything  which  I had  at  that  time  sufficient  grounds  to  affirm. 
The  investigations  of  that  eminent  authority  on  agricultural  statistics, 
M.  Leonce  de  Lavergne,  undertaken  by  desire  of  the  Academy  of 
Moral  and  Pohtical  Sciences  of  the  Institute  of  France,  have  led  to 
the  conclusion  that  since  the  Revolution  of  1789,  the  total  produce 
of  French  agriculture  has  doubled  ; profits  and  wages  having  both 
increased  in  about  the  same,  and  rent  in  a still  greater  ratio.  M. 
de  Lavergne,  whose  impartiality  is  one  of  his  greatest  merits,  is, 
moreover,  so  far  in  this  instance  from  the  suspicion  of  having  a case 
to  make  out,  that  he  is  labouring  to  show,  not  how  much  French 
agriculture  has  accomplished,  but  how  much  still  remains  for  it  to 
do.  “We  have  required  ” (he  says)  “ no  less  than  seventy  years  to 
bring  into  cultivation  two  million  hectares  ” (five  million  English 
acres)  “ of  waste  land,  to  suppress  half  our  fallows,  double  our 
agricultural  products,  increase  our  population  by  30  per  cent,  our 
wages  by  100  per  cent,  our  rent  by  150  per  cent.  At  this  rate  we 
shall  require  three  quarters  of  a century  more  to  arrive  at  the 
point  which  England  has  already  attained.*’  ♦ 

After  this  evidence,  we  have  surely  now  heard  the  last  of  the 
incompatibihty  of  small  properties  and  small  farms  with  agricultural 
improvement.  The  only  question  which  remains  open  is  one  of 
degree ; the  comparative  rapidity  of  agricultural  improvement 
under  the  two  systems  ; and  it  is  the  general  opinion  of  those 
who  are  equally  well  acquainted  with  both,  that  improvement 
is  greatest  under  a due  admixture  between  them. 

In  the  present  chapter,  I do  not  enter  on  the  question  between 
great  and  small  cultivation  in  any  other  respect  than  as  a question 
of  production,  and  of  the  efficiency  of  labour.  We  shall  return  to 
it  hereafter  as  afiecting  the  distribution  of  the  produce,  and  the 
physical  and  social  well-being  of  the  cultivators  themselves ; in 
which  aspects  it  deserves,  and  requires,  a still  more  particular 
examination.! 

* Economie  Burale  de  la  France  depute  1789.  Par  M.  Leonce  de  Lavergne, 
Membre  de  ITnstitut  et  de  la  Soci6t6  Centrale  d’Agriculture  de  France. 

4d.  p.  59. 

‘ [See  Appendix  H.  Large  and  Small  Farming.} 


CHAPTER  X 


OF  THE  LAW  OP  THE  INCREASE  OF  LABOUR 

§ 1.  We  have  now  successively  considered  each  of  the  agents 
or  conditions  of  production,  and  of  the  means  by  which  the  efficacy 
of  these  various  agents  is  promoted.  In  order  to  come  to  an  end 
of  the  questions  which  relate  exclusively  to  production,  one  more, 
of  primary  importance,  remains. 

Production  is  not  a fixed,  but  an  increasing  thing.  When 
not  kept  back  by  bad  institutions,  or  a low  state  of  the  arts  of 
life,  the  produce  of  industry  has  usually  tended  to  increase  ; stimu- 
lated not  only  by  the  desire  of  the  producers  to  augment  their 
means  of  consumption,  but  by  the  increasing  number  of  the  con- 
sumers. Nothing  in  political  economy  can  be  of  more  importance 
than  to  ascertain  the  law  of  this  increase  of  production ; the  con- 
ditions to  which  it  is  subject : whether  it  has  practically  any  limits, 
and  what  these  are.  There  is  also  no  subject  in  pohtical  economy 
which  is  popularly  less  understood,  or  on  which  the  errors  committed 
are  of  a character  to  produce,  and  do  produce,  greater  mischief. 

We  have  seen  that  the  essential  requisites  of  production  are 
three — labour,  capital,  and  natural  agents ; the  term  capital 
including  all  external  and  physical  requisites  which  are  products 
of  labour,  the  term  natural  agents  all  those  which  are  not.  But 
among  natural  agents  we  need  not  take  into  account  those  which, 
existing  in  unhmited  quantity,  being  incapable  of  appropriation, 
and  never  altering  in  their  qualities,  are  always  ready  to  lend  an 
equal  degree  of  assistance  to  production,  whatever  may  be  its 
extent ; as  air,  and  the  fight  of  the  sun.  Being  now  about  to  con- 
sider the  impediments  to  production,  not  the  facilities  for  it,  we 
need  advert  to  no  other  natural  agents  than  those  which  are  liable 
to  be  deficient  either  in  quantity  or  in  productive  power.  These- 
may  be  all  represented  by  the  term  land.  Land,  in  the  narrowest 
acceptation,  as  the  source  of  agricultural  produce,  is  the  chief- 


150 


BOOK  I.  CHAPTER  K.  § 2 


of  them ; and  if  we  extend  the  term  to  mines  and  fisheries — to 
what  is  found  in  the  earth  itself,  or  in  the  waters  which  partly 
cover  it,  as  well  as  to  what  is  grown  or  fed  on  its  surface,  it 
embraces  everything  with  which  we  need  at  present  concern 
ourselves. 

We  may  say,  then,  without  a greater  stretch  of  language  than 
under  the  necessary  explanation  is  permissible,  that  thajLgfluisites 
of  production  are  L Capital,  and  Land.  The  increase  of 

production,  therefore,  depends  on  the  properties  of  these  elements. 
It  is  a result  of  the  increase  either  of  the  elements  themselves,  or  of 
their  productiveness.  The  law  of  the  increase  of  production  must 
be  a consequence  of  the  laws  of  these  elements ; the  liniits  to  the 
increase  of  production  must  be  the  limits,  whatever  they  are, 
set  by  those  laws.  We  proceed  to  consider  the  three  elements 
successively,  with  reference  to  this  efiect ; or  in  other  words,  the 
law  of  the  increase  of  production,  viewed  in  respect  of  its  dependence, 
first  on  Labour,  secondly  on  Capital,  and  lastly  on  Land. 

§ 2.  The  increase  of  labour  is  the  increase  of  mankind ; of 
population.  On  this  subject  the  discussions  excited  by  the  Essay 
of  Mr.  Malthus  have  made  the  truth,  though  by  no  means  universally 
admitted,  yet  so  fully  known,  that  a briefer  examination  of  the 
question  than  would  otherwise  have  been  necessary  will  probably 
on  the  present  occasion  suffice. 

The  power  of  multiplication  inherent  in  all  organic  life  may 
be  regarded  as  infinite.  There  is  no  one  species  of  vegetable  or 
animal,  which,  if  the  earth  were  entirely  abandoned  to  it,  and 
to  the  things  on  which  it  feeds,  would  not  in  a small  number  of 
years  overspread  every  region  of  the  globe,  of  which  the  climate 
was  compatible  with  its  existence.  The  degree  of  possible  rapidity  is 
different  in  different  orders  of  beings ; but  in  all  it  is  sufficient, 
for  the  earth  to  be  very  speedily  filled  up.  There  are  many  species 
of  vegetables  of  which  a single  plant  will  produce  in  one  year  the 
germs  of  a thousand ; if  only  two  come  to  maturity,  in  fourteen 
years  the  two  will  have  multiplied  to  sixteen  thousand  and  more. 
It  is  but  a moderate  case  of  fecundity  in  animals  to  be  capable  of 
quadrupling  their  numbers  in  a single  year ; if  they  only  do  as  much 
in  half  a century,  ten  thousand  will  have  swelled  within  two  centuries 
to  upwards  of  two  millions  and  a half.  The  capacity  of  increase 
is  necessarily  in  a geometrical  progression : the  numerical  ratio 
alone  is  different. 


LAW  OF  THE  INCREASE  OF  LABOUR 


157 


To  this  property  of  organized  beings,  the  human  species  forms 
no  ^ception.  Its  power  of  increase  is  indefinite,  and  the  actual 
multiplication  would  be  extraordinarily  rapid,  if  the  power  were 
exercised  to  the  utmost.  It  never  is  exercised  to  the  utmost,  and 
yet,  in  the  most  favourable  circumstances  known  to  exist,  which 
are  those  of  a fertile  region  colonized  from  an  industrious  and 
civihzed  community,  population  has  continued,  for  several  genera- 
tions, independently  of  fresh  immigration,  to  double  itself  in  not 
much  more  than  twenty  years.*  That  the  capacity  of  multiplication 
in  the  human  species  exceeds  even  this,  is  evident  if  we  consider  how 
great  is  the  ordinary  number  of  children  to  a family,  where  the 
climate  is  good  and  early  marriages  usual ; and  how  small  a pro- 
portion of  them  die  before  the  age  of  maturity,  in  the  present  state 
of  hygienic  knowledge,  where  the  locahty  is  healthy,  and  the  family 
adequately  provided  with  the  means  of  living.  It  is  a very  low 
estimate  of  the  capacity  of  increase,  if  we  only  assume,  that  in  a 
good  sanitary  condition  of  the  people,  each  generation  may  be 
double  the  number  of  the  generation  which  preceded  it. 

Twenty  or  thirty  years  ago,  these  propositions  might  still  have 
required  considerable  enforcement  and  illustration  ; but  the  evidence 
of  them  is  so  ample  and  incontestable,  that  they  have  made  their 
way  against  all  kinds  of  opposition,  and  may  now  be  regarded  as 
axiomatic  : though  the  extreme  reluctance  felt  to  admitting  them 
every  now  and  then  gives  birth  to  some  ephemeral  theory,  speedily 
forgotten,  of  a different  law  of  increase  in  different  circumstances, 
through  a providential  adaptation  of  the  fecundity  of  the  human 
species  to  the  exigencies  of  society. f The  obstacle  to  a just  under- 

♦ [1865]  This  has  been  disputed ; but  the  highest  estimate  I have  seen  of 
the  term  which  population  requires  for  doubling  itself  in  the  United  States, 
independently  of  immigrants  and  of  their  progeny — that  of  Mr.  Carey — does 
not  exceed  thirty  years. 

f [1852]  One  of  these  theories,  that  of  Mr.  Doubleday,  may  be  thought  to 
require  a passing  notice,  because  it  has  of  late  obtained  some  followers,  and 
because  it  derives  a semblance  of  support  from  the  general  analogies  of  organic 
life.  This  theory  maintains  that  the  fecundity  of  the  human  animal,  and  of 
all  other  living  beings,  is  in  inverse  proportion  to  the  quantity  of  nutriment : 
that  an  underfed  population  multiplies  rapidly,  but  that  all  classes  in  comfort- 
able circumstances  are,  by  a physiological  law,  so  unprolific,  as  seldom  to  keep 
up  their  numbers  without  being  recruited  from  a poorer  class.  There  is  no 
doubt  that  a positive  excess  of  nutriment,  in  animals  as  well  as  in  fruit  trees, 
is  unfavourable  to  reproduction  ; and  it  is  quite  possible,  though  by  no  means 
proved,  that  the  physiological  conditions  of  fecundity  may  exist  in  the  greatest 
degree  when  the  supply  of  food  is  somewhat  stinted.  But  any  one  who  might 
be  inclined  to  draw  from  this,  even  if  admitted,  conclusions  at  variance  with 
the  principles  of  Mr.  Malthus,  needs  only  be  invited  to  look  through  a volume 
of  the  Peerage,  and  observe  the  enormous  families,  almost  universal  in  that 


158 


BOOK  I.  CHAPTER  X.  § 3 


standing  of  the  subject  does  not  arise  from  these  theories,  but  from 
too  confused  a notion  of  the  causes  which,  at  most  times  and  places, 
keep  the  actual  increase  of  mankind  so  far  behind  the  capacity. 

§ 3.  Those  causes,  nevertheless,  are  in  no  way  mysterious. 
What  prevents  the  population  of  hares  and  rabbits  from  over- 
stocking the  earth  ? Not  want  of  fecundity,  but  causes  very 
'different : many  enemies,  and  insufficient  subsistence  ; not  enough 
to  eat,  and  liability  to  be  eaten.  In  the  human  race,  which  is  not 
generally  subject  to  the  latter  inconvenience,  the  equivalents  for 
it  are  war  and  disease.  If  the  multiplication  of  mankind  proceeded 
only  hke  that  of  the  other  animals,  from  a blind  instinct, 
it  would  be  limited  in  the  same  manner  with  theirs ; the  births 
would  be  as  numerous  as  the  physical  constitution  of  the  species 
admitted  of,  and  the  population  would  be  kept  down  by  deaths.* 
But  the  conduct  of  human  creatures  is  more  or  less  influenced  by 
foresight  of  consequences,  and  by  impulses  superior  to  mere  animal 
instincts : and  they  do  not,  therefore,  propagate  hke  swine,  but 

class  ; or  call  to  mind  the  large  families  of  the  English  clergy,  and  generally  of 
the  middle  classes  of  England. 

[1865]  It  is,  besides,  well  remarked  by  Mr.  Carey,  that,  to  be  consistent 
with  Mr.  Doubleday’s  theory,  the  increase  of  the  population  of  the  United 
States,  apart  from  immigration,  ought  to  be  one  of  the  slowest  on  record. 

[1865]  Mr.  Carey  has  a theory  of  his  own,  also  grounded  on  a physiological 
truth,  that  the  total  sum  of  nutriment  received  by  an  organized  body  directs 
itself  in  largest  proportion  to  the  parts  of  the  system  which  are  most  used ; 
from  which  he  anticipates  a diminution  in  the  fecundity  of  human  beings,  not 
through  more  abundant  feeding,  but  through  the  greater  use  of  their  brains 
incident  to  an  advanced  civihzation.  There  is  considerable  plausibihty  in  this 
speculation,  and  experience  may  hereafter  confirm  it.  But  the  change  in  the 
human  constitution  which  it  supposes,  if  ever  realized,  will  conduce  to  the 
expected  effect  rather  by  rendering  physical  self-restraint  easier,  than  by  dis- 
pensing with  its  necessity  ; since  the  most  rapid  known  rate  of  multipUcation 
is  quite  compatible  with  a very  sparing  employment  of  the  multiplying  power. 

* [1865]  Mr.  Carey  expatiates  on  the  absurdity  of  supposing  that  matter 
tends  to  assume  the  highest  form  of  organization,  the  human,  at  a more  rapid 
rate  than  it  assumes  the  lower  forms,  which  compose  human  food  ; that  human 
beings  multiply  faster  than  turnips  and  cabbages.  But  the  Hmit  to  the  increase 
of  mankind,  according  to  the  doctrine  of  Mr.  Malthus,  does  not  depend  on  the 
power  of  increase  of  turnips  and  cabbages,  but  on  the  hmited  quantity  of  the 
land  on  which  they  can  be  grown.  So  long  as  the  quantity  of  land  is  practically 
anhmited,  which  it  is  in  the  United  States,  and  food,  consequently,  can  be 
increased  at  the  highest  rate  which  is  natural  to  it,  mankind  also  may,  without 
augmented  difficulty  in  obtaining  subsistence,  increase  at  their  highest  rate. 
When  Mr.  Carey  can  show,  not  that  turnips  and  cabbages,  but  that  the  soil 
itself,  or  the  nutritive  elements  contained  in  it,  tend  naturally  to  multiply,  and 
that  too  at  a rate  exceeding  the  most  rapid  possible  increase  of  mankind,  he 
will  have  said  something  to  the  purpose.  Tfll  then,  this  part  at  least  of  his 
argument  may  be  considered  as  non-existent. 


LAW  OF  THE  INCREASE  OF  LABOUR 


169 


are  capable,  though  in  very  unequal  degrees,  of  being  withheld  by 
prudence,  or  by  the  social  affections,  from  giving  existence  to  beings 
born  only  to  misery  and  premature  death.  In  proportion  as  man- 
kind rise  above  the  condition  of  the  beasts,  population  is  restrained 
by  the  fear  of  want  rather  than  by  want  itself.  Even  where  there 
is  no  question  of  starvation,  many  are  similarly  acted  upon  by  the 
apprehension  of  losing  what  have  come  to  be  regarded  as  the 
decencies  of  their  situation  in  life.  Hitherto  no  other  motives  than 
these  two  have  been  found  strong  enough,  in  the  generality  of 
mankind,  to  counteract  the  tendency  to  increase.  It  has  been  the 
practice  of  a great  majority  of  the  middle  and  the  poorer  classes, 
whenever  free  from  external  control,  to  marry  as  early,  and  in 
most  countries  to  have  as  many  children,  as  was  consistent  with 
maintaining  themselves  in  the  condition  of  life  which  they  were 
bom  to,  or  were  accustomed  to  consider  as  theirs.  Among  the 
middle  classes,  in  many  individual  instances,  there  is  an  additional 
restraint  exercised  from  the  desire  of  doing  more  than  maintaining 
their  circumstances — of  improving  them ; but  such  a desire  is 
rarely  found,  or  rarely  has  that  effect,  in  the  labouring  classes.  If 
they  can  bring  up  a family  as  they  were  themselves  brought  up, 
even  the  prudent  among  them  are  usually  satisfied.  Too  often 
they  do  not  think  even  of  that,  but  rely  on  fortune,  or  on  the 
resources  to  be  found  in  legal  or  voluntary  charity. 

In  a very  backward  state  of  society,  like  that  of  Europe  in  the 
Middle  Ages,  and  many  parts  of  Asia  at  present  [1848],  population 
is  kept  down  by  actual  starvation.  The  starvation  does  not  take 
place  in  ordinary  years,  but  in  seasons  of  scarcity,  which  in  those 
states  of  society  are  much  more  frequent  and  more  extreme  than 
Europe  is  now  accustomed  to.  In  these  seasons  actual  want,  or  the 
maladies  consequent  on  it,  carry  off  numbers  of  the  population, 
which  in  a succession  of  favourable  years  again  expands,  to  be  again 
cruelly  decimated.  In  a more  improved  state,  few,  even  among 
the  poorest  of  the  people,  are  limited  to  actual  necessaries,  and  to  a 
bare  sufficiency  of  those  : and  the  increase  is  kept  within  bounds, 
not  by  excess  of  deaths,  but  by  limitation  of  births.  The  hmitation 
is  brought  about  in  various  ways.  In  some  countries,  it  is  the 
result  of  prudent  or  conscientious  self-restraint.  There  is  a con- 
dition to  which  the  labouring  people  are  habituated  ; they  perceive 
that  by  having  too  numerous  families,  they  must  sink  below  that 
condition,  or  fail  to  transmit  it  to  their  children ; and  this  they 
do  not  choose  to  submit  to.  The  countries  in  which,  so  far  as  is 


160 


BOOK  I.  CHAPTER  X.  § 3 


known,  a great  degree  of  voluntary  prudence  has  been  longest 
practised  on  this  subject,  are  [1848]  Norway  and  parts  of  Switzerland. 
Concerning  both,  there  happens  to  be  unusually  authentic  informa- 
tion ; many  facts  were  carefully  brought  together  by  Mr.  Malthus, 
and  much  additional  evidence  has  been  obtained  since  his  time. 
In  both  these  countries  the  increase  of  population  is  very  slow ; 
and  what  checks  it,  is  not  multitude  of  deaths,  but  fewness  of  births. 
Both  the  births  and  the  deaths  are  remarkably  few  in  proportion 
to  the  population ; the  average  duration  of  life  is  the  longest  in 
Europe  ; the  population  contains  fewer  children,  and  a greater 
proportional  number  of  persons  in  the  vigour  of  life,  than  is  known 
to  be  the  case  in  any  other  part  of  the  world.  The  paucity  of  births 
tends  directly  to  prolong  life,  by  keeping  the  people  in  comfortable 
circumstances;  and  the  same  prudence  is  doubtless  exercised  in 
avoiding  causes  of  disease,  as  in  keeping  clear  of  the  principal  cause 
of  poverty.  It  is  worthy  of  remark  that  the  two  countries  thus 
honourably  distinguished  are  countries  of  small  landed  proprietors. 

There  are  other  cases  in  which  the  pirudence  and  forethought, 
which  perhaps  might  not  be  exercised  by  the  people  themselves, 
are  exercised  by  the  state  for  their  benefit ; marriage  net-  being 
permitted  until  the  contracting  parties  cj,n  show  that  they  have 
the  prospect  of  a comfortable  support.  Under  these  laws,  of  which 
I shall  speak  more  fully  hereafter,  the  condition  of  the  people  is 
reported  to  be  good,  and  the  illegitimate  births  not  so  numerous 
as  might  be  expected.  There  are  places,  again,  in  which  the  re- 
straining cause  seems  to  be  not  so  much  individual  prudence,  as 
some  general  and  perhaps  even  accidental  habit  of  the  country. 
In  the  rural  districts  of  England,  during  the  last  century,  the  growth 
of  population  was  very  effectually  repressed  by  the  difficulty  of 
obtaining  a cottage  to  live  in.  It  was  the  custom  for  unmarried 
labourers  to  lodge  and  board  with  theit  employers ; it  was  the 
custom  for  married  labourers  to  have  a cottage  : and  the  rule  of 
the  English  poor  laws  by  which  a parish  was  charged  with  the 
support  of  its  unemployed  poor,  rendered  landowners  averse  to 
promote  marriage.  About  the  end  of  the  century,  the  great  demand 
for  men  in  war  and  manufactures  made  it  be  thought  a patriotic 
thing  to  encourage  population  : and  about  the  same  time  the 
growing  inclination  of  farmers  to  live  like  rich  people,  favoured 
as  it  was  by  a long  period  of  high  prices,  made  them  desirous  of 
keeping  inferiors  at  a greater  distance,  and,  pecuniary  motives  arising 
from  abuses  of  the  poor  laws  being  superadded,  they  gradually 


LAW  OF  THE  INCREASE  OF  LABOUR 


161 


drove  their  labourers  into  cottages,  which  the  landlords  now  no  longer 
refused  permission  to  build.  In  some  countries  an  old  standing 
custom  that  a girl  should  not  marry  until  she  had  spun  and  woven 
for  herself  an  ample  trousseau  (destined  for  the  supply  of  her  whole 
subsequent  life),  is  said  to  have  acted  as  a substantial  check  to 
population.  In  England,  at  present  [1848],  the  influence  of  pru- 
dence in  keeping  down  multiplication  is  seen  by  the  diminished 
number  of  marriages  in  the  manufacturing  districts  in  years  when 
trade  is  bad. 

But  whatever  be  the  causes  by  which  population  is  anywhere 
limited  to  a comparatively  slow  rate  of  increase,  an  acceleration 
of  the  rate  very  speedily  follows  any  diminution  of  the  motives  to 
restraint.^  It  is  but  rarely  that  improvements  in  the  condition  ot 
the  labouring  classes  do  anything  more  than  give  a temporary 
margin,  speedily  filled  up  by  an  increase  of  their  numbers.  The  use 
they  commonly  choose  to  make  of  any  advantageous  change  in  their 
circumstances,  is  to  take  it  out  in  the  form  which,  by  augmenting 
the  population,  deprives  the  succeeding  generation  of  the  benefit. 
Unless,  either  by  their  general  improvement  in  intellectual  and 
moral  culture,  or  at  least  by  raising  their  habitual  standard  of 
comfortable  living,  they  can  be  taught  to  make  a better  use  ot 
favourable  circumstances,  nothing  permanent  can  be  done  for  them  ; 
the  most  promising  schemes  end  only  in  having  a more  numerous, 
but  not  a happier  people.  By  their  habitual  standard,  I mean  that 
(when  any  such  there  is)  down  to  which  they  will  multiply,  but  not 
lower.  Every  advance  they  make  in  education,  civilization,  and 
social  improvement,  tends  to  raise  this  standard ; and  there  is  no 
doubt  that  it  is  gradually,  though  slowly,  rising  in  the  more  advanced 
countries  of  Western  Europe.  Subsistence  and  employment  in 
England  have  never  increased  more  rapidly  than  in  the  last  forty 
years  [1862],  but  every  census  since  1821  showed  a smaller  propor- 
tional increase  of  population  than  that  of  the  period  preceding ; 
and  the  produce  of  French  agriculture  and  industry  is  increasing 
in  a progressive  ratio,  while  the  population  exhibits,  in  every 
quinquennial  census,  a smaller  proportion  of  births  to  the  population. 

The  subject,  however,  of  population,  in  its  connexion  with  the 
condition  of  the  labouring  classes,  will  be  considered  in  another 
place  : in  the  present  we  have  to  do  with  it  solely  as  one  of  the 

1 [So  from  the  3rd  ed.  (1852).  The  original  second  clause  of  the  sentence 
ran  : “ There  is  always  an  immense  residuary  power  behind,  ready  to  start  into 
activity  as  soon  as  the  pressure  which  restrained  it  is  taken  off.”] 

o 


162 


BOOK  I.  CHAPTER  X.  § 3 


elements  of  Production  : and  in  that  character  we  could  not  dispense 
with  pointing  out  the  unlimited  extent  of  its  natural  powers  of 
increase,  and  the  causes  owing  to  which  so  small  a portion  of  that 
unlimited  power  is  for  the  most  part  actually  exercised.  After  this 
brief  indication,  we  shall  proceed  to  the  other  elements.^ 

* [See  Appendix  I.  P(ypulation»’\ 


CHAPTER  XI 


OP  THE  LAW  OF  THE  INCREASE  OF  CAPITAL 

§ 1.  The  requisites  of  production  being  labour,  capital,  and 
land,  it  has  been  seen  from  the  preceding  chapter  that  the  impedi* 
ments  to  the  increase  of  production  do  not  arise  from  the  first  of 
these  elements.  On  the  side  of  labour  there  is  no  obstacle  to  an 
increase  of  production,  indefinite  in  extent  and  of  unslackening 
rapidity.  Population  has  the  power  of  increasing  in  an  uniform  and 
rapid  geometrical  ratio.  If  the  only  essential  condition  of  produc- 
tion  were  labour,  the  produce  might,  and  naturally  would,  increase  in 
the  same  ratio ; and  there  would  be  no  limit,  until  the  numbers  of 
mankind  were  brought  to  a stand  from  actual  want  of  space. 

But  production  has  other  requisites,  and  of  these,  the  one  which 
we  shall  next  consider  is  Capital.  There  cannot  be  more  people  in 
any  country,  or  in  the  world,  than  can  be  supported  from  the  produce 
of  past  labour  until  that  of  present  labour  comes  in.  There  will  be 
no  greater  number  of  productive  labourers  in  any  country,  or  in  the 
world,  than  can  be  supported  from  that  portion  of  the  produce  of 
past  labour  which  is  spared  from  the  enjoyments  of  its  possessor  for 
purposes  of  reproduction,  and  is  termed  Capital.  We  have  next, 
therefore,  to  inquire  into  the  conditions  of  the  increase  of  capital : 
the  causes  by  which  £he  rapidity  of  its  increase  is  determinedj  and 
the  necessary  limitations  of  that  increase. 

Since  all  capital  is  the  product  of  saving,  that  is,  of  abstinence 
from  present  consumption  for  the  sake  of  a future  good,  the  increase 
of  capital  must  depend  upon  two  things^the  amount  of  the  fund 
from  which  saving  can  be  made,  and  the  strength  of  the  dispositions 
which  prompt  to  it. 

The  fund  from  which  saving  can  be  made,  is  the  surplus  of  the 
produce  of  labour,  after  supplying  the  necessaries  of  hfe  to  all 
concerned  in  the  production  : including  those  employed  in  replacing 
the  materials,  and  keeping  the  fixed  capital  in  repair.  More  than 


164 


BOOK  1.  CHAPTER  XI.  § 1 


this  surplus  cannot  be  saved  under  any  circumstances.  As  much 
* this,  though  it  never  is  saved,  always  might  be.  Th^  “ 

the  fund  from  which  the  enjoyments,  as  djstingmshed  * 

necessaries,  of  the  producers  are  provided  ; it  is  the  fund  from  which 
all  are  subsisted,  who  are  not  themselves  engaged  in  production , 
and  Tom  Sch  all  additions  are  made  to  capital.  Iti|  the  real  net 
produce  of  the  country.  The  phrase,  net  prod'io®- ^ TftT'd 
a more  limited  sense,  to  denote  only  the  profits  of  the  capitahst  and 
the  rent  of  the  landlord,  under  the  idea  that  nothmg  can  be  included 
in  the  net  produce  of  capital,  but  what  is  returned  to  the  owner  of 
le  capital  after  replacing  his  expenses.  But  this  is  too  narrow  an 
acceptLion  of  the  term.  Th^oapifal  of  ^h?  em^^^^ 
reveLe  of  the  labourers,  and  if  this  exceeds  the  ne|pssari_e3_6i  hfe, 
it  gives  them  a surplus  which  they  may  either  expend  in  enjoyments 
or Tve  For  every  purpose  for  which  there  can  be  occasion  to 
spiiFBrthe  net  produce  of  industry,  this  surplus  ought  t°  be  in- 
cluded in  it.  When  this  is  included,  and  not  otherwise,  the  net 
produce  of  the  country  is  the  measure  of  its  efiectjye  power , 
what  it  can  spare  for  any  purposes  of  pubhc  utihty,  “ 
indulgence ; the  portion  of  its  produce  of  wtoh  it  can  dispose  at 
pleasme ; which  can  be  drawn  upon 

any  wishes,  either  of  the  government  or  of  individuals  , which  it  c 
either  spend  for  its  satisfaction,  or  save  for  ^ 

The  amount  of  this  fund,  this  net  produce,  this  excess  of  produc- 
tion above  the  physical  necessaries  of  the  producers  is  one  of  the 
elements  that  determine  the  amount  of  saving.  The  grea  er 
produce  of  labour  after  supporting  the  labourers,  the 
which  can  be  saved.  The  same  thing  also  partly 
determine  how  much  will  be  saved.  A part  of  the  motive  to  saying 
consists  in  the  prospect  of  deriving  an  incoine  from  sayings , 
the  fact  that  capital,  employed  in  if,  ®^P^“® 

reproducing  itself  but  yielding  an  increase.  The_£eater  t^e  proB 
that  can  be  made  from  capital,  the  stronger  is  the 
accumulation.  That  indeed  which  forms  the  inducement  to  save, 
is  not  the  whole  of  the  fund  which  supphes  “®“® 
not  the  whole  net  produce  of  the  land,  capital,  and  labour  of  the  corn- 
try,  but  only  a part  of  it,  the  part  which  forms  the  remuneratira 
of  the  capitalist,  and  is  called  profit  of  stock.  I*  ^ ^°TTinna 
readily  eMUgh  understood,  even  previously  to  the  explanations 
which  will  be  given  hereafter,  that  when-the  general  productiveness 
oHabour  and  capital  is  great,  the  returns  to  the  capitalist  are  hkely 


LAW  OF  THE  INCREASE  OF  CAPITAL 


166 


to  be  large,  and  that  some  proportion,  though  not  an  uniform  one, 
will  commonly  obtain  between  the  two. 

§ 2.  But  the  disposition  to  save  does  not  wholly  depend  on 
the  external  inducement  to  it ; on  the  amount  of  profit  to  be  made 
from  savings.  With  the  same  pecuniary  inducement,  the  inclina-  - ' 
tion  is  very  different,  in  different  persons,  and  in  different  commu- 
nities. The effecj^^^esire  of  accumulatic^  is  of  unequal  strength,  y 
net  only  accormng  to  the  varieties  of  individual  character,  but  to  the 
general  state  of  society  and  civilization.  Like  all  other  moral 
attributes,  it  is  one  in  which  the  human  race  exhibits  great  differ- 
ences, conformably  to  the  diversity  of  its  circumstances  and  the 
stage  of  its  progress. 

On  topics  which  if  they  were  to  be  fully  investigated  would  exceed 
the  bounds  that  can  be  allotted  to  them  in  this  treatise,  it  is  satis- 
factory to  be  able  to  refer  to  other  works  in  which  the  necessary 
developments  have  been  presented  more  at  length.  On  the  subject 
of  Population  this  valuable  service  has  been  rendered  by  the  cele- 
brated Essay  of  Mr.  Malthus  ; and  on  the  point  which  now  occupies 
us  I can  refer  with  equal  confidence  to  another,  though  a less  known 
work,  Eew  Principles  of  Political  Economy,  by  Dr.  Kae.*  In  no 
other  book  known  to  me  is  so  much  hght  thrown,  both  from 
principle  and  history,  on  the  causes  which  determine  the  accumula- 
tion of  capital.  ^ , 

AIL  accumul ation  involves  the  sacrifice  of  a present,  for  the  sake  ^ 
of  a Juture  good.  But  the  expediency  of  such  a sacrifice  varies . 

* This  treatise  is  an  example,  such  as  not  unfrequently  presents  itself, 
how  much  more  depends  on  accident,  than  on  the  qualities  of  a book,  in  deter- 
mining its  reception.  Had  it  appeared  at  a suitable  time,  and  been  favoured 
by  circumstances,  it  would  have  had  every  requisite  for  great  success.  The 
author,  a Scotchman  settled  in  the  United  States,  unites  much  knowledge,  an 
original  vein  of  thought,  a considerable  turn  for  philosophic  generalities,  and  a 
manner  of  exposition  and  illustration  calculated  to  make  ideas  tell  not  only 
for  what  they  are  worth,  but  for  more  than  they  are  worth,  and  which  some- 
times, I think,  has  that  effect  in  the  writer’s  own  mind.  The  principal  fault  of 
the  book  is  the  position  of  antagonism  in  which,  with  the  controversial  spirit 
apt  to  be  found  in  those  who  have  new  thoughts  on  old  subjects,  he  has  placed 
himself  towards  Adam  Smith.  I call  this  a fault,  (though  I think  many  of  the 
criticisms  just,  and  some  of  them  far-seeing,)  because  there  is  much  less  real 
difference  of  opinion  than  might  be  supposed  from  Dr.  Rae’s  animadversions ; 
and  because  what  he  has  found  vulnerable  in  his  great  predecessor  is  chiefly 
the  “ human  too  much  ” in  Iris  premises;  the  portion  of  them  that  is  over  and 
abovo  what  was  either  required  or  is  actually  used  for  the  establishment  of  his 
conclusions.  [A  i^-arranged  reprint  of  John  Rae’s  New  Principles  of  Political 
Economy  (1834)  has  been  edited  by  Professor  IMixter,  and  published  (1906) 
under  the  title  The  Sociological  Theory  of  Capital.] 


166 


BOOH  I.  CHAPTER  XI.  § 2 


very  mucii  in  different  states  of  circumstances  ; and  the  willingness 
to  make  it  varies  still  more. 

In  weighing  the  future  against  the  present,  the  uncertainty 
of  all  things  future  is  a leading  element ; and  that  uncertainty  is  of 
very  different  degrees.  “ All  circumstances  ” therefore,  “ increasing 
the  probability  of  the  provision  we  make  for  futurity  being  enjoyed  by 
ourselves  or  others,  tend  ” justly  and  reasonably  “ to  give  strength 
to  the  effective  desire  of  accumulation.  Thus  a healthy  climate  or 
occupation,  by  increasing  the  probability  of  hfe,  has  a tendency  to 
add  to  this  desire.  When  engaged  in  safe  occupations,  and  living  in 
healthy  countries,  men  are  much  more  apt  to  be  frugal,  than  in 
unhealthy  or  hazardous  occupations,  and  in  climates  pernicious  to 
human  hfe.  Sailors  and  soldiers  are  prodigals.  In  the  West  Indies, 
New  Orleans,  the  East  Indies,  the  expenditure  of  the  inhabitants  is 
profuse.  The  same  people,  coming  to  reside  in  the  healthy  parts  of 
Europe,  and  not  getting  into  the  vortex  of  extravagant  fashion, 
hve  economically.  War  and  pestilence  have  always  waste  and 
luxury  among  the  other  evils  that  follow  in  their  train.  For  similar 
reasons,  whatever  gives  security  to  the  affairs  of  the  community 
is  favourable  to  the  strength  of  this  principle.  In  this  respect  the 
general  prevalence  of  law  and  order,  and  the  prospect  of  the  con- 
tinuance of  peace  and  tranquillity,  have  considerable  influence.”* 
The  more  perfect  the  security,  the  greater  will  be  the  effective 
strength  of  the  desire  of  accumulation.  Where  property  is  less  safe, 
or  the  vicissitudes  ruinous  to  fortunes  are  more  frequent  and  severe, 
fewer  persons  wiU  save  at  all,  and  of  those  who  do,  many  will  require 
the  inducement  of  a higher  rate  of  profit  on  capital,  to  make  them 
prefer  a doubtful  future  to  the  temptation  of  present  enjoyment. 

These  are  considerations  which  affect  the  expediency,  in  the  eye 
of  reason,  of  consulting  future  interests  at  the  expense  of  present. 
But  the  inclination  to  make  the  sacrifice  does  not  solely  depend  upon 
its  expediency.  The  disposition  to  save  is  often  far  short  of  what 
reason  would  dictate  : and  at  other  times  is  liable  to  be  in  excess 
of  it. 

^ (U'  Deficient  strength  of  the  desire  of  accumulation  may  arise  from 
improvidence,  or  from  want  of  interest  in  others.  Improvidence 
may  be  connected  with  intellectual  as  well  as  moral  causes.  Indivi- 
duals and  communities  of  a very  low  state  of  intelligence  are  always 
improvident.  A certain  measure  of  intellectual  development 
seems  necessary  to  enable  absent  things,  and  especiaMy  things  future, 
* Rae,  p.  123  [ed.  JVlixter,  p.  67]. 


LAW  OF  THE  INCREASE  OF  CAPITAL 


167 


to  act  Tvitli  any  force  on  the  imagination  and  will.  The  effect  of 
want  of  interest  in  others  in  diminishing  accumulation  will  be  ad- 
mitted, if  we  consider  how  much  saving  at  present  takes  place, 
which  has  for  its  object  the  interest  of  others  rather  than  of  ourselves  ; 
the  education  of  children,  their  advancement  in  life,  the  future 
interests  of  other  personal  connexions,  the  power  of  promoting, 
by  the  bestowal  of  money  or  time,  objects  of  public  or  private 
usefulness.  If  mankind  were  generally  in  the  state  of  mind  to  which 
some  approach  was  seen  in  the  declining  period  of  the  Roman  Empire 
— caring  nothing  for  their  heirs,  as  well  as  nothing  for  friends,  the 
public,  or  any  object  which  survived  them — they  would  seldom 
deny  themselves  any  indulgence  for  the  sake  of  saving,  beyond  what 
was  necessary  for  their  own  future  years ; which  they  would  place 
in  hfe  annuities,  or  in  some  other  form  which  would  make  its 
existence  and  their  lives  terminate  together. 

§ 3.  From  these  various  causes,  intellectual  and  moral,  there  is, 
in  different  portions  of  the  human  race,  a greater  diversity  than  is 
usually  adverted  to,  in  the  strength  of  the  effective  desire  of  accumu- 
lation. A backward  state  of  general  civilization  is  often  more  the 
effect  of  deficiency  in  this  particular,  than  in  many  others  which 
attract  more  attention.  In  the  circumstances,  for  example,  of  a 
hunting^  tribe,  “ man  may  be  said  to  be  necessarily  improvident, 
and  regardless  of  futurity,  because,  in  this  state,  the  future  presents 
nothing  which  can  be  with  certainty  either  foreseen  or  governed.  . . . 
Besides  a want  of  the  motives  exciting  to  provide  for  the  needs 
of  futurity  through  means  of  the  abilities  of  the  present,  there  is  a 
want  of  the  habits  of  perception  and  action,  leading  to  a constant 
connexion  in  the  mind  of  those  distant  points,  and  of  the  series 
of  events  serving  to  unite  them.  Even,  therefore,  if  motives  be 
awakened  capable  of  producing  the  exertion  necessary  to  effect  this 
connexion,  there  remains  the  task  of  training  the  mind  to  think  and 
act  so  as  to  establish  it.’* 

For  instance  : “ Upon  the  banks  of  the  St.  Lawrence  there  are 
several  httle  Indian  villages.  They  are  surrounded  in  general  by  a 
good  deal  of  land,  from  which  the  wood  seems  to  have  been  long 
extirpated,  and  have,  besides,  attached  to  them,  extensive  tracts 
of  forest.  The  cleared  land  is  rarely,  I may  almost  say  never, 
cultivated,  nor  are  any  inroads  made  in  the  forest  for  such  a purpose. 
The  soil  is,  nevertheless,  fertile,  and  were  it  not,  manure  lies  in  heaps 
by  their  houses.  Were  every  family  to  enclose  half  an  acre  of  ground, 


168 


BOOK  I.  CHAPTER  XI.  § 3 


till  it,  and  plant  it  in  potatoes  and  maize,  it  won  Id  yield  a sufficiency 
to  support  them  one  half  the  year.  They  suffer,  too,  e’very  now  and 
then,  extreme  want,  insomuch  that,  joined  to  occasional  intem- 
perance, it  is  rapidly  reducing  their  numbers.  This,  to  us,  so  strange 
apathy  proceeds  not,  in  any  great  degree,  from  repugnance  to  labour  ; 
on  the  contrary,  they  apply  very  diligently  to  it  when  its  reward 
is  immediate.  Thus,  besides  their  peculiar  occupations  of  hunting 
and  fishing,  in  which  they  are  ever  ready  to  engage,  they  are  much 
employed  in  the  navigation  of  the  St.  Lawrence,  and  may  be  seen 
labouring  at  the  oar,  or  setting  with  the  pole,  in  the  large  boats  used 
for  the  purpose,  and  always  furnish  the  greater  part  of  the  additional 
hands  necessary  to  conduct  rafts  through  some  of  the  rapids.  Nor 
is  the  obstacle  aversion  to  agricultural  labour.  This  is  no  doubt 
a prejudice  of  theirs ; but  mere  prejudices  always  yield,  principles 
of  action  cannot  be  created.  When  the  returns  from  agricultural 
labour  are  speedy  and  great,  they  are  also  agriculturists.  Thus, 
some  of  the  little  islands  on  Lake  St.  Francis,  near  the  Indian  village 
of  St.  Regis,  are  favourable  to  the  growth  of  maize,  a plant  yielding 
a return  of  a hundredfold,  and  forming,  even  when  half  ripe,  a 
pleasant  and  substantial  repast.  Patches  of  the  best  land  on  these 
islands  are  therefore  every  year  cultivated  by  them  for  this  purpose. 
As  their  situation  renders  them  inaccessible  to  cattle,  no  fence  is 
required  ; were  this  additional  outlay  necessary,  I suspect  they  would 
be  neglected,  like  the  commons  adjoining  their  village.  These  had 
apparently,  at  one  time,  been  under  crop.  The  cattle  of  the  neigh- 
bouring settlers  would  now,  however,  destroy  any  crop  not  securely 
fenced,  and  this  additional  necessary  outlay  consequently  bars  their 
culture.  It  removes  them  to  an  order  of  instruments  of  slower  return 
than  that  which  corresponds  to  the  strength  of  the  effective  desire 
of  accumulation  in  this  httle  society. 

“ It  is  here  deserving  of  notice,  that  what  instruments  of  this  kind 
they  do  form,  are  completely  formed.  The  small  spots  of  corn  they 
cultivate  are  thoroughly  weeded  and  hoed.  A little  neglect  in  this 
part  would  indeed  reduce  the  crop  very  much ; of  this  experience 
has  made  them  perfectly  aware,  and  they  act  accordingly.  It  is 
evidently  not  the  necessary  labour  that  is  the  obstacle  to  more  ex- 
tended culture,  but  the  distant  return  from  that  labour.  I am 
assured,  indeed,  that  among  some  of  the  more  remote  tribes,  the  labour 
thus  expended  much  exceeds  that  given  by  the  whites.  The  same 
portions  of  ground  being  cropped  without  remission,  and  manure  not 
being  used,  they  would  scarcely  yield  any  return,  were  not  the  soil 


LAW  OF  THE  INCREASE  OF  CAPITAL 


169 


most  carefully  broken  and  pulverized,  both  with  the  hoe  and  the 
hand.  In  such  a situation  a white  man  would  clear  a fresh  piece  of 
ground.  It  would  perhaps  scarce  repay  his  labour  the  first  year, 
and  he  would  have  to  look  for  his  reward  in  succeeding  years.  On 
the  Indian,  succeeding  years  are  too  distant  to  make  sufficient 
impression  ; though,  to  obtain  what  labour  may  bring  about  in  the 
course  of  a few  months,  he  toils  even  more  assiduously  than  the  white 
man.”  * 

This  view  of  things  is  confirmed  by  the  experience  of  the  Jesuits, 
in  their  interesting  efforts  to  civilize  the  Indians  of  Paraguay. 
They  gained  the  confidence  of  these  savages  in  a most  extraordinary 
degree.  They  acquired  influence  over  them  sufficient  to  make  them 
change  their  whole  manner  of  life.  They  obtained  their  absolute 
submission  and  obedience.  They  established  peace.  They  taught 
them  all  the  operations  of  European  agriculture,  and  many  of  the 
more  difficult  arts.  There  were  everywhere  to  be  seen,  according  to 
Charlevoix  “ workshops  of  gilders,  painters,  sculptors,  goldsmiths, 
watchmakers,  carpenters,  joiners,  dyers,”  &c.  These  occupations 
were  not  practised  for  the  personal  gain  of  the  artificers  : the 
produce  was  at  the  absolute  disposal  of  the  missionaries,  who 
ruled  the  people  by  a voluntary  despotism.  The  obstacles  arising 
from  aversion  to  labour  were  therefore  very  completely  over- 
come. The  real  difficulty  was  the  improvidence  of  the  people ; 
their  inabihty  to  think  for  the  future  : and  the  necessity  accordingly 
of  the  most  unremitting  and  minute  superintendence  on  the  part  of 
their  instructors.  “ Thus  at  first,  if  these  gave  up  to  them  the  care 
of  the  oxen  with  which  they  ploughed,  their  indolent  thoughtlessness 
would  probably  leave  them  at  evening  still  yoked  to  the  implement. 
Worse  than  this,  instances  occurred  where  they  cut  them  up  for 
supper,  thinking,  when  reprehended,  that  they  sufficiently  excused 
themselves  by  saying  they  were  hungry.  . . . These  fathers,  says 
Ulloa,  have  to  visit  the  houses,  to  examine  what  is  really  wanted  : 
for  without  this  care,  the  Indians  would  never  look  after  anything. 
They  must  be  present,  too,  when  animals  are  slaughtered,  not  only 
that  the  meat  may  be  equally  divided,  but  that  nothing  may  be  lost.” 
“ But  notwithstanding  all  this  care  and  superintendence,”  says 
Charlevoix,  “ and  all  the  precautions  which  are  taken  to  prevent  any 
want  of  the  necessaries  of  life,  the  missionaries  are  sometimes  much 
embarrassed.  It  often  happens  that  they  ” (the  Indians)  “ do  not 
reserve  to  themselves  a sufficiency  of  grain,  even  for  seed.  As  for 
♦ Rae.  p.  136  [ed.  Mixter,  p.  71]. 


170 


BOOK  I.  CHAPTER  KI.  § 3 


their  other  provisions,  were  they  not  well  looked  after,  chey  would 
soon  be  without  wherewithal  to  support  hfe.”* 

As  an  example  intermediate,  in  the  strength  of  the  efiective 
desire  of  accumulation,  between  the  state  of  things  thus  depicted 
and  that  of  modern  Europe,  the  case  of  the  Chinese-deserves  attention. 
From  various  circumstances  in  their  personal  habits  and  social  con- 
dition, it  might  be  anticipated  that  they  would  possess  a degree  of 
prudence  and  self-control  greater  than  other  Asiatics,  but  inferior 
to  most  European  nations ; and  the  following  evidence  is  adduced 
of  the  fact. 

“ Durability  is  one  of  the  chief  qualities,  marking  a high  degree 
of  the  effective  desire  of  accumulation.  The  testimony  of  travellers 
ascribes  to  the  instruments  formed  by  the  Chinese  a very  inferior 
durability  to  similar  instruments  constructed  by  Europeans.  The 
houses,  we  are  told,  unless  of  the  higher  ranks,  are  in  general  of  un- 
burnt bricks,  of  clay,  or  of  hurdles  plastered  with  earth  ; the  roofs, 
of  reeds  fastened  to  laths.  We  can  scarcely  conceive  more  unsub- 
stantial or  temporary  fabrics.  Their  partitions  are  of  paper,  requiring 
to  be  renewed  every  year.  A similar  observation  may  be  made 
concerning  their  implements  of  husbandry,  and  other  utensils. 
They  are  almost  entirely  of  wood,  the  metals  entering  but  very 
sparingly  into  their  construction  ; consequently  they  soon  wear  out, 
and  require  frequent  renewals.  A greater  degree  of  strength  in  the 
effective  desire  of  accumulation  would  cause  them  to  be  constructed 
of  materials  requiring  a greater  present  expenditure  but  being  far 
more  durable.  From  the  same  cause,  much  land,  that  in  other  coun- 
tries would  be  cultivated,  lies  waste.  All  travellers  take  notice  of 
large  tracts  of  lands,  chiefly  swamps,  which  continue  in  a state  of 
nature.  To  bring  a swamp  into  tillage  is  generally  a process,  to 
complete  which,  requires  several  years.  It  must  be  previously 
drained,  the  surface  long  exposed  to  the  sun,  and  many  operations 
performed,  before  it  can  be  made  capable  of  bearing  a crop.  Though 
yielding,  probably,  a very  considerable  return  for  the  labour  bestowed 
on  it,  that  return  is  not  made  until  a long  time  has  elapsed.  The 
cultivation  of  such  land  implies  a greater  strength  of  the  effective 
desire  of  accumulation  than  exists  in  the  empire. 

“ The  produce  of  the  harvest  is,  as  we  have  remarked,  always  an 
instrument  of  some  order  or  another ; it  is  a provision  for  future 
want,  and  regulated  by  the  same  laws  as  those  to  which  other  means 
of  attaining  a similar  end  conform.  It  is  there  chiefly  rice,  of  which 
• Rae,  p.  140  [ed.  Mixter,  p.  76]. 


LAW  OF  THE  INCREASE  *0F  CAPITAL 


171 


there  are  two  harvests,  the  one  in  June,  the  other  in  October.  The 
period  then  of  eight  months  between  October  and  June,  is  that  for 
which  provision  is  made  each  year,  and  the  different  estimate  they 
make  of  to-day  and  this  day  eight  months  will  appear  in  the  self- 
denial  they  practise  now,  in  order  to  guard  against  want  then. 
The  amount  of  this  self-denial  would  seem  to  be  small.  The  father 
.farennin,  indeed,  (who  seems  to  have  been  one  of  the  most  intelligent 
of  the  Jesuits  and  spent  a long  life  among  the  Chinese  of  all  classes,) 
asserts,  that  it  is  their  great  deficiency  in  forethought  and  frugahty 
in  this  respect,  which  is  the  cause  of  the  scarcities  and  famines  that 
frequently  occur.” 

That  it  is  defect  of  providence,  not  defect  of  industry,  that 
limits  production  among  the  Chinese,  is  still  more  ob\dous  than  in 
the  case  of  the  semi-agriculturized  Indians.  “ Where  the  returns 
are  quick,  where  the  instruments  formed  require  but  little  time  to 
bring  the  events  for  which  they  were  formed  to  an  issue,”  it  is  well 
known  that  “the  great  progress  which  has  been  made  in  the  know- 
ledge of  the  arts  suited  to  the  nature  of  the  country  and  the  wants 
of  its  inhabitants  ” makes  industry  energetic  and  effective.  “ The 
warmth  of  the  climate,  the  natural  fertility  of  the  country,  the  know- 
ledge which  the  inhabitants  have  acquired  of  the  arts  of  agriculture, 
and  the  discovery  and  gradual  adaptation  to  every  soil  of  the 
most  useful  vegetable  productions,  enable  them  very  speedily  to 
draw  from  almost  any  part  of  the  surface,  what  is  there  esteemed 
an  equivalent  to  much  more  than  the  labour  bestowed  in  tilling 
and  cropping  it.  They  have  commonly  double,  sometimes  treble 
harvests.  These  when  they  consist  of  a grain  so  productive  as  rice, 
the  usual  crop,  can  scarce  fail  to  yield  to  their  skill,  from  almost  any 
portion  of  soil  that  can  be  at  once  brought  into  culture,  very  ample 
returns.  Accordingly  there  is  no  spot  that  labour  can  immediately 
bring  under  cultivation  that  is  not  made  to  yield  to  it.  Hills, 
even  mountains,  are  ascended  and  formed  into  terraces  ; and  water, 
in  that  country  the  great  productive  agent,  is  led  to  every  part 
by  drains,  or  carried  up  to  it  by  the  ingenious  and  simple  hydraulic 
machines  which  have  been  in  use  from  time  immemorial  among 
this  singular  people.  They  effect  this  the  more  easily,  from  the  soil, 
even  in  these  situations,  being  very  deep  and  covered  with  much 
vegetable  mould.  But  what  yet  more  than  this  marks  the  readiness 
with  which  labour  is  forced  to  form  the  most  difficult  materials 
into  instruments,  where  these  instruments  soon  bring  to  an  issue 
the  events  for  which  they  are  formed,  is  the  frequent  occurrence 


172 


BOOK  t CHAPTER  XL  § 3 


on  many  of  their  lakes  and  rivers,  of  structures  resembling  the 
floating  gardens  of  the  Peruvians,  rafts  covered  with  vegetable  soil 
and  cultivated.  Labour  in  this  way  draws  from  the  materials  on 
which  it  acts  very  speedy  returns.  Nothing  can  exceed  the  luxuri- 
ance of  vegetation  when  the  quickening  powers  of  a genial  sun  are 
ministered  to  by  a rich  soil  and  abundant  moisture.  It  is  otherwise, 
as  we  have  seen,  in  cases  where  the  return,  though  copious,  is  distant. 
European  travellers  are  surprised  at  meeting  these  little  floating  farms 
by  the  side  of  swamps  which  only  require  draining  to  render  them 
tillable.  It  seems  to  them  strange  that  labour  should  not  rather  be 
bestowed  on  the  solid  earth,  where  its  fruits  might  endure,  than  on 
structures  that  must  decay  and  perish  in  a few  years.  The  people 
they  are  among  think  not  so  much  of  future  years  as  of  the  present 
time.  The  effective  desire  of  accumulation  is  of  very  different 
strength  in  the  one,  from  what  it  is  in  the  other.  The  views  of  the 
European  extend  to  a distant  futurity,  and  he  is  surprised  at  the 
Chinese,  condemned  through  improvidence,  and  want  of  sufficient 
prospective  care,  to  incessant  toil,  and,  as  he  thinks,  insufferable 
wretchedness.  The  views  of  the  Chinese  are  confined  to  narrower 
bounds ; he  is  content  to  live  from  day  to  day,  and  has  learnt 
to  conceive  even  a life  of  toil  a blessing.”  * 

When  a country  has  carried  production  as  far  as  in  the  existing 
state  of  knowledge  it  can  be  carried  with  an  amount  of  return  corres- 
ponding to  the  average  strength  of  the  effective  desire  of  accumula- 
tion in  that  country,  it  has  reached  what  is  called  the  stationary 
state  ; the  state  in  which  no  further  addition  will  be  made  to  capital, 
unless  there  takes  place  either  some  improvement  in  the  arts  of 
production,  or  an  increase  in  the  strength  of  the  desire  to  accumulate. 
In  the  stationary  state,  though  capital  does  not  on  the  whole  increase, 
some  persons  grow  richer  and  others  poorer.  Those  whose  degree 
of  providence  is  below  the  usual  standard,  become  impoverished, 
their  capital  perishes,  and  makes  room  for  the  savings  of  those  whose 
effective  desire  of  accumulation  exceeds  the  average.  These  become 
the  natural  purchasers  of  the  lands,  manufactories,  and  other 
instruments  of  production  owned  by  their  less  provident  countrymen. 

What  the  causes  are  which  make  the  return  to  capital  greater 
in  one  country  than  in  another,  and  which,  in  certain  circumstances, 
make  it  impossible  for  any  additional  capital  to  find  investment 
unless  at  diminished  returns,  will  appear  clearly  hereafter.  In 
China,  if  that  country  has  reaUy  attained,  as  it  is  supposed  to  have 
♦ Rae,  pp.  161-6  [ed.  Mixter,  pp.  88-92]. 


LAW  OF  THE  INCREASE  OF  CAPITAL 


173 


done,  stationary  state,  accumulation  has  stopped  when  the 
returns  to  capital  are  still  [1848]  as  high  as  is  indicated  by  a rate 
of  interest  legally  twelve  per  cent,  and  practically  varying  (it  is  said) 
between  eighteen  and  thirty-six.  It  is  to  be  presumed  therefore 
that  no  greater  amount  of  capital  than  the  country  already  possesses, 
can  find  employment  at  this  high  rate  of  profit,  and  that  any  lower 
rate  does  not  hold  out  to  a Chinese  sufficient  temptation  to  induce 
him  to  abstain  from  present  enjoyment.  What  a contrast  with 
Holland,  where,  during  the  most  flourishing  period  of  its  history, 
the  government  was  able  habitually  to  borrow  at  two  per  cent,  and 
private  individuals,  on  good  security,  at  three.  Since  China  is  not  a 
country  like  Burmah  or  the  native  states  of  India,  where  an  enormous 
interest  is  but  an  indispensable  compensation  for  the  risk  incurred 
from  the  bad  faith  or  poverty  of  the  state,  and  of  almost  all  private 
borrowers ; the  fact,  if  fact  it  be,  that  the  increase  of  capital  has 
come  to  a stand  while  the  returns  to  it  are  still  so  large,  denotes  a 
much  less  degree  of  the  effective  desire  of  accumulation,  in  other 
words  a much  lower  estimate  of  the  future  relatively  to  the  present, 
than  that  of  most  European  nations. 

§ 4.  We  have  hitherto  spoken  of  countries  in  which  the  average 
strength  of  the  desire  to  accumulate  is  short  of  that  which,  in  circum- 
stances of  any  tolerable  security,  reason  and  sober  calculation  would 
approve.  We  have  now  to  speak  of  others  in  which  it  decidedly 
surpasses  that  standard.  In  the  more  prosperous  countries  of 
Europe,  there  are  to  be  found  abundance  of  prodigals ; in  some  of 
them  (and  in  none  more  than  England)  the  ordinary  degree  of 
economy  and  providence  among  those  who  live  by  manual  labour 
cannot  be  considered  high : still,  in  a very  numerous  portion  of 
the  community,  the  professional,  manufacturing,  and  trading  classes, 
being  those  who,  generally  speaking,  unite  more  of  the  means  with 
more  of  the  motives  for  saving  than  any  other  class,  the  spirit  of 
accumulation  is  so  strong,  that  the  signs  of  rapidly  increasing  wealth 
meet  every  eye  : and  the  great  amount  of  capital  seeking  investment 
excites  astonishment,  whenever  peculiar  circumstances  turning 
much  of  it  into  some  one  channel,  such  as  railway  construction  or 
foreign  speculative  adventure,  bring  the  largeness  of  the  total  amount 
into  evidence. 

There  are  many  circumstances,  which,  in  England,  give  a peculiar 
force  to  the  accumulating  propensity.  The  long  exemption  of  the 
country  from  the  ravages  of  war,  and  the  far  earlier  period  than 


174 


BOOK  L CHAPTER  XI.  § 4 


elsewhere  at  which  property  was  secure  from  military  violence  oi 
arbitrary  spoliation,  have  produced  a long-standing  and  hereditary 
confidence  in  the  safety  of  funds  when  trusted  out  of  the  owner’s 
hands,  which  in  most  other  countries  is  of  much  more  recent  origin, 
and  less  firmly  established.  The  geographical  causes  which  have 
made  industry  rather  than  war  the  natural  source  of  power  and 
importance  to  Great  Britain,  have  turned  an  unusual  proportion 
of  the  most  enterprising  and  energetic  characters  into  the  direction 
of  manufactures  and  commerce ; . into  supplying  their  wants  and 
gratifying  their  ambition  by  producing  and  saving,  rather  than 
by  appropriating  what  has  been  produced  and  saved.  Much  also 
depended  on  the  better  political  institutions  of  this  country,  which 
by  the  scope  they  have  allowed  to  individual  freedom  of  action,  have 
encouraged  personal  activity  and  self-reliance,  while  by  the  hberty 
they  confer  of  association  and  combination,  they  facilitate  industrial 
enterprise  on  a large  scale.  The  same  institutions  in  another  of 
their  aspects,  give  a most  direct  and  potent  stimulus  to  the 
desire  of  acquiring  wealth.  The  earlier  dechne  of  feudalism 
having  removed  or  much  weakened  invidious  distinctions  between 
the  originally  trading  classes  and  those  who  have  been  accustomed 
to  despise  them ; and  a polity  having  grown  up  which  made  wealth 
the  real  source  of  pohtical  influence  ; its  acquisition  was  invested 
with  a factitious  value,  independent  of  its  intrinsic  utility.  It  be- 
came synonymous  with  power ; and  since  power  with  the  common 
herd  of  mankind  gives  power,  wealth  became  the  chief  source  of 
personal  consideration,  and  the  measure  and  stamp  of  success  in  life. 
To  get  out  of  one  rank  in  society  into  the  next  above  it,  is  the  great 
aim  of  Enghsh  middle-class  life,  and  the  acquisition  of  wealth  the 
means.  And  inasmuch  as  to  be  rich  without  industry  has  always 
hitherto  constituted  a step  in  the  social  scale  above  those  who  are 
rich  by  means  of  industry,  it  becomes  the  object  of  ambition  to  save 
not  merely  as  much  as  will  afford  a large  income  while  in  business, 
but  enough  to  retire  from  business  and  live  in  affluence  on  realized 
gains.  These  causes  have,  in  England,  been  greatly  aided  by  that 
extreme  incapacity  of  the  people  for  personal  enjoyment,  which  is  a 
characteristic  of  countries  over  which  puritanism  has  passed.  But 
if  accumulation  is,  on  one  hand,  rendered  easier  by  the  absence  of  a 
taste  for  pleasure,  it  is,  on  the  other,  made  more  difficult  by  the 
presence  of  a very  real  taste  for  expense.  So  strong  is  the  association 
between  personal  consequence  and  the  signs  of  wealth,  that  the  silly 
desire  for  the  appearance  of  a large  expenditure  has  the  force  of  a 


LAW  OF  THE  INCREASE  OF  CAPITAL 


176 


passion,  among  large  classes  of  a nation  whicli  derives  less  pleasure 
than  perhaps  any  other  in  the  world  from  what  it  spends.  Owing 
to  this  circumstance,  the  effective  desire  of  accumulation  has  never 
reached  so  high  a pitch  in  England  as  it  did  in  Holland,  where,  there 
being  no  rich  idle  class  to  set  the  example  of  a reckless  expenditure, 
and  the  mercantile  classes,  who  possessed  the  substantial  power  on 
which  social  influence  always  waits,  being  left  to  establish  their  own 
scale  of  living  and  standard  of  propriety,  their  habits  remained 
frugal  and  unostentatious. 

In  ^England  and  Holland,  then,  for  a long  time  past,  and  now 
in  most  other  countries  in  Europe  (which  are  rapidly  following 
England  in  the  same  race),  the  desire  of  accumulation  does  not  require, 
to  make  it  effective,  the  copious  returns  which  it  requires  in  Asia, 
but  is  sufficiently  called  into  action  by  a rate  of  profit  so  low,  ‘that 
instead  of  slackening,  accumulation  seems  now  to  proceed  more 
rapidly  than  ever  ; and  the  second  requisite  of  increased  production, 
increase  of  capital,  shows  no  tendency  to  become  deficient.  So 
far  as  that  element  is  concerned,  production  is  susceptible  of  an 
increase  without  any  assignable  bounds. 

The  progress  of  accumulation  would  no  doubt  be  considerably 
checked  if  the  returns  to  capital  were  to  be  reduced  still  lower  than 
at  present.  But  why  should  any  possible  increase  of  capital  have 
that  effect  ? This  question  carries  the  mind  forward  to  the  remaining 
one  of  the  three  requisites  of  production.  The  limitation  to  pro- 
duction, not  consisting  in  any  necessary  limit  to  the  increase  of  the 
other  two  elements,  labour  and  capital,  must  turn  upon  the  proper- 
ties of  the  only  element  which  is  inherently,  and  in  itself,  limited 
in  quantity.  It  must  depend  on  the  properties  of  land. 


CHAPTER  XII 


OP  THE  LAW  OF  THE  INCREASE  OF  PRODUCTION  FROM  LAND 

§ 1.  Land  differs  from  the  other  elements  of  production,  labour 
and*  capital,  in  not  being  susceptible  of  indefinite  increase.  Its 
extent  is  limited,  and  the  extent  of  the  more  productive  kinds  of  it 
more  hmited  still.  It  is  also  evident  that  the  quantity  of  produce 
capable  of  being  raised  on  any  given  piece  of  land  is  not  indefinite. 
This  limited  quantity  pf  land,  and  limited  productiveness  of  it,  are 
the  real  limits  to  the  increase  of  production. 

That  they  are  the  ultimate  limits,  must  always  have  been  clearly 
seen.  But  since  the  final  barrier  has  never  in  any  instance  been 
reached  ; since  there  is  no  country  in  which  all  the  land,  capable  of 
yielding  food,  is  so  highly  cultivated  that  a larger  produce  could 
not  (even  without  supposing  any  fresh  advance  in  agricultural 
knowledge)  be  obtained  from  it,  and  since  a large  portion  of  the  earth’s 
surface  still  remains  entirely  uncultivated  ; it  is  commonly  thought, 
and  is  very  natural  at  first  to  suppose,  that  for  the  present  all 
limitation  of  production  or  population  from  this  source  is  at  an 
indefinite  distance,  and  that  ages  must  elapse  before  any  practical 
necessity  arises  for  taking  the  limiting  principle  into  serious 
consideration. 

I apprehend  this  to  be  not  only  an  error,  but  the  most  serious  one, 
to  be  found  in  the  whole  field  of  pohtical  economy.  The  question 
is  more  important  and  fundamental  than  any  other ; it  involves 
the  whole  subject  of  the  causes  of  poverty,  in  a rich  and  industrious 
community  : and  unless  this  one  matter  be  thoroughly  understood, 
it  is  to  no  purpose  proceeding  any  further  in  our  inquiry. 

§ 2.  The  limitation  to  production  from  the  properties  of  the 
soil,  is  not  like  the  obstacle  opposed  by  a wall,  which  stands  im- 
movable in  one  particular  spot,  and  offers  no  hindrance  to  motion 


LAW  OF  INCREASE  OF  PRODUCTION  FROM  LAND 


177 


short  of  stopping  it  entirely.  We  may  rather  compare  it  to  a 
highly  elastic  and  extensible  band,  which  is  hardly  ever  so 
violently  stretched  that  it  could  not  possibly  be  stretched  any 
more,  yet  the  pressure  of  which  is  felt  long  before  the  final  limit  is 
reached,  and  felt  more  severely  the  nearer  that  limit  is  approached. 

After  a certain,  and  not  very  advanced,  stage  in  the  progress 
of  agriculture,!  it  is  the  law  of  production  from  the  land,  that  in 
any  given  state  of  agricultural  skill  and  knowledge,  by  increasing 
the  labour,  the  produce  is  not  increased  in  an  equal  degree  ; doubling 
the  labour  does  not  double  the  produce ; or,  to  express  the  same 
thing  in  other  words,  every  increase  of  produce  is  obtained  by  a / 
more  than  proportional  increase  in  the  application  of  labour  to  the  T> 
land. 

This  general  law  of  agricultural  industry  is  the  most  important 
proposition  in  political  economy.  Were  the  law  different,  nearly 
all  the  phenomena  of  the  production  and  distribution  of  wealth 
would  be  other  than  they  are.  The  most  fundamental  errors  which 
still  prevail  on  our  subject,  result  from  not  perceiving  this  law  at 
work  underneath  the  more  superficial  agencies  on  which  attention 
fixes  itself;  but  mistaking  those  agencies  for  the  ultimate  causes 
of  effects  of  which  they  may  influence  the  form  and  mode,  but  of 
which  it  alone  determines  the  essence. 

When,  for  the  purpose  of  raising  an  increase  of  produce  recourse 
is  had  to  inferior  land,  it  is  evident  that,  so  far,  the  produce  does 
not  increase  in  the  same  proportion  with  the  labour.  The  very 
meaning  of  inferior  land,  is  land  which  with  equal  labour  returns 
a smaller  amount  of  produce.  Land  may  be  inferior  either  in 
fe^ility  or  in  situation.  The  one  requires  a greater  proportional 
amount  of  labour  for  growing  the  produce,  the  other  for  carrying 
it  to  market.  If  the  land  A yields  a thousand  quarters  of  wheat, 
to  a given  outlay  in  wages,  manure,  &c.,  and  in  order  to  raise  another 
thousand  recourse  must  be  had  to  the  land  B,  which  is  either  less 
fertile  or  more  distant  from  the  market,  the  two  thousand  quarters 
will  cost  more  than  twice  as  much  labour  as  the  original  thousand, 
and  the  produce  of  agriculture  will  be  increased  in  a less  ratio  than 
the  labour  employed  in  procuring  it. 

Instead  of  cultivating  the  land  B,  it  would  be  possible,  by 
higher  cultivation,  to  make  the  land  A produce  more.  It  might 

* [From  the  6lh  ed.  (1865)  was  first  omitted  the  following  explanatory 
clause  of  the  original : “ as  soon,  in  fact,  as  men  have  applied  themselves  to 
cultivation  with  any  energy,  and  have  brought  to  it  any  tolerable  tools.”] 


178 


BOOK  I.  CHAPTER  XII.  § 2 


be  ploughed  or  harrowed  twice  instead  of  once,  or  three  times 
instead  of  twice ; it  might  be  dug  instead  of  being  ploughed ; 
after  ploughing,  it  might  be  gone  over  with  a hoe  instead  of  a harrow, 
and  the  soil  more  completely  pulverized ; it  might  be  oftener  or 
more  thoroughly  weeded  ; the  implements  used  might  be  of  higher 
finish,  or  more  elaborate  construction  ; a greater  quantity  or  more 
expensive  kinds  of  manure  might  be  applied,  or,  when  applied,  they 
might  be  more  carefully  mixed  and  incorporated  with  the  soil. 
These  are  some  of  the  modes  by  which  the  same  land  may  be  made 
to  yield  a greater  produce  ; and  when  a greater  produce  must  be  had, 
some  of  these  are  among  the  means  usually  employed  for  obtaining 
it.  But,  that  it  is  obtained  at  a more  than  proportional  increase 
of  expense,  is  evident  from  the  fact  that  inferior  lands  are  cultivated. 
Inferior  lands,  or  lands  at  a greater  distance  from  the  market,  of 
course  yield  an  inferior  return,  and  an  increasing  demand  cannot 
be  supphed  from  them  unless  at  an  augmentation  of  cost,  and  there- 
fore of  price.  If  the  additional  demand  could  continue  to  be  supplied 
from  the  superior  lands,  by  applying  additional  labour  and  capital, 
at  no  greater  proportional  cost,  than  that  at  which  they  yield  the 
quantity  first  demanded  of  them,  the  owners  or  farmers  of  those 
lands  could  undersell  all  others,  and  engross  the  whole  market. 
Lands  of  a lower  degree  of  fertility  or  in  a more  remote  situation,  might 
indeed  be  cultivated  by  their  proprietors,  for  the  sake  of  subsistence 
or  independence ; but  it  never  could  be  the  interest  of  any  one 
to  farm  them  for  profit.  That  a profit  can  be  made  from  them, 
sufficient  to  attract  capital  to  such  an  investment,  is  a proof  that 
cultivation  on  the  more  eligible  lands  has  reached  a point,  beyond 
which  any  greater  application  of  labour  and  capital  would  yield, 
at  the  best,  no  greater  return  than  can  be  obtained  at  the  same 
expense  from  less  fertile  or  less  favourably  situated  lands. 

The  careful  cultivation  of  a well-farmed  district  of  England 
or  Scotland  is  a symptom  and  an  effect  of  the  more  unfavourable 
terms  which  the  land  has  begun  to  exact  for  any  increase  of  its 
fruits.  Such  elaborate  cultivation  costs  much  more  in  proportion, 
and  requires  a higher  price  to  render  it  profitable,  than  farming 
on  a more  superficial  system ; and  would  not  be  adopted  if  access 
could  be  had  to  land  of  equal  fertility,  previously  unoccupied. 
Where  there  is  the  choice  of  raising  the  increasing  supply  which 
society  requires,  from  fresh  land  of  as  good  quality  as  that  already 
cultivated,  no  attempt  is  made  to  extract  from  land  anything 
approaching  to  what  it  will  yield  on  what  are  esteemed  the  best 


LAW  OF  INCREASE  OF  PRODUCTION  FROM  LAND 


179 


European  inodes  of  cultivating.  The  land  is  tasked  up  to  the 
point  at  which  the  greatest  return  is  obtained  in  proportion  to  the 
labour  employed,  but  no  further  : any  additional  labour  is  carried 
elsewhere.  “ It  is  long,”  says  an  intelligent  traveller  in  the  United 
States,*  “ before  an  English  eye  becomes  reconciled  to  the  lightness 
of  the  crops  and  the  careless  farming  (as  we  should  call  it)  which 
is  apparent.  One  forgets  that  where  land  is  so  plentiful  and  labour 
BO  dear  as  it  is  here,  a totally  different  principle  must  be  pursued 
to  that  which  prevails  in  populous  countries,  and  that  the  conse- 
quence will  of  course  be  a want  of  tidiness,  as  it  were,  and  finish, 
about  everything  which  requires  labour.”  Of  the  two  causes  men- 
tioned, the  plentifulness  of  land  seems  to  me  the  true  explanation, 
rather  than  the  dearness  of  labour ; for,  however  dear  labour  may 
be,  when  food  is  wanted,  labour  will  always  be  applied  to  producing 
it  in  preference  to  anything  else.  But  this  labour  is  more  effective 
for  its  end  by  being  applied  to  fresh  soil,  than  if  it  were  employed 
in  bringing  the  soil  already  occupied  into  higher  cultivation.  Only 
when  no  soil  remains  to  be  broken  up  but  such  as  either  from  distance 
or  inferior  quality  require  a considerable  rise  of  price  to  render 
their  cultivation  profitable,  can  it  become  advantageous  to  apply  the 
high  farming  of  Europe  to  any  American  lands ; except,  perhaps, 
in  the  immediate  vicinity  of  towns,  where  saving  in  cost  of  carriage 
may  compensate  for  great  inferiority  in  the  return  from  the  soil 
itself.  As  American  farming  is  [1848]  to  England,  so  is  the  ordinary 
English  to  that  of  Flanders,  Tuscany,  or  the  Terra  di  Lavoro ; 
where  by  the  application  of  a far  greater  quantity  of  labour  there 
is  obtained  a considerably  larger  gross  produce,  but  on  such  terms 
as  would  never  be  advantageous  to  a mere  speculator  for  profit, 
unless  made  so  by  much  higher  prices  of  agricultural  produce. 

The  principle  which  has  now  been  stated  must  be  received, 
no  doubt,  with  certain  explanations  and  limitations.  Even  after 
the  land  is  so  highly  cultivated  that  the  mere  application  of  ad- 
ditional labour,  or  of  an  additional  amount  of  ordinary  dressing, 
would  yield  no  return  proportioned  to  the  expense,  it  may  still 
happen  that  the  application  of  a much  greater  additional  labour 
and  capital  to  improving  the  soil  itself,  by  draining  or  permanent 
manures,  would  be  as  liberally  remunerated  by  the  produce,  as  any 
portion  of  the  labour  and  capital  already  employed.  It  would 
sometimes  be  much  more  amply  remunerated.  This  could  not  be,  if 

* Letters  from  America,  by  John  Robert  Godley,  vol.  i.  p.  42.  See  also 
Lyell’s  Travels  in  America,  vol.  ii.  p.  83. 


180 


BOOK  I.  CHAPTER  XII.  § 2 


capital  always  sought  and  found  the  most  advantageous  employment ; 
but  if  the  most  advantageous  employment  has  to  wait  longest  for 
its  remuneration,  it  is  only  in  a rather  advanced  stage  of  industrial 
development  that  the  preference  will  be  given  to  it ; and  even  in  that 
advanced  stage,  the  laws  or  usages  connected  with  property  in  land 
and  the  tenure  of  farms  are  often  such  as  to  prevent  the  disposable 
capital  of  the  country  from  flowing  freely  into  the  channel  of  agri- 
cultural improvement : and  hence  thejncreased  supply,  requireji  by 
increasing  population,  is  sometimes  raised  at  an  augmenting  cost  by 
higher  cultivation,  when  the  means  of  producing  it  without  increase  of 
cost  are  known  and  accessible.  There  can  be  no  doubt,  that  if 
capital  were  forthcoming  to  execute,  within  the  next  year,  all  known 
and  recognised  improvements  in  the  lands  of  the  United  Kingdom 
which  would  pay  at  the  existing  prices,  that  is,  which  would  increase 
the  produce  in  as  great  or  a greater  ratio  than  the  expense ; the 
result  would  be  such  (especially  if  we  include  Ireland  in  the  sup- 
position) that  inferior  land  would  not  for  a long  time  require  to  be 
brought  under  tillage  : probably  a considerable  part  of  the  less 
productive  lands  now  cultivated,  which  are  not  particularly  favoured 
by  situation,  would  go  out  of  culture ; or  (as  the  improvements  in 
question  are  not  so  much  applicable  to  good  land,  but  operate 
rather  by  converting  bad  land  into  good)  the  contraction  of  cultiva- 
tion might  principally  take  place  by  a less  high  dressing  and  less 
elaborate  tilling  of  land  generally ; a falling  back  to  something 
nearer  the  character  of  American  farming ; such  only  of  the  poor 
lands  being  altogether  abandoned  as  were  not  found  susceptible 
of  improvement.  And  thus  the  aggregate  produce  of  the  whole 
cultivated  land  would  bear  a larger  proportion  than  before  to  the 
labour  expended  on  it ; and  the  general  law  of  diminishing  return 
from  land  would  have  undergone,  to  that  extent,  a temporary 
supersession.  No  one,  however,  can  suppose  that  even  in  these 
circumstances,  the  whole  produce  required  for  the  country  could 
be  raised  exclusively  from  the  best  lands,  together  with  those 
possessing  advantages  of  situation  to  place  them  on  a par  with  the 
best.  Much  would  undoubtedly  continue  to  be  produced  under 
less  advantageous  conditions,  and  with  the  smaller  proportional 
return,  than  that  obtained  from  the  best  soils  and  situations.  And 
in  proportion  as  the  further  increase  of  population  required  a still 
greater  addition  to  the  supply,  the  general  law  would  resume  its 
course,  and  the  further  augmentation  would  be  obtained  at  a 
more  than  proportionate  expense  of  labour  and  capital. 


LAW  OF  INCREASE  OF  PRODUCTION  FROM  LAND 


181 


§ 3.  1 That  the  produce  of  land  increases,  cceteris  paribus,  in 
a diminishing  ratio  to  the  increase  in  the  labour  employed,  is  a 
truth  more  often  ignored  or  disregarded  than  actually  denied.  It 
has,  however,  met  with  a direct  impugner  in  the  well-known  American 
political  economist,  Mr.  H.  C.  Carey,  who  maintains  that  the  real 
law  of  agricultural  industry  is  the  very  reverse ; the  produce 
increasing  in  a greater  ratio  than  the  labour,  or  in  other  words 
affording  to  labour  a perpetually  increasing  return.  To  substantiate 
this  assertion,  he  argues  that  cultivation  does  not  begin  with  the 
better  soils,  and  extend  from  them,  as  the  demand  increases,  to  the 
poorer,  but  begins  with  the  poorer,  and  does  not,  till  long  after, 
extend  itself  to  the  more  fertile.  Settlers  in  a new  country  invariably 
commence  on  the  high  and  thin  lands ; the  rich  but  swampy  soils 
of  the  river  bottoms  cannot  at  first  be  brought  into  cultivation,  by 
reason  of  their  unhealthiness,  and  of  the  great  and  prolonged  labour 
required  for  clearing  and  draining  them.  As  population  and 
wealth  increase,  cultivation  travels  down  the  hill  sides,  clearing 
them  as  it  goes,  and  the  most  fertile  soils,  those  of  the  low  grounds, 
are  generally  (even  he  says  universally)  the  latest  cultivated.  These 
propositions,  with  the  inferences  which  Mr.  Carey  draws  from  them, 
are  set  forth  at  much  length  in  his  latest  and  most  elaborate  treatise. 
Principles  of  Social  Science  ; and  he  considers  them  as  subverting 
the  very  foundation  of  what  he  calls  the  Enghsh  political  economy, 
with  all  its  practical  consequences,  especially  the  doctrine  of  free 
trade. 

As  far  as  words  go,  Mr.  Carey  has  a good  case  against  several 
of  the  highest  authorities  in  political  economy,  who  certainly  did 
enunciate  in  too  universal  a manner  the  law  which  they  laid  down, 
not  remarking  that  it  is  not  true  of  the  first  cultivation  in  a newly 
settled  country.  Where  population  is  thin  and  capital  scanty, 
land  which  requires  a large  outlay  to  render  it  fit  for  tillage  must 
remain  untilled ; though  such  lands,  when  their  time  has  come, 
often  yield  a greater  produce  than  those  earlier  cultivated,  not  only 
absolutely,  but  proportionally  to  the  labour  employed,  even  if  we 
include  that  which  has  been  expended  in  originally  fitting  them  for 
culture.  But  it  is  not  pretended  that  the  law  of  diminishing  return 
was  operative  from  the  very  beginning  of  society  : and  though  some 

^ [The  account  of  Carey’s  argument,  occupying  this  and  the  next  two  para- 
graphs, took  the  place  in  the  6th  ed.  (1865)  of  the  brief  paragraph  referring, 
without  mentioning  any  name,  to  the  assertion  that  “ the  returns  from  land 
are  greater  in  an  advanced,  than  in  an  early,  stage  of  cultivation — when  much 
capital,  than  when  little,  is  applied  to  agriculture.] 


182 


BOOK  I.  CHAPTER  XII.  § 3 


political  economists  may  have  believed  it  to  come  into  operation 
earlier  than  it  does,  it  begins  quite  early  enough  to  support  the 
conclusions  they  founded  on  it.  Mr.  Carey  will  hardly  assert  that 
in  any  old  country — in  England  or  France,  for  example — the  lands 
left  waste  are,  or  have  for  centuries  been,  more  naturally  fertile  than 
those  under  tiUage.  Judging  even  by  his  own  imperfect  test,  that 
of  local  situation — how  imperfect  T need  not  stop  to  point  out — ^is  it 
true  that  in  England  or  France  at  the  present  day  the  uncultivated 
part  of  the  soil  consists  of  the  plains  and  valleys,  and  the  cultivated, 
of  the  hills  ? Every  one  knows,  on  the  contrary,  that  it  is  the 
high  lands  and  thin  soils  which  are  left  to  nature,  and  when 
the  progress  of  population  demands  an  increase  of  cultivation,  the 
extension  is  from  the  plains  to  the  hills.  Once  in  a century,  perhaps, 
a Bedford  Level  may  be  drained,  or  a Lake  of  Harlem  pumped  out : 
but  these  are  slight  and  transient  exceptions  to  the  normal  progress 
of  things  ; and  in  old  coimtries  which  are  at  all  advanced  in  civiliza- 
tion, little  of  this  sort  remains  to  be  done.* 

Mr*  Carey  himself  unconsciously  bears  the  strongest  testimony 
to  the  reality  of  the  law  he  contends  against : for  one  of  the  pro- 
positions most  strenuously  maintained  by  him  is,  that  the  raw 
products  of  the  soil,  in  an  advancing  community,  steadily  tend  to 
rise  in  price.  Now,  the  most  elementary  truths  of  political  economy 
show  that  this  could  not  happen,  unless  the  cost  of  production, 
measured  in  labour,  of  those  products,  tended  to  rise.  If  the 
application  of  additional  labour  to  the  land  was,  as  a general  rule, 
attended  with  an  increase  in  the  proportional  return,  the  price  of 
produce,  instead  of  rising,  must  necessarily  fall  as  society  advances, 
unless  the  cost  of  production  of  gold  and  silver  fell  still  more  ; a case 
so  rare,  that  there  are  only  two  periods  in  all  history  when  it  is 
known  to  have  taken  place  ; the  one,  that  which  followed  the  open- 
ing of  the  Mexican  and  Peruvian  mines ; the  other,  that  in  which 
we  now  live.  At  aU  known  periods,  except  these  two,  the  cost  of 
production  of  the  precious  metals  has  been  either  stationary  or 
rising.  If,  therefore,  it  be  true  that  the  tendency  of  agricultural 
produce  is  to  rise  in  money  price  as  wealth  and  population  increase, 
there  needs  no  other  evidence  that  the  labour  required  for  raising 

* Ireland  may  be  alleged  as  an  exception  ; a large  fraction  of  the  entire  soil 
of  that  country  being  still  [1865]  incapable  of  cultivation  for  want  of  drainage. 
But  though  Ireland  is  an  old  country,  unfortunate  social  and  political  circum- 
stances have  kept  it  a poor  and  backward  one.  Neither  is  it  at  all  certain  that 
the  bogs  of  Ireland,  if  drained  and  brought  under  tillage,  would  take  their  place 
along  with  Mr.  Carey’s  fertile  river  bottoms,  or  amcng  any  but  the  poorer  soils. 


183 


LAW  OF  INCREASE  OF  PRODUCTION  FROM  LAND 

it  from  the  soil  tends  to  augment  when  a greater  quantity  is  de- 
manded. 

I do  not  go  so  far  as  Mr.  Carey  : I do  not  assert  that  the  cost 
of  production,  and  consequently  the  price,  of  agricultural  produce, 
always  and  necessarily  rises  as  population  increases.  It  tends  to  do 
BO ; but  the  tendency  may  be,  and  sometimes  is,  even  during 
long  periods,  held  in  check.  The  effect  does  not  depend  on  a 
single  principle,  but  on  two  antagonizing  principles.  There  is 
another  agency,  in  habitual  antagonism  to  the  law  of  diminishing 
return  from  land ; and  to  the  consideration  of  this  we  shall  now 
proceed.  It  is  no  other  than  the  progress  of  civilization.  I use 
this  general  and  somewhat  vague  expression,  because  the  things 
to  be  included  are  so  various,  that  hardly  any  term  of  a more  re- 
stricted signification  would  comprehend  them  all. 

Of  these,  the  most  obvious  is  the  progress  of  agricultural  know- 
]edge,  skill,  and . invention.  Improved  processes  of  agriculture 
are  of  two  kinds  f^ome  enable  the  land  to  yield  a greater  absolute  r 
produce,  without  an  equivalent  increase  of  labour  ; 'Others  have  not 
the  power  of  increasing  the  produce,  but  have  that  of  diminishing 
the  labour  and  expense  by  which  it  is  obtained.  Among  the  first 
are  to  be  reckoned  the  disuse  of  fallows,  by  means  of  the  rotation 
of  crops  ; and  the  introduction  of  new  articles  of  cultivation  capable 
of  entering  advantageously  into  the  rotation.  The  change  made 
in  British  agriculture  towards  the  close  of  the  last  century,  by  the 
introduction  of  turnip  husbandry,  is  spoken  of  as  amounting  to  a 
revolution.  These  improvements  operate  not  only  by  enabling 
the  land  to  produce  a crop  every  year,  instead  of  remaining  idle 
one  year  in  every  two  or  three  to  renovate  its  powers,  but  also 
by  direct  increase  of  its  productiveness ; since  the  great  addition 
made  to  the  number  of  cattle,  by  the  increase  of  their  food,  affords 
more  abundant  manure  to  fertilize  the  corn  lands.  Next  in  order 
comes  the  introduction  of  new  articles  of  food,  containing  a greater 
amount  of  sustenance,  like  the  potato,  or  more  productive  species  , 
or  varieties  of  the  same  plant,  such  as  the  Swedish  turnip.  In  the  same 
class  of  improvements  must  be  placed  a better  knowledge  of  the 
properties  of  manures,  and  of  the  most  effectual  modes  of  applying 
them ; the  introduction  of  new  and  more  powerful  fertilizing  agents, 
such  as  guano,  and  the  conversion  to  the  same  purpose  of  substances 
previously  wasted  j inventions  like  subsoil-ploughing  or  tile 
draining ; improvements  in  the  breed  or  feeding  of  labouring 
cattle  ; augmented  stock  of  the  animals  which  consume  and  convert 


184 


BOOK  I.  CHAPTER  XII.  § 3 


into  human  food  what  would  otherwise  be  wasted ; and  the  like. 
The  other  sort  of  improvements,  those  which  diminish  labour,  but 
without  increasing  the  capacity  of  the  land  to  produce,  are  such 
as  the  improved  construction  of  tools ; the  introduction  of  new 
instruments  "wdiich  spare  manual  labour,  as  the  winnowing  and 
threshing  machines ; a more  skilful  and  economical  application 
of  muscular  exertion,  such  as  the  introduction,  so  slowly  accom- 
plished in  England,  of  Scotch  ploughing,  with  two  horses  abreast 
and  one  man,  instead  of  three  or  four  horses  in  a team  and  two 
men,  &c.  These  improvements  do  not  add  to  the  productiveness 
of  the  land,  but  they  are  equally  calculated  with  the  former  to 
counteract  the  tendency  in  the  cost  of  production  of  agricultural 
produce  to  rise  with  the  progress  of  population  and  demand. 

Analogous  in  effect  to  this  second  class  of  agricultural  improve- 
ments, are  improved  means  of  communication.  Good  roads  are 
equivalent  to  good  tools.  It  is  of  no  consequence  whether  the 
economy  of  labour  takes  place  in  extracting  the  produce  from  the 
soil,  or  in  conveying  it  to  the  place  where  it  is  to  be  consumed. 
Not  to  say  in  addition,  that  the  labour  of  cultivation  itself  is 
diminished  by  whatever  lessens  the  cost  of  bringing  manure  from 
a distance,  or  facilitates  the  many  operations  of  transport  from 
place  to  place  which  occur  within  the  bounds  of  the  farm.  Kailways 
and  canals  are  virtually  a diminution  of  the  cost  of  production 
of  all  things  sent  to  market  by  them ; and  literally  so  of  all  those, 
the  appliances  and  aids  for  producing  which,  they  serve  to  transmit. 
By  their  means  land  can  be  cultivated,  which  could  not  otherwise 
have  remunerated  the  cultivators  without  a rise  of  price.  Improve- 
ments in  navigation  have,  with  respect  to  food  or  materials  brought 
from  beyond  sea,  a corresponding  effect. 

From  similar  considerations,  it  appears  that  many  purely 
mechanical  improvements,  which  have,  apparently  at  least,  no 
peculiar  connexion  with  agriculture,  nevertheless  enable  a given 
amount  of  food  to  be  obtained  with  a smaller  expenditure  of  labour. 
A great  improvement  in  the  process  of  smelting  iron  would  tend 
to  cheapen  agricultural  implements,  diminish  the  cost  of  railroads, 
of  waggons  and  carts,  ships,  and  perhaps  buildings,  and  many  other 
things  to  which  iron  is  not  at  present  applied,  because  it  is  too 
costly  ; and  would  thence  diminish  the  cost  of  production  of  food. 
The  same  effect  would  follow  from  an  improvement  in  those  pro- 
cesses of  what  may  be  termed  manufacture  to  which  the  material 
of  food  is  subjected  after  it  is  separated  from  the  ground.  The 


LAW  OF  INCREASE  OF  PRODUCTION  FROM  LAND 


185 


first  application  of  wind  or  water  power  to  grind  corn  tended  to 
cheapen  bread  as  much  as  a very  important  discovery  in  agriculture 
would  have  done  ; and  any  great  improvement  in  the  construction 
of  corn-mills  would  have,  in  proportion,  a similar  influence.  The 
effects  of  cheapening  locomotion  have  been  already  considered. 
There  are  also  engineering  inventions  which  facihtate  all  great 
operations  on  the  earth’s  surface.  An  improvement  in  the  art  of 
taking  levels  is  of  importance  to  draining,  not  to  mention  canal 
and  railway  making.  The  fens  of  Holland,  and  of  some  parts  of 
England,  are  drained  by  pumps  worked  by  the  wind  or  by  steam. 
Where  canals  of  irrigation,  or  where  tanks  or  embankments  are 
necessary,  mechanical  skill  is  a great  resource  for  cheapening  pro- 
duction. 

Those  manufacturing  improvements  which  cannot  be  made 
instrumental  to  facilitate,  in  any  of  its  stages,  the  actual  production 
of  food,  and  therefore  do  not  help  to  counteract  or  retard  the 
diminution  of  the  proportional  return  to  labour  from  the  soil,  have, 
however,  another  effect,  which  is  practically  equivalent.  What 
they  do  not  prevent,  they  yet,  in  some  degree,  compensate  for. 

The  materials  of  manufacture  being  all  drawn  from  the  land, 
and  many  of  them  from  agriculture,  which  supplies  in  particular 
the  entire  material  of  clothing ; the  general  law  of  production  ^ 
from  the  land,  the  law  of  diminishing  return,  must  in  the  last^^ 
resort  be  applicable  to  manufacturing  as  well  as  to  agricultural^ 
history.  As  population  increases,  and  the  power  of  the  land  to 
yield  increased  produce  is  strained  harder  and  harder,  any  additional 
supply  of  material,  as  well  as  of  food,  must  be  obtained  by  a more 
than  proportionally  increasing  expenditure  of  labour.  But  the  cost  of 
the  material  forming  generally  a very  small  portion  of  the  entire 
cost  of  the  manufacture,  the  agricultural  labour  concerned  in  the 
production  of  manufactured  goods  is  but  a small  fraction  of 
the  whole  labour  worked  up  in  the  commodity.  All  the  rest  of  the 
labour  tends  constantly  and  strongly  towards  diminution,  as  the 
amount  of  production  increases.  Manufactures  are  vastly  more 
susceptible  than  agriculture  of  mechanical  improvements,  and 
contrivances  for  saving  labour ; and  it  has  already  been  seen  how 
greatly  the  division  of  labour,  and  its  skilful  and  economical  dis- 
tribution, depend  on  the  extent  of  the  market,  and  on  the  possibility 
of  production  in  large  masses.  In  manufactures,  accordingly,  the 
causes  tending  to  increase  the  productiveness  of  industry,  pre^ 
ponderate  greatly  over  the  one  cause  which  tends  to  diminish  it : and 


186 


BOOR  I.  CHAPTER  XII.  § 3 


the  increase  of  production,  called  forth  by  the  progress  of  society, 
takes  place,  not  at  an  increasing,  but  at  a continually  diminishing 
proportional  cost.  This  fact  has  manifested  itself  in  the  progressive 
fall  of  the  prices  and  values  of  almost  every  kind  of  manufactured 
goods  during  two  centuries  past ; a fall  accelerated  by  the  mechanical 
inventions  of  the  last  seventy  or  eighty  years,  and  susceptible  of 
being  prolonged  and  extended  beyond  any  limit  which  it  would  be 
safe  to  specify. 

Now  it  is  quite  conceivable  that  the  efficiency  of  agricultural 
labour  might  be  undergoing,  with  the  increase  of  produce,  a gradual 
diminution ; that  the  price  of  food,  in  consequence,  might  be  pro- 
gressively rising,  and  an  ever  growing  proportion  of  the  population 
might  be  needed  to  raise  food  for  the  whole ; while  yet  the  productive 
power  of  labour  in  all  other  branches  of  industry  might  be  so  rapidly 
augmenting,  that  the  required  amount  of  labour  could  be  spared 
from  manufactures,  and  nevertheless  a greater  produce  be  obtained, 
and  the  aggregate  wants  of  the  community  be  on  the  whole  better 
supphed,  than  before.  The  benefit  might  even  extend  to  the  poorest 
class.  The  increased  cheapness  of  clothing  and  lodging  might  make 
up  to  them  for  the  augmented  cost  of  their  food. 

There  is,  thus,  no  possible  improvement  in  the  arts  of  production 
which  does  not  in  one  or  another  mode  exercise  an  antagonist 
influence  to  the  law  of  diminishing  return  to  agricultural  labour. 
Nor  is  it  only  industrial  improvements  which  have  this  effect. 
Improvements  in  government,  and  almost  every  kind  of  moral 
and  social  advancement,  operate  in  the  same  manner.  Suppose 
a country  in  the  condition  of  France  before  the  Revolution  : taxa- 
tion imposed  almost  exclusively  on  the  industrial  classes,  and  on 
such  a principle  as  to  be  an  actual  penalty  on  production  ; and  no 
redress  obtainable  for  any  injury  to  property  or  person,  when 
inflicted  by  people  of  rank,  or  court  influence.  Was  not  the  hurri- 
cane which  swept  away  this  system  of  things,  even  if  we  look  no 
further  than  to  its  effect  in  augmenting  the  productiveness  of 
labour,  equivalent  to  many  industrial  inventions  ? The  removal 
of  a fiscal  burthen  on  agriculture,  such  as  tithe,  has  the  same  effect 
as  if  the  labour  necessary  for  obtaining  the  existing  produce  were 
suddenly  reduced  one-tenth.  The  abohtion  of  corn  laws,  or  of 
any  other  restrictions  which  prevent  commodities  from  being 
produced  where  the  cost  of  their  production  is  lowest,  amounts  to 
a vast  improvement  in  production.  When  fertile  land,  previously 
reserved  as  hunting  ground,  or  for  any  other  purpose  of  amusement, 


LAW  OF  INCREASE  OF  PRODUCTION  FROM  LAND 


187 


is  set  free  for  culture,  the  aggregate  productiveness  of  agricultural 
industry  is  increased.  It  is  well  known  what  has  been  the  effect 
in  England  of  badly  administered  poor  laws,  and  the  still  worse 
effect  in  Ireland  of  a bad  system  of  tenancy,  in  rendering  agricultural 
labour  slack  and  ineffective.  No  improvements  operate  more 
directly  upon  the  productiveness  of  labour,  than  those  in  the  tenure 
of  farms,  and  in  the  laws  relating  to  landed  property.  The  breaking 
up  of  entails,  the  cheapening  of  the  transfer  of  property,  and  whatever 
else  promotes  the  natural  tendency  of  land,  in  a system  of  freedom, 
to  pass  out  of  hands  which  can  make  httle  of  it  into  those  which 
can  make  more  ; the  substitution  of  long  leases  for  tenancy  at  will, 
and  of  any  tolerable  system  of  tenancy  whatever  for  the  wretched 
cottier  system ; above  all,  the  acquisition  of  a permanent  interest 
in  the  soil  by  the  cultivators  of  it ; ail  these  things  are  as  real,  and 
some  of  them  as  great,  improvements  in  production,  as  the  invention 
of  the  spinning-]  enny  or  the  steam-engine. 

We  may  say  the  same  of  improvements  in  education.  The 
intelhgence  of  the  workman  is  a most  important  element  in  the 
productiveness  of  labour.  So  low,  in  some  of  the  most  civilized 
countries,  is  the  present  [1848]  standard  of  intelligence,  that  there  is 
hardly  any  source  from  which  a more  indefinite  amount  of  improve- 
ment may  be  looked  for  in  productive  power,  than  by  endowing 
with  brains  those  who  now  have  only  hands.  The  carefulness, 
economy,  and  general  trustworthiness  of  labourers  are  as  important 
as  their  intelhgence.  Friendly  relations,  and  a community  of 
interest  and  feehng  between  labourers  and  employers,  are  eminently 
so  : I should  rather  say,  would  be : for  I know  not  where  any 
such  sentiment  of  friendly  alliance  now  exists.  Nor  is  it  only 
in  the  labouring  class  that  improvement  of  mind  and  character 
operates  with  beneficial  effect  even  on  industry.  In  the  rich  and 
idle  classes,  increased  mental  energy,  more  sohd  instruction,  and 
stronger  feehngs  of  conscience,  public  spirit,  or  philanthropy, 
would  quahfy  them  to  originate  and  promote  the  most  valuable 
improvements,  both  in  the  economical  resources  of  their  country, 
and  in  its  institutions  and  customs.  To  look  no  further  than  the 
most  obvious  phenomena  ; the  backwardness  of  French  agriculture 
in  the  precise  points  in  which  benefit  might  be  expected  from  the 
influence  of  an  educated  class,  is  partly  accounted  for  by  the  ex- 
clusive devotion  of  the  richer  landed  proprietors  to  town  interests 
and  town  pleasures.  There  is  scarcely  any  possible  amehoration 
of  human  affairs  which  would  not,  among  its  other  benefits,  have 


188 


BOOK  I.  CHAPTER  XII.  § 3 


a favourable  operation,  direct  or  indirect,  upon  the  productiveness 
of  industry.  The  intensity  of  devotion  to  industrial  occupations 
would  indeed  in  many  cases  be  moderated  by  a more  hberal  and 
genial  mental  culture,  but  the  labour  actually  bestowed  on  those 
occupations  would  almost  always  be  rendered  more  effective. 

Before  pointing  out  the  principal  inferences  to  be  drawn  from 
the  nature  of  the  two  antagonist  forces  by  which  the  productiveness 
jf  agricultural  industry  is  determined,  we  must  observe  that  what 
we  have  said  of  agriculture  is  true,  with  httle  variation,  of  the  other 
occupations  which  it  represents;  of  all  the  arts  which  extract 
materials  from  the  globe.  Mining  industry,  for  example,  usually 
yields  an  increase  of  produce  at  a more  than  proportional  increase 
of  expense.  It  does  worse,  for  even  its  customary  annual  produce 
requires  to  be  extracted  by  a greater  and  greater  expenditure  of 
labour  and  capital.  As  a mine  does  not  reproduce  the  coal  or 
ore  taken  from  it,  not  only  are  all  mines  at  last  exhausted,  but 
even  when  they  as  yet  show  no  signs  of  exhaustion,  they  must  be 
worked  at  a continually  increasing  cost ; shafts  must  be  sunk 
deeper,  galleries  driven  farther,  greater  power  apphed  to  keep  them 
clear  of  water  ; the  produce  must  be  hfted  from  a greater  depth,  or 
conveyed  a greater  distance.  The  law  of  diminishing  return  applies 
therefore  to  mining,  in  a still  more  unquahfied  sense  than  to  agri- 
culture : but  the  antagonizing  agency,  that  of  improvements  in 
production,  also  apphes  in  a stiff  greater  degree.  Mining  operations 
are  more  susceptible  of  mechanical  improvements  than  agricultural : 
the  first  great  application  of  the  steam-engine  was  to  mining ; and 
there  are  unlimited  possibilities  of  improvement  in  the  chemical 
processes  by  which  the  metals  are  extracted.  There  is  another 
contingency,  of  no  unfrequent  occurrence,  which  avails  to  counter- 
balance the  progress  of  all  existing  mines  towards  exhaustion : 
this  is,  the  discovery  of  new  ones,  equal  or  superior  in  richness. 

To  resume ; all  natural  agents  which  are  limited  in  quantity, 
are  not  only  limited  in  their  ultimate  productive  power,  but,  long 
before  that  power  is  stretched  to  the  utmost,  they  yield  to  any 
additional  demands  on  progressively  harder  terms.  This  law  may 
however  be  suspended,  or  temporarily  controlled,  by  whatever 
adds  to  the  general  power  of  mankind  over  nature  ; and  especially 
by  any  extension  of  their  knowledge,  and  their  consequent  command, 
of  the  properties  and  powers  of  natural  agents.^ 

^ [See  Appendix  J.  The  Law  of  Diminishing  Return.^ 


CHAPTER  XIII 


CONSEQUENCES  OP  THE  FOREGOING  LAWS 

§ 1.  From  the  preceding  exposition  it  appears  that  the  limit 
to  the  increase  of  production  is  two-fold  ; from  deficiency  of  capital, 
or  of  land.  Production  comes  to  a pause,  either  because  the  effective 
desire  of  accumulation  is  not  sufficient  to  give  rise  to  any  further 
increase  of  capital,  or  because,  however  disposed  the  possessors  of 
surplus  income  may  be  to  save  a portion  of  it,  the  limited  land  at  the 
disposal  of  the  community  does  not  permit  additional  capital  to  be 
employed  with  such  a return  as  would  be  an  equivalent  to  them 
for  their  abstinence. 

In  countries  where  the  principle  of  accumulation  is  as  weak  as  it 
is  in  the  various  nations  of  Asia  ; where  people  will  neither  save,  nor 
work  to  obtain  the  means  of  saving,  unless  under  the  inducement  of 
enormously  high  profits,  nor  even  then  if  it  is  necessary  to  wait  a 
considerable  time  for  them  ; where  either  productions  remain  scanty, 
or  drudgery  great,  because  there  is  neither  capital  forthcoming 
nor  forethought  sufficient  for  the  adoption  of  the  contrivances  by 
which  natural  agents  are  made  to  do  the  work  of  human  labour ; 
the  desideratum  for  such  a country,  economically  considered,  is  an 
increase  of  industry,  and  of  the  effective  desire  of  accumulation.  ) I " 
I The  means  are,  first,  a better  government : more  complete  security 
oi  property  ; moderate  taxes,  and  freedom  from  arbitrary  exaction 
under  the  name  of  taxes  ; a more  permanent  and  more  advantageous 
tenure  of  land,  securing  to  the  cultivator  as  far  as  possible  the  undi- 
vided benefits  of  the  industry,  skill,  and  economy  he  may  exert. 

^ Secondly,  improvement  of  the  public  intelligence  : the  decay  of 
usages  or  superstitions  which  interfere  with  the  effective  employment 
of  industry  ; and  the  growth  of  mental  activity,  making  the  people 
- alive  to  new  objects  of  desire.  Thirdly,  the^ii^roduction  of  foreign 
arts,  which  raise  the  returns  derivable  from  additional  capital,  to  a 
rate  corresponding  to  the  low  strength  of  the  desire  of  accumulation  : 


190 


BOOK  I.  CHAPTER  XIII.  § 2 


and  the  importation  of  foreign  capital,  which  renders  the  increase  of 
production  no  longer  exclusively  dependent  on  the  thrift  or  provi- 
dence of  the  inhabitants  themselves,  while  it  places  before  them  a 
stimulating  example,  and  by  instilling  new  ideas  and  breaking  the 
chains  of  habit,  if  not  by  improving  the  actual  condition  of  the  popu- 
lation, tends  to  create  in  them  new  wants,  increased  ambition,  and 
greater  thought  for  the  future.  These  considerations  apply  more  or 
less  to  all  the  Asiatic  populations,  and  to  the  less  civilized  and  indus- 
trious parts  of  Europe,  as  Russia,  Turkey,  Spain,  and  Ireland. 

§ 2.  But  there  are  other  countries,  and  England  is  at  the  head 
of  them,  in  which  neither  the  spirit  of  industry  nor  the  effective 
desire  of  accumulation  need  any  encouragement ; where  the  people 
will  toil  hard  for  a small  remuneration,  and  save  much  for  a small 
profit ; where,  though  the  general  thriftiness  of  the  labouring  class  is 
much  below  what  is  desirable,  the  spirit  of  accumulation  in  the  more 
prosperous  part  of  the  community  requires  abatement  rather  than 
increase.  In  these  countries  there  would  never  be  any  deficiency  of 
capital,  if  its  increase  were  never  checked  or  brought  to  a stand  by 
too  great  a diminution  of  its  returns.  It  is  the  tendency  of  the 
returns  to  a progressive  diminution,  which  causes  the  increase  of 
production  to  be  often  attended  with  a deterioration  in  the  con- 
dition of  the  producers ; and  this  tendency,  which  would  in  time 
put  an  end  to  increase  of  production  altogether,  is  a result  of  the 
necessary  and  inherent  conditions  of  production  from  the  land. 

In  all  countries  which  have  passed  beyond  a rather  ^ early  stage 
in  the  progress  of  agriculture,  every  increase  in  the  demand  for  food, 
occasioned  by  increased  population,  will  always,  unless  there  is  a 
simultaneous  improvement  in  production,  (Bminish  the  share  which 
on  a fair  division  would  fall  to  each  individual.  An  increased  pro- 
duction, in  default  of  unoccupied  tracts  of  fertile  land,  or  of  fresh 
improvements  tending  to  cheapen  commodities,  can  never  be 
obtained  but  by  increasing  the  labour  in  more  than  the  same  pro- 
portion. The  population  must  either  work  harder,  or  eat  less,  or 
obtain  their  usual  food  by  sacrificing  a part  of  their  other  customary 
comforts.  Whenever  this  necessity  is  postponed,  notwithstanding 
an  increase  of  population,^  it  is  because  the  improvements  which 
facilitate  production  continue  progressive  ; because  the  contrivances 

* [In  the  6th  ed.  (1865)  “ rather  ” replaced  the  original  “ very.”] 

2 [The  qualifying  clause  ” notwithstanding  . . population  ” was  inserted 
in  the  6th  ed.  (1865).] 


CONSEQUENCES  OF  THE  FOREGOING  LAWS 


101 


of  mankind  for  making  their  labour  more  effective  keep  up  an  equal 
struggle  with  nature,  and  extort  fresh  resources  from  her  reluctant 
powers  as  fast  as  human  necessities  occupy  and  engross  the  old. 

From  this,  results  the  important  corollary,  that  the  necessity 
of  restraining  population  is  not,  as  many  persons  believe,  peculiar 
to  a condition  of  great  inequality  of  property.  A greater  number 
of  people  cannot,  in  any  given  state  of  civilization,  be  collectively 
so  well  provided  for  as  a smaller.  The  niggardliness  of  nature,  not 
the  injustice  of  society,  is  the  cause  of  the  penalty  attached  to  over- 
population. An  unjust  distribution  of  wealth  does  not  even  aggra- 
vate the  evil,  but,  at  most,  causes  it  to  be  somewhat  earlier  felt. 
It  is  in  vain  to  say,  that  aU  mouths  which  the  increase  of  mankind 
calls  into  existence,  bring  with  them  hands.  The  new  mouths 
require  as  much  food  as  the  old  ones,  and  the  hands  do  not  produce 
as  much.  If  all  instruments  of  production  were  held  in  joint 
property  by  the  whole  people,  and  the  produce  divided  with  perfect 
equality  among  them,  and  if,  in  a society  thus  constituted,  industry 
were  as  energetic  and  the  produce  as  ample  as  at  present,  there  would 
be  enough  to  make  all  the  existing  population  extremely  comfortable; 
but  when  that  population  had  doubled  itself,  as,  with  the  existing 
habits  of  the  people,  under  such  an  encouragement,  it  undoubtedly 
would  in  little  more  than  twenty  years,  what  would  then  be  their  con- 
dition ? Unless  the  arts  of  production  were  in  the  same  time 
improved  in  an  almost  unexampled  degree, ^ the  inferior  soils  which 
must  be  resorted  to,  and  the  more  laborious  and  scantily  remunera- 
tive cultivation  which  must  be  employed  on  the  superior  soils, 
to  procure  food  for  so  much  larger  a population,  would,  by  an 
insuperable  necessity,  render  every  individual  in  the  community 
poorer  than  before.  If  the  population  continued  to  increase  at 
the  same  rate,  a time  would  soon  arrive  when  no  one  would  have 
more  than  mere  necessaries,  and,  soon  after,  a time  when  no  one 
would  have  a sufficiency  of  those,  and  the  further  increase  of  popula- 
tion would  be  arrested  by  death. 

Whether,  at  the  present  or  any  other  time,  the  produce  of 
industry  proportionally  to  the  labour  employed,  is  increasing  or 
diminishing,  and  the  average  condition  of  the  people  improving  or 
deteriorating,  depends  upon  whether  population  is  advancing  faster 
than  improvement,  or  improvement  than  population.  After  a 
degree  of  density  has  been  attained,  sufficient  to  allow  the  principal 

' [So  from  the  3rd  ed.  (1852).  The  original  ran  ; “so  unexampled  a degree 
as  to  double  the  productive  power  of  labour.”] 


192 


BOOK  I.  CHAPTER  XIII.  § 2 


benefits  of  combination  of  labour,  all  further  increase  tends  in  itself 
to  mischief,  so  far  as  regards  the  average  condition  of  the  people  ; but 
the  progress  of  improvement  has  a counteracting  operation,  and 
allows  of  increased  numbers  without  any  deterioration,  and  even 
consistently  with  a higher  average  of  comfort.  Improvement 
must  here  be  understood  in  a wide  sense,  including  not  only  new 
industrial  inventions,  or  an  extended  use  of  those  already  known, 
but  imjprovements  in  institutions,  education,  opinions,  and  human 
affairs  generally,  provided  they  tend,  as  almost  all  improvements 
do,  to  give  new  motives  or  new  facilities  to  production.  If  the 
productive  powers  of  the  country  increase  as  rapidly  as  advancing 
numbers  call  for  an  augmentation  of  produce,  it  is  not  necessary  to 
obtain  that  augmentation  by  the  cultivation  of  soils  more  sterile  than 
the  worst  already  under  culture,  or  by  applying  additional  labour 
to  the  old  soils  at  a diminished  advantage ; or  at  all  events  this  loss 
of  power  is  compensated  by  the  increased  efficiency  with  which,  in 
the  progress  of  improvement,  labour  is  employed  in  manufactures. 
In  one  way  or  the  other,  the  increased  population  is  provided  for, 
and  a/1  are  as  well  off  as  before.  But  if  the  growth  of  human  power 
over  nature  is  suspended  or  slackened,  and  population  does  noi 
slacken  its  increase  ; if,  with  only  the  existing  command  over  natural 
agencies,  those  agencies  are  called  upon  for  an  increased  produce ; 
this  greater  produce  will  not  be  afforded  to  the  increased  population, 
without  either  demanding  on  the  average  a greater  effort  from  each, 
or  on  the  average  reducing  each  to  a smaller  ration  out  of  the  aggre- 
gate produce. 

As  a matter  of  fact,  at  some  periods  the  progress  of  population 
has  been  the  more  rapid  of  the  two,  at  others  that  of  improvement. 
In  England  during  a long  interval  preceding  the  French  Revolution, 
population  increased  slowly ; but  the  progress  of  improvement,  at 
least  in  agriculture,  would  seem  to  have  been  still  slower,  since  though 
nothing  occurred  to  lower  the  value  of  the  precious  metals,  the  price 
of  corn  rose  considerably,  and  England,  from  an  exporting,  became 
an  importing  country.  This  evidence,  however,  is  short  of  conclu- 
sive, inasmuch  as  the  extraordinary  number  of  abundant  seasons 
during  the  first  half  of  the  century,  not  continuing  during  the  last, 
was  a cause  of  increased  price  in  the  later  period,  extrinsic  to  the 
ordinary  progress  of  society.  Whether  during  the  same  period 
improvements  in  manufactures,  or  diminished  cost  of  imported  com- 
modities, made  amends  for  the  diminished  productiveness  of  labour 
on  the  land,  is  uncertain.  But  ever  since  the  great  mechanical 


CONSEQUENCES  OF  THE  FOREGOING  LAWS 


193 


Inventions  of  Watt,  Arkwright,  and  their  contemporaries,  the 
return  to  labour  has  probably  increased  as  fast  as  the  population  ; 
and  would  have  outstripped  it,  if  that  very  augmentation  of  return 
had  not  called  forth  an  additional  portion  of  the  inherent  power 
of  multipUcation  in  the  human  species.  During  the  twenty  or 
thirty  years  last  elapsed  [1857],  so  rapid  has  been  the  extension  of 
improved  processes  of  agriculture,  that  even  the  land  pelds  a greater 
produce  in  proportion  to  the  labour  employed  ; the  average  price  of 
com  had  become  decidedly  lower,  even  before  the  repeal  of  the 
corn  laws  had  so  materially  lightened,  for  the  time  being,  the  pressure 
of  population  upon  production.  But  though  improvement  may 
during  a certain  space  of  time  keep  up  with,  or  even  surpass,  the 
actual  increase  of  population,  it  assuredly  never  comes  up  to  the  rate 
of  increase  of  which  population  is  capable  ; and  nothing  could  have 
prevented  a general  deterioration  in  the  condition  of  the  human 
race,  were  it  not  that  population  has  in  fact  been  restrained.  Had 
it  been  restrained  still  more,  and  the  same  improvements  taken  place, 
there  would  have  been  a larger  dividend  than  there  now  is,  for  the 
nation  or  the  species  at  large.  The  new  ground  wrung  from  nature 
by  the  improvements  would  not  have  been  all  used  up  in  the  support 
of  mere  numbers.  Though  the  gross  produce  would  not  have  been 
so  great,  there  would  have  been  a greater  produce  per  head  of  the 
population. 

§ 3.  When  the  growth  of  numbers  outstrips  the  progress  of 
improvement,  and  a country  is  driven  to  obtain  the  means  of  sub- 
sistence on  terms  more  and  more  unfavourable,  by  the  inability 
of  its  land  to  meet  additional  demands  except  on  more  onerous 
conditions ; there  are  two  expedients  by  which  it  may  hope  to 
mitigate  that  disagreeable  necessity,  even  though  no  change  should 
take  place  in  the  habits  of  the  people  with  respect  to  their  rate 
of  increase.  One  of  these  expedients  is  the  importation  of  food 
from  abroad.  The  other  is  emigration. 

The  admission  of  cheaper  food  from  a foreign  country  is  equiva- 
lent to  an  agricultural  invention  by  which  food  could  be  raised 
at  a similarly  diminished  cost  at  home.  It  equally  increases  the 
productive  power  of  labour.  The  return  was  before,  so  much  food 
for  so  much  labour  employed  in  the  growth  of  food  : the  return 
is  now,  a greater  quantity  of  food,  for  the  same  labour  employed  in 
producing  cottons  or  hardware  or  some  other  commodity,  to  be  given 
in  exchange  for  food.  The  one  improvement,  like  the  other,  throws 


194 


BOOK  I.  CHAPTER  XIII.  § 3 


back  the  decKne  of  the  productive  power  of  labour  by  a certain 
distance  : but  in  the  one  case  as  in  the  other,  it  immediately  resumes 
its  course  ; the  tide  which  has  receded,  instantly  begins  to  re-advance. 
It  might  seem,  indeed,  that  when  a country  draws  its  supply  of  food 
from  so  wide  a surface  as  the  whole  habitable  globe,  so  little  impres- 
sion can  be  produced  on  that  great  expanse  by  any  increase  of 
mouths  in  one  small  corner  of  it,  that  the  inhabitants  of  the  country 
may  double  and  treble  their  numbers,  without  feeling  the  effect 
in  any  increased  tension  of  the  springs  of  production,  or  any  en- 
hancement of  the  price  of  food  throughout  the  world.  But  in  this 
calculation  several  things  are  overlooked. 

In  the  first  place,  the  foreign  regions  from  which  com  can  be 
imported  do  not  comprise  the  whole  globe,  but  those  parts  of  it 
principally  which  are  in  the  immediate  neighbourhood  of  coasts  or 
navigable  rivers.  The  coast  is  the  part  of  most  countries  which  is 
earliest  and  most  thickly  peopled,  and  has  seldom  any  food  to  spare. 
The  chief  source  of  supply,  therefore,  is  the  strip  of  country  along 
the  banks  of  some  navigable  river,  as  the  Nile,  the  Vistula,  or  the 
Mississippi ; and  of  such  there  is  not,  in  the  productive  regions  of  the 
earth,  so  great  a multitude  as  to  suffice  during  an  indefinite  time  for  a 
rapidly  growing  demand,  without  an  increasing  strain  on  the  pro- 
ductive powers  of  the  soil.  To  obtain  auxiliary  supplies  of  com 
from  the  interior  in  any  abundance,  is,  in  the  existing  state  of  the 
communications  [1871],  in  most  cases  impracticable.  By  improved 
roads,  and  by  canals  and  railways,  the  obstacle  will  eventually  be 
80  reduced  as  not  to  be  insuperable : but  this  is  a slow  progress ; in  all 
the  food-exporting  countries  except  America,  a very  slow  progress ; 
and  one  which  cannot  keep  pace  with  population,  unless  the  increase 
of  the  last  is  very  effectually  restrained. 

In  the  next  place,  even  if  the  supply  were  drawn  from  the 
whole  instead  of  a small  part  of  the  surface  of  the  exporting  countries, 
the  quantity  of  food  wordd  still  be  limited,  which  could  be  obtained 
from  them  without  an  increase  of  the  proportional  cost.  The  coun- 
tries which  export  food  may  be  divided  into  two  classes ; those  in 
which  the  effective  desire  of  accumulation  is  strong,  and  those  in 
which  it  is  weak.  In  Australia  and  the  United  States  of  America, 
the  effective  desire  of  accumulation  is  strong;  capital  increases 
fast,  and  the  production  of  food  might  be  very  rapidly  extended. 
But  in  such  countries  population  also  increases  with  extraordinary 
rapidity.  Their  agriculture  has  to  provide  for  their  own  expanding 
numbers,  as  well  as  for  those  of  the  importing  countries.  They 


CONSEQUENCES  OF  THE  FOREGOING  LAWS 


196 


must,  therefore,  from  the  nature  of  the  case,  be  rapidly  driven 
if  not  to  less  fertile,  at  least  what  is  equivalent,  to  remoter  and  less 
accessible  lands,  and  to  modes  of  cultivation  like  those  of  old  coun- 
tries, less  productive  in  proportion  to  the  labour  and  expense. 

But  the  countries  which  have  at  the  same  time  cheap  food  and 
great  industrial  prosperity  are  few,  being  only  those  in  which  the 
arts  of  civilized  life  have  been  transferred  full-grown  to  a rich  and 
uncultivated  soil.  Among  old  countries,  those  which  are  able  to 
export  food,  are  able  only  because  their  industry  is  in  a very  back- 
ward state ; because  capital,  and  hence  population,  have  never 
increased  sufficiently  to  make  food  rise  to  a higher  price.  Such 
countries  are  [1848]  Russia,  Poland,  and  the  plains  of  the  Danube. 
In  those  regions  the  effective  desire  of  accumulation  is  weak,  the 
arts  of  production  most  imperfect,  capital  scanty,  and  its  increase, 
especially  from  domestic  sources,  slow.  When  an  increased  demand 
arose  for  food  to  be  exported  to  other  countries,  it  would  only  be 
very  gradually  that  food  could  be  produced  to  meet  it.  The  capital 
needed  could  not  be  obtained  by  transfer  from  other  employments, 
for  such  do  not  exist.  The  cottons  or  hardware  which  would  be 
received  from  England  in  exchange  for  corn,  the  Russians  and  Poles 
do  not  now  produce  in  the  country  : they  go  without  them.  Some- 
thing might  in  time  be  expected  from  the  increased  exertions  to 
which  producers  would  be  stimulated  by  the  market  opened  for 
their  produce  ; but  to  such  increase  of  exertion,  the  habits  of  coun- 
tries whose  agricultural  population  consists  of  serfs,  or  of  peasants 
who  have  but  just  emerged  from  a servile  condition,  are  the  reverse  of 
favourable,  and  even  in  this  age  of  movement  these  habits  do  not 
rapidly  change.  If  a greater  outlay  of  capital  is  relied  on  as  the 
source  from  which  the  produce  is  to  be  increased,  the  means  must 
either  be  obtained  by  the  slow  process  of  saving,  under  the  impulse 
given  by  new  commodities  and  more  extended  intercourse  (and  in 
that  case  the  population  would  most  likely  increase  as  fast),  or 
must  be  brought  in  from  foreign  countries.  If  England  is  to  obtain 
a rapidly  increasing  supply  of  com  from  Russia  or  Poland,  English 
capital  must  go  there  to  produce  it.  This,  however,  is  attended 
with  so  many  difficulties,  as  are  equivalent  to  great  positive  dis- 
advantages. It  is  opposed  by  differences  of  language,  differences 
of  manners,  and  a thousand  obstacles  arising  from  the  institutions 
and  social  relations  of  the  country ; and  after  all  it  would  in- 
evitably so  stimulate  population  on  the  spot,  that  nearly  all  the 
increase  of  food  produced  by  its  means  would  probably  be 


196 


BOOK  I.  CHAPTER  XIII.  § 3 


consumed  without  leaving  the  country  : so  that,  if  it  were  not  the 
almost  only  mode  of  introducing  foreign  arts  and  ideas,  and  giving 
an  effectual  spur  to  the  backward  civihzation  of  those  countries, 
little  rehance  could  be  placed  on  it  for  increasing  the  exports,  and 
supplying  other  countries  with  a progressive  and  indefinite  increase 
of  food.  But  to  improve  the  civilization  of  a country  is  a slow 
process,  and  gives  time  for  so  great  an  increase  of  population  both 
in  the  country  itself,  and  in  those  supplied  from  it,  that  its  effect  in 
keeping  down  the  price  of  food  against  the  increase  of  demand  is  not 
hkely  to  be  more  decisive  on  the  scale  of  all  Europe,  than  on  the 
smaller  one  of  a particular  nation. 

The  law,  therefore,  of  diminishing  return  to  industry,  whenever 
population  makes  a more  rapid  progress  than  improvement,  is  not 
solely  applicable  to  countries  which  are  fed  from  their  own  soil,  but 
in  substance  applies  quite  as  much  to  those  which  are  willing  to  draw 
their  food  from  any  accessible  quarter  that  can  afford  it  cheapest. 
A sudden  and  great  cheapening  of  food,  indeed,  in  whatever  manner 
produced,  would,  like  any  other  sudden  improvement  in  the  arts  of 
life,  throw  the  natural  tendency  of  affairs  a stage  or  two  further  back, 
though  without  altering  its  course.^  There  is  one  contingency 
connected  with  freedom  of  importation,  which  may  yet  produce 
temporary  effects  greater  than  were  ever  contemplated  either  by  the 
bitterest  enemies  or  the  most  ardent  adherents  of  free-trade  in  food. 
Maize,  or  Indian  com,  is  a product  capable  of  being  supphed  in  quan- 
tity sufficient  to  feed  the  whole  country,  at  a cost,  allowing  for 
difference  of  nutritive  quality,  cheaper  even  than  the  potato.  If 
maize  should  ever  substitute  itself  for  wheat  as  the  staple  food  of  the 
poor,  the  productive  power  of  labour  in  obtaining  food  would  be  so 

' [This  one  sentence  replaced  in  the  3rd  ed.  (1852)  the  following  passage  of 
the  original  text ; “ If,  indeed,  the  release  of  the  com  trade  from  restriction  had 
produced,  or  should  still  produce,  a sudden  cheapening  of  food,  this,  like  any 
other  sudden  improvement  in  the  arts  of  life,  would  throw  the  natural  tendency 
of  affairs  a stage  or  two  further  back,  but  without  at  all  altering  its  course. 
There  would  be  more  for  everybody  in  the  first  instance  ; but  this  more  would 
begin  immediately  and  continue  always  to  grow  less,  so  long  as  population 
went  on  increasing,  unaccompanied  by  other  events  of  a countervailing 
tendency. 

Whether  the  repeal  of  the  com  laws  is  likely,  even  temporarily,  to  give  any 
considerable  increase  of  margin  for  population  to  fill  up,  it  would  be  premature 
as  yet  to  attempt  to  decide.  All  the  elements  of  the  question  have  been  thrown 
into  temporary  disorder  by  the  consequences  of  bad  harvests  and  of  the  potatoe 
failure.  But  as  far  as  can  be  foreseen,  there  seems  little  reason  to  expect  an 
importation  of  the  customary  articles  of  food  either  so  great  in  itself,  or  capable 
of  such  rapid  increase,  as  to  interfere  much  with  the  operation  of  the  general 
law.”] 


CONSEQUENCES  OF  THE  FOREGOING  LAWS 


197 


enormously  increased,  and  the  expense  of  maintaining  a family  so 
diminished,  that  it  would  require  perhaps  some  generations  for 
population,  even  if  it  started  forward  at  an  American  pace,  to  over- 
take this  great  accession  to  the  facihties  of  its  support. 

§ 4.  Besides  the  importation  of  corn,  there  is  another  resource 
which  can  be  invoked  by  a nation  whose  increasing  numbers  press 
hard,  not  against  their  capital,  but  against  the  productive  capacity 
of  their  land  : I mean  Emigration,  especially  in  the  form  of  Coloniza- 
tion. Of  this  remedy  the  efficacy  as  far  as  it  goes  is  real,  since  it 
consists  in  seeking  elsewhere  those  unoccupied  tracts  of  fertile  land, 
which  if  they  existed  at  home  would  enable  the  demand  of  an  increas- 
ing population  to  be  met  without  any  falling  ofi  in  the  productive- 
ness of  labour.  Accordingly,  when  the  region  to  be  colonized  is 
near  at  hand,  and  the  habits  and  tastes  of  the  people  sufficiently 
migratory,  this  remedy  is  completely  effectual.  The  migration 
from  the  older  parts  of  the  American  Confederation  to  the  new 
territories,  which  is  to  all  intents  and  purposes  colonization,  is  what 
enables  population  to  go  on  unchecked  throughout  the  Union  without 
having  yet  diminished  the  return  to  industry,  or  increased  the  diffi- 
culty of  earning  a subsistence.  If  Australia  or  the  interior  of  Canada 
were  as  near  to  Great  Britain  as  Wisconsin  and  Iowa  to  New  York  ; 
if  the  superfluous  people  could  remove  to  it  without  crossing  the  sea, 
and  were  of  as  adventurous  and  restless  a character,  and  as  little 
addicted  to  staying  at  home,  as  their  kinsfolk  of  New  England,  those 
unpeopled  continents  would  render  the  same  service  to  the  United 
Kingdom  which  the  old  states  of  America  derive  from  the  new.  But, 
these  things  being  as  they  are — though  a judiciously  conducted 
emigration  is  a most  important  resource  for  suddenly  lightening  the 
pressure  of  population  by  a single  effort — and  though  in  such  an 
extraordinary  case  as  that  of  Ireland  under  the  threefold  operation  of 
the  potato  failure,  the  poor  law,  and  the  general  turning- out  of 
tenantry  throughout  the  country,  spontaneous  emigration  may  at 
a particular  crisis  remove  greater  multitudes  than  it  was  ever  pro- 
posed to  remove  at  once  by  any  national  scheme  ^ ; it  still  remains 
to  be  shown  by  experience  ^ whether  a permanent  stream  of  emigra- 
tion can  be  kept  up,  sufficient  to  take  off,  as  in  America,  all  that 
portion  of  the  annual  increase  (when  proceeding  at  its  greatest 

* [The  reference  to  Ireland  (“  and  though  . . . scheme  ”)  was  inserted  in 
the  3rd  ed.  (1852).] 

* [So  from  the  6th  ed.  (1865).  The  original  ran  ; “ There  is  no  probability 
that  even  under  the  most  enlightened  arranscements  a permanent  stream,  &c.”] 


198 


BOOK  I.  CHAPTER  XIII.  § 4 


rapidity)  which,  being  in  excess  of  the  progress  made  during  the  same 
short  period  in  the  arts  of  life,  tends  to  render  living  more  difficult 
for  every  averagely-situated  individual  in  the  community.  And 
unless  this  can  be  done,  emigration  cannot,  even  in  an  economical 
point  of  view,  dispense  with  the  necessity  of  checks  to  population. 
Further  than  this  we  have  not  to  speak  of  it  in  this  place.  The 
general  subject  of  colonization  as  a practical  question,  its  importance 
to  old  countries,  and  the  principles  on  which  it  should  be  conducted, 
will  be  discussed  at  some  length  in  a subsequent  portion  of  this 
treatise. 


BOOK  II 


DISTRIBUTION 


CHAPTER  I 

OF  PROPERTY 

§ 1.  The  principles  which  have  been  set  forth  in  the  first  part  of 
this  treatise,  are,  in  certain  respects,  strongly  distinguished  from 
those  on  the  consideration  of  which  we  are  now  about  to  enter. 
The  laws  and  conditions  of  the  Production  of  wealth  partake  of  the 
character  of  physical  truths.  There  is  nothing  optional  or  arbitrary 
in  them.  Whatever  mankind  produce,  must  be  produced  in  the 
modes,  and  under  the  conditions,  imposed  by  the  constitution  of 
external  things,  and  by  the  inherent  properties  of  their  own  bodily 
and  mental  structure.  Whether  they  like  it  or  not,  their  produc- 
tions will  be  limited  by  the  amount  of  their  previous  accumulation, 
and,  that  being  given,  it  will  be  proportional  to  their  energy,  their 
skill,  the  perfection  of  their  machinery,  and  their  judicious  use  of  the 
advantages  of  combined  labour.  Whether  they  like  it  or  not,  a 
double  quantity  of  labour  will  not  raise,  on  the  same  land,  a double 
quantity  of  food,  unless  some  improvement  takes  place  in  the  pro- 
cesses of  cultivation.  Wkether  they  like  it  or  not,  the  unproductive 
expenditure  of  individuals  will  pro  tanto  tend  to  impoverish  the  com- 
munity, and  only  their  productive  expenditure  will  enrich  it.  The 
opinions,  or  the  wishes,  which  may  exist  on  these  different  matters, 
do  not  control  the  things  themselves.  We  cannot,  indeed,  foresee 
to  what  extent  the  modes  of  production  may  be  altered,  or  the 
productiveness  of  labour  increased,  by  future  extensions  of  our 
knowledge  of  the  laws  of  nature,  suggesting  new  processes  of  industry 
of  which  we  have  at  present  no  conception.  But  howsoever  we 


200 


BOOK  II.  CHAPTER  I.  § 1 


may  succeed  in  making  for  ourselves  more  space  within  the  limits 
set  by  the  constitution  of  things,  we  know  that  there  must  be  limits. 
We  cannot  alter  the  ultimate  properties  either  of  matter  or  mind, 
but  can  only  employ  those  properties  more  or  less  successfully,  to 
bring  about  the  events  in  which  we  are  interested.^ 

It  is  not  so  with  the  Distribution  of  wealth.  That  is  a matter 
of  human  institution  solely.  The  things  once  there,  mankind, 
individually  or  collectively,  can  do  mth  them  as  they  hke.  They 
can  place  them  at  the  disposal  of  whomsoever  they  please,  and  on 
whatever  terms.  Further,  in  the  social  state,  in  every  state  except 
total  solitude,  any  disposal  whatever  of  them  can  only  take  place 
by  the  consent  of  society,^  or  rather  of  those  who  dispose  of  its 
active  force.  Even  what  a person  has  produced  by  his  individual 
toil,  unaided  by  any  one,  he  cannot  keep,  unless  by  the  permission 
of  society.  Not  only  can  society  take  it  from  him,  but  individuals 
could  and  would  take  it  from  him,  if  society  only  remained  passive  ; 
if  it  did  not  either  interfere  en  masse,  or  employ  and  pay  people  for 
the  purpose  of  preventing  him  from  being  disturbed  in  the  possession. 
The  distribution  of  wealth,  therefore,  depends  on  the  laws  and  cus- 
toms of  society.  The  rules  by  which  it  is  determined  are  what  the 
opinions  and  feelings  of  the  ruling  portion  of  the  community  make 
them,  and  are  very  different  in  different  ages  and  countries ; and 
might  be  still  more  different,  if  mankind  so  chose. 

The  opinions  and  feelings  of  mankind,  doubtless,  are  not  a matter 
of  chance.  They  are  consequences  of  the  fundamental  laws  of  human 
nature,  combined  with  the  existing  state  of  knowledge  and  experi- 
ence, and  the  existing  condition  of  social  institutions  and  intel- 
lectual and  moral  culture.  But  the  laws  of  the  generation  of  human 
opinions  are  not  within  our  present  subject.  They  are  part 
of  the  general  theory  of  human  progress,  a far  larger  and  more 
difficult  subject  of  inquiry  than  political  economy.  We  have  here 
to  consider,  not  the  causes,  but  the  consequences,  of  the  rules  accord- 
ing to  which  wealth  may  be  distributed.  Those,  at  least,  are  as 
little  arbitrary,  and  have  as  much  the  character  of  physical  laws, 
as  the  laws  of  production.  Human  beings  can  control  their  own 

1 [So  since  the  3rd  ed.  (1862).  The  original  ran : “ But  howsoever  . . . 
things,  those  limits  exist ; there  are  ultimate  laws,  which  we  did  not  make, 
which  we  cannot  alter,  and  to  which  we  can  only  conform.”] 

2 [The  concluding  words  of  this  sentence  were  added  in  the  3rd  ed.,  and 
**  general  ” was  deleted  before  “ consent.”  In  the  next  sentence  the  keeping  of 
property  was  made  to  depend  on  **  the  permission  ” and  not  on  the  will  ” of 
society.] 


PROPERTY 


201 


acts>  but  not  the  consequences  of  their  acts  either  to  themselves  or 
to  others.  Society  can  subject  the  distribution  of  wealth  to  whatever 
rules  it  thinks  best : but  what  practical  results  will  flow  from  the 
operation  of  those  rules  must  be  discovered,  hke  any  other  physical 
or  mental  truths,  by  observation  and  reasoning. 

We  proceed,  then,  to  the  consideration  of  the  different  modes  of 
distributing  the  produce  of  land  and  labour,  which  have  been  adopted 
in  practice,  or  may  be  conceived  in  theory.  Among  these,  our  atten- 
tion is  first  claimed  by  that  primary  and  fundamental  institution, 
on  which,  unless  in  some  exceptional  and  very  hmited  cases,  the 
economical  arrangements  of  society  have  always  rested,  though  in 
its  secondary  features  it  has  varied,  and  is  liable  to  vary.  I mean, 
of  course,  the  institution  of  individual  property. 

§ 2.  Private  property,  as  an  institution,  did  not  owe  its  origin 
to  any  of  those  considerations  of  utihty,  which  plead  for  the  mainten- 
ance of  it  when  estabhshed.  Enough  is  known  of  rude  ages,  both 
from  history  and  from  analogous  states  of  society  in  our  own  time,  to 
show  that  tribunals  (which  always  precede  laws)  were  originally 
established,  not  to  determine  rights,  but  to  repress  violence  and 
terminate  quarrels.  With  this  object  chiefly  in  view,  they  naturally 
enough  gave  legal  effect  to  first  occupancy,  by  treating  as  the 
aggressor  the  person  who  first  commenced  violence,  by  turning, 
or  attempting  to  turn,  another  out  of  possession.  The  preservation 
of  the  peace,  which  was  the  original  object  of  civil  government, 
was  thus  attained  : while  by  confirming,  to  those  who  already 

possessed  it,  even  what  was  not  the  fruit  of  personal  exertion,  a 
guarantee  was  incidentally  given  to  them  and  others  that  they 
would  be  protected  in  what  was  so. 

In  considering  the  institution  of  property  as  a question  in  social 
philosophy,  we  must  leave  out  of  consideration  its  actual  origin  in 
any  of  the  existing  nations  of  Europe.  We  may  suppose  a com- 
munity unhampered  by  any  previous  possession  ; a body  of  colonists, 
occupying  for  the  first  time  an  uninhabited  country ; bringing  nothing 
with  them  but  what  belonged  to  them  in  common,  and  having  a 
clear  field  for  the  adoption  of  the  institutions  and  polity  which  they 
judged  most  expedient ; required,  therefore,  to  choose  whether  they 
would  conduct  the  work  of  production  on  the  principle  of  individual 
property,  or  on  some  system  of  common  ownership  and  collective 
agency. 

If  private  property  were  adopted,  we  must  presume  that  it  would 


BOOK  II.  CHAPTER  1.  § 2 


be  accompanied  by  none  of  the  initial  inequalities  and  injustices 
which  obstruct  the  beneficial  operation  of  the  principle  in  old 
societies.  Every  full  grown  man  or  woman,  we  must  suppose, 
would  be  secured  in  the  unfettered  use  and  disposal  of  his  or  her 
bodily  and  mental  faculties ; and  the  instruments  of  production, 
the  land  and  tools,  would  be  divided  fairly  among  them,  so  that  all 
might  start,  in  respect  to  outward  appliances,  on  equal  terms. 
It  is  possible  also  to  conceive  that  in  this  original  apportionment, 
compensation  might  be  made  for  the  injuries  of  nature,  and  the 
balance  redressed  by  assigning  to  the  less  robust  members  of  the 
community  advantages  in  the  distribution,  sufficient  to  put  them 
on  a par  with  the  rest.  But  the  division,  once  made,  would  not 
again  be  interfered  with ; individuals  would  be  left  to  their  own 
exertions  and  to  the  ordinary  chances,  for  making  an  advantageous 
use  of  what  was  assigned  to  them.  If  individual  property,  on  the 
contrary,  were  excluded,  the  plan  which  must  be  adopted  would  be 
to  hold  the  land  and  all  instruments  of  production  as  the  joint 
property  of  the  community,  and  to  carry  on  the  operations  of 
industry  on  the  common  account.  The  direction  of  the  labour  of 
the  community  would  devolve  upon  a magistrate  or  magistrates, 
whom  we  may  suppose  elected  by  the  suffrages  of  the  community, 
and  whom  we  must  assume  to  be  voluntarily  obeyed  by  them.  The 
division  of  the  produce  would  in  like  manner  be  a public  act.  The 
principle  might  either  be  that  of  complete  equality,  or  of  apportion- 
ment to  the  necessities  or  deserts  of  individuals,  in  whatever  manner 
might  be  conformable  to  the  ideas  of  justice  or  policy  prevailing 
in  the  community. 

Examples  of  such  associations,  on  a small  scale,  are  the  monastic 
orders,  the  Moravians,  the  followers  of  Kapp,  and  others  : and  from 
the  hopes  ^ which  they  hold  out  of  rehef  from  the  miseries  and 
iniquities  of  a state  of  much  inequality  of  wealth,  schemes  for  a 
larger  application  of  the  same  idea  have  reappeared  and  become 
popular  at  all  periods  of  active  speculation  on  the  first  principles  of 
society.  In  an  age  hke  the  present  [1848],  when  a general  recon- 
sideration of  all  first  principles  is  felt  to  be  inevitable,  and  when  more 
than  at  any  former  period  of  history  the  suffering  portions  of  the 
j I community  have  a voice  in  the  discussion,  it  was  impossible  but 
^ that  ideas  of  this  nature  should  spread  far  and  wide.^  The  late 

* [So  since  the  ^rd  ed.  (1852).  In  the  original,  “ the  plausible  remedy.”] 

* [Here  followed  in  the  original  text  the  following  passage  : “ Owenism,  or 
Socialism,  in  this  country,  and  Communism  on  the  continent,  are  the  most 
prevailing  forms  of  the  doctrine.  These  suppose  a demociatic  government  of 


PROPERTY 


203 


revolutions  in  Europe  have  thrown  up  a great  amount  of  speculation 
of  this  character,  and  an  unusual  share  of  attention  has  consequently 
been  drawn  to  the  various  forms  which  these  ideas  have  assumed  : 
nor  is  this  attention  likely  to  diminish,  but  on  the  contrary,  to 
increase  more  and  more. 

The  assailants  of  the  principle  of  individual  property  may  be 
divided  into  two  classes  : those  whose  scheme  implies  absolute 
equality  in  the  distribution  of  the  physical  means  of  life  and  enjoy- 
ment, and  those  who  admit  inequality,  but  grounded  on  some 
principle,  or  supposed  principle,  of  justice  or  general  expediency,  and 
not,  like  so  many  of  the  existing  social  inequalities,  dependent  on 
accident  alone.  At  the  head  of  the  first  class,  as  the  earliest  of 
those  belonging  to  the  present  generation,  must  be  placed  Mr.  Owen 
and  his  followers.  M.  Louis  Blanc  and  M.  Cabet  have  more  recently 
become  conspicuous  as  apostles  of  similar  doctrines  (though  the 
former  advocates  equality  of  distribution  only  as  a transition  to  a 
still  higher  standard  of  justice,  that  all  should  work  according  to 
their  capacity,  and  receive  according  to  their  wants).  The  charac- 
teristic name  for  this  economical  system  is  Communism,  a word 
of  continental  origin,  only  of  late  introduced  into  this  country. 
The  word  Socialism,  which  originated  among  the  English  Communists, 
and  was  assumed  by  them  as  a name  to  designate  their  own  doc- 
trine, is  now  [1849],  on  the  Continent,  employed  in  a larger  sense  ; 
not  necessarily  implying  Communism,  or  the  entire  abolition  of 
private  property,  but  applied  to  any  system  which  requires  that  the 
land  and  the  instruments  of  production  should  be  the  property,  not 

the  industry  and  funds  of  society,  and  an  equal  division  of  the  fruits.  In  the 
more  elaborate  and  refined  form  of  the  same  scheme,  which  obtained  a tempo- 
rary celebrity  under  the  name  of  St.  Simonism,  the  administering  authority 
was  supposed  to  be  a monarchy  or  aristocracy,  not  of  birth  but  of  capacity  ; 
the  remuneration  of  each  member  of  the  community  being  by  salary,  propor- 
tioned to  the  importance  of  the  services  supposed  to  be  rendered  by  each  to  the 
general  body.” 

This  was  replaced  in  the  2nd  ed.  (18491  by  the  present  reference  to  “ the 
late  revolutions  in  Europe,”  and  by  the  following  paragraph,  dividing  “ the 
assailants  of  the  principle  of  individual  property  ” into  two  classes.  The  present 
form,  however,  of  the  clause  beginning  “ Nor  is  this  attention  ” dates  from  the 
3rd  ed.  (1852).  In  the  2nd  it  ran  : “ This  attention  is  not  likely  to  diminish  ; 
attacks  on  the  institution  of  property  being,  in  the  existing  state  of  human 
intellect,  a natural  expression  of  the  discontent  of  all  those  classes  on  whom, 
in  whatever  manner,  the  present  constitution  of  society  bears  hardly  ; and  it 
is  a safe  prediction  that,  unless  the  progress  of  the  human  mind  can  be  checked, 
such  speculations  will  never  cease,  until  the  laws  of  property  are  freed  from 
whatever  portion  of  injustice  they  contain,  and  until  whatever  is  well  grounded 
in  the  opinions  and  legitimate  in  the  aims  of  its  assailants  is  adopted  into  the 
framework  of  society.”] 


204 


BOOK  II.  CHAPTER  1.  § 3 


of  individuals,  but  of  communities  or  associations,  or  of  the  govern- 
ment. Among  such  systems,  the  two  of  highest  intellectual  pre- 
tension are  those  which,  from  the  names  of  their  real  or  reputed 
authors,  have  been  called  St.  Simonism  and  Fourierism  ; the  former 
defunct  as  a system,  but  which  during  the  few  years  of  its  public 
promulgation  sowed  the  seeds  of  nearly  all  the  Socialist  tendencies 
which  have  since  spread  so  widely  in  France  : the  second,  still  [1865] 
flourishing  in  the  number,  talent,  and  zeal  of  its  adherents. 

§ 3.1  Whatever  may  be  the  merits  or  defects  of  these  various 
schemes,  they  cannot  be  truly  said  to  be  impracticable.  No  reason- 
able person  can  doubt  that  a village  community,  composed  of  a 
few  thousand  inhabitants,  cultivating  in  joint  ownership  the  same 
extent  of  land  which  at  present  feeds  that  number  of  people,  and 
producing  by  combined  labour  and  the  most  improved  processes 
the  manufactured  articles  which  they  required,  could  raise  an 
amount  of  productions  sufficient  to  maintain  them  in  comfort  ; 
and  would  find  the  means  of  obtaining,  and  if  need  be,  exacting, 
the  quantity  of  labour  necessary  for  this  purpose,  from  every 
member  of  the  association  who  was  capable  of  work. 

• The  objection  ordinarily  made  to  a system  of  community  of  pro- 
perty and  equal  distribution  of  the  produce,  that  each  person  would 
be  incessantly  occupied  in  evading  his  fair  share  of  the  work,  points, 
undoubtedly,  to  a real  difficulty.  But  those  who  urge  this  objection 
forget  to  how  great  an  extent  the  same  difficulty  exists  under  the 
system  on  which  nine- tenths  of  the  business  of  society  is  now 
conducted.  The  objection  supposes,  that  honest  and  efficient 
labour  is  only  to  be  had  from  those  who  are  themselves  individually 
to  reap  the  benefit  of  their  own  exertions.  But  how  small  a part 
of  all  the  labour  performed  in  England,  from  the  lowest-paid  to  the 
highest,  is  done  by  persons  worldng  for  their  own  benefit.  From 
the  Irish  reaper  or  hodman  to  the  chief  justice  or  the  minister  of  state, 
nearly  all  the  work  of  society  is  remunerated  by  day  wages  or  fixed 
salaries.  A factory  operative  has  less  personal  interest  in  his  work 
than  a member  of  a Communist  association,  since  he  is  not,  like  him, 

[The  whole  of  this  section  was  rewritten  in  the  3rd  ed.  (1852),  with  the 
aid  of  some  passages  from  the  2nd  ed.  (1849),  for  the  reason  stated  in 
the  Preface  to  the  3rd  edition  The  present  first  paragraph  of  § 4 was 
added,  and  the  next  paragraph  modified  by  the  omission  of  the  assertion  that 
the  arguments  of  § 3 while  “ not  applicable  to  St.  Simonism  ” were,  to  his  mind, 
**  conclusive  against  Communism.”  For  the  original  text  of  § 3 see  Appendix 
K-  Mill's  earlier  and  later  writings  <m  Socialism.] 


PROPERTY 


205 


working  for  a partnership  of  which  he  is  himself  a member 
It  will  no  doubt  be  said,  that  though  the  labourers  themselves  have 
not,  in  most  cases,  a personal  interest  in  their  work,  they  are  watched 
and  superintended,  and  their  labour  directed,  and  the  mental  part 
of  the  labour  performed,  by  persons  who  have.  Even  this,  however, 
is  far  from  being  universally  the  fact.  In  all  public,  and  many 
of  the  largest  and  most  successful  private  undertakings,  not  only 
the  labours  of  detail  but  the  control  and  superintendence  are 
entrusted  to  salaried  officers.  And  though  the  “ master’s  eye,” 
when  the  master  is  vigilant  and  intelligent,  is  of  proverbial  value, 
it  must  be  remembered  that  in  a Socialist  farm  or  manufactory, 
each  labourer  would  be  under  the  eye  not  of  one  master,  but  of  the 
whole  community.  In  the  extreme  case  of  obstinate  perseverance 
in  not  performing  the  due  share  of  work,  the  community  would 
have  the  same  resources  which  society  now  has  for  compelling 
conformity  to  the  necessary  conditions  of  the  association.  Dismissal, 
the  only  remedy  at  present,  is  no  remedy  when  any  other  labourer 
who  may  be  engaged  does  no  better  than  his  predecessor  : the 
power  of  dismissal  only  enables  an  employer  to  obtain  from  his 
workmen  the  customary  amount  of  labour,  but  that  customary 
labour  may  be  of  any  degree  of  inefficiency.  Even  the  labourer  wh^ 
loses  his  employment  by  idleness  or  negligence,  has  nothing  worse 
to  suffer,  in  the  most  unfavourable  case,  than  the  discipline  of  a 
workhouse,  and  if  the  desire  to  avoid  this  be  a sufficient  motive  in 
the  one  system,  it  would  be  sufficient  in  the  other.  I am  not 
undervaluing  the  strength  of  the  incitement  given  to  labour  when 
the  whole  or  a large  share  of  the  benefit  of  extra  exertion  belongs 
to  the  labourer.  But  under  the  present  system  of  industry  this 
incitement,  in  the  great  majority  of  cases,  does  not  exist.  If 
Communistic  labour  might  be  less  vigorous  than  that  of  a peasant 
proprietor,  or  a workman  labouring  on  his  own  account,  it  would 
probably  be  more  energetic  than  that  of  a labourer  for  hire,  who 
has  no  personal  interest  in  the  matter  at  all.  The  neglect  by  the 
uneducated  classes  of  labourers  for  hire  of  the  duties  which  they 
engage  to  perform,  is  in  the  present  state  of  society  most  flagrant. 
Now  it  is  an  admitted  condition  of  the  Communist  scheme  that  all 
shall  be  educated  : and  this  being  supposed,  the  duties  of  the 
members  of  the  association  would  doubtless  be  as  diligently  per- 
formed as  those  of  the  generality  of  salaried  officers  in  the  middle 
or  higher  classes  ; who  are  not  supposed  to  be  necessarily  unfaithful 
to  their  trust,  because  so  long  as  they  are  not  dismissed,  their  pay 


206 


BOOK  II.  CHAPTER  I.  § 3 


is  the  same  in  however  lax  a manner  their  duty  is  fulfilled.  Un- 
doubtedly, as  a general  rule,  remuneration  by  fixed  salaries  does 
not  in  any  class  of  functionaries  produce  the  maximum  of  zeal : 
and  this  is  as  much  as  can  be  reasonably  alleged  against  Communistic 
labour. 

That  even  this  inferiority  would  necessarily  exist,  is  by  no  means 
so  certain  as  is  assumed  by  those  who  are  little  used  to  carry 
their  minds  beyond  the  state  of  things  with  which  they  are  familiar. 
Mankind  are  capable  of  a far  greater  amount  of  pubhc  spirit  than 
the  present  age  is  accustomed  to  suppose  possible.  History  bears 
witness  to  the  success  with  which  large  bodies  of  human  beings 
may  be  trained  to  feel  the  public  interest  their  own.  And  no  soil 
could  be  more  favourable  to  the  growth  of  such  a feeling,  than  a 
Communist  association,  since  all  the  ambition,  and  the  bodily 
and  mental  activity,  which  are  now  exerted  in  the  pursuit  of  separate 
and  self-regarding  interests,  would  require  another  sphere  of  employ- 
ment, and  would  naturally  find  it  in  the  pursuit  of  the  general 
benefit  of  the  community.  The  same  cause,  so  often  assigned  in 
explanation  of  the  devotion  of  the  Catholic  priest  or  monk  to  the 
interest  of  his  order — that  he  has  no  interest  apart  from  it — would, 
under  Communism,  attach  the  citizen  to  the  community.  And 
independently  of  the  public  motive,  every  member  of  the  association 
would  be  amenable  to  the  most  universal,  and  one  of  the  strongest, 
of  personal  motives,  that  of  public  opinion.  The  force  of  this 
motive  in  deterring  from  any  act  or  omission  positively  reproved 
by  the  community,  no  one  is  hkely  to  deny ; but  the  power  also 
of  emulation,  in  exciting  to  the  most  strenuous  exertions  for  the 
sake  of  the  approbation  and  admiration  of  others,  is  borne  witness 
to  by  experience  in  every  situation  in  which  human  beings  pubhcly 
compete  with  one  another,  even  if  it  be  in  things  frivolous,  or  from 
which  the  public  derive  no  benefit.  A contest,  who  can  do  most  for 
the  common  good,  is  not  the  kind  of  competition  which  Socialists 
repudiate.  To  what  extent,  therefore,  the  energy  of  labour  would 
be  diminished  by  Communism,  or  whether  in  the  long  run  it  would 
be  diminished  at  all,  must  be  considered  for  the  present  [1852] 
an  imdecided  question. 

Another  of  the  objections  to  Communism  is  similar  to  that 
so  often  urged  against  poor  laws : that  if  every  member  of  the 
community  were  assured  of  subsistence  for  himself  and  any 
number  of  children,  on  the  sole  condition  of  willingness  to  work, 
prudential  restraint  on  the  multiplication  of  mankind  would  be 


COMMUNISM 


207 


at  an  end,  and  population  would  start  forward  at  a rate  which 
would  reduce  the  community,  through  successive  stages  of  increasing 
discomfort,  to  actual  starvation.  There  would  certainly  be  much 
ground  for  this  apprehension  if  Communism  provided  no  motives 
to  restraint,  equivalent  to  those  which  it  would  take  away.  But 
Communism  is  precisely  the  state  of  things  in  which  opinion  might 
be  expected  to  declare  itself  with  greatest  intensity  against  this 
kind  of  selfish  intemperance.  Any  augmentation  of  numbers 
which  diminished  the  comfort  or  increased  the  toil  of  the  mass, 
would  then  cause  (which  now  it  does  not)  immediate  and  unmis- 
takeable  inconvenience  to  every  individual  in  the  association  ; 
inconvenience  which  could  not  then  be  imputed  to  the  avarice 
of  employers,  or  the  unjust  privileges  of  the  rich.  In  such  altered 
circumstances  opinion  could  not  fail  to  reprobate,  and  if  reprobation 
did  not  suffice,  to  repress  by  penalties  of  some  description,  this  or 
any  other  culpable  self-indulgence  at  the  expense  of  the  community. 
The  Communistic  scheme,  instead  of  being  peculiarly  open  to  the 
objection  drawn  from  danger  of  over-population,  has  the  recom- 
mendation of  tending  in  an  especial  degree  to  the  prevention  of  that 
evil. 

A more  real  difficulty  is  that  of  fairly  apportioning  the  labour 
of  the  community  among  its  members.  There  are  many  kinds 
of  work,  and  by  what  standard  are  they  to  be  measured  one  against 
another  ? Who  is  to  judge  how  much  cotton  spinning,  or  dis- 
tributing goods  from  the  stores,  or  bricklaying,  or  chimney  sweeping, 
is  equivalent  to  so  much  ploughing  ? The  difficulty  of  making 
the  adjustment  between  different  qualities  of  labour  is  so  strongly 
felt  by  Communist  writers,  that  they  have  usually  thought  it  neces- 
sary to  provide  that  all  should  work  by  turns  at  every  description  of 
useful  labour : an  arrangement  which,  by  putting  an  end  to  the 
division  of  employments,  would  sacrifice  so  much  of  the  advantage 
of  co-operative  production  as  greatly  to  diminish  the  productiveness 
of  labour.  Besides,  even  in  the  same  kind  of  work,  nominal 
equality  of  labour  would  be  so  great  a real  inequahty,  that  the 
feeling  of  justice  would  revolt  against  its  being  enforced.  All  persons 
are  not  equally  fit  for  all  labour ; and  the  same  quantity  of  labour 
is  an  unequal  burthen  on  the  weak  and  the  strong,  the  hardy  and 
the  delicate,  the  quick  and  the  slow,  the  dull  and  the  intelligent. 

But  these  difficulties,  though  real,  are  not  necessarily  insuperable. 
The  apportionment  of  work  to  the  strength  and  capacities  of  in- 
dividuals, the  mitigation  of  a general  rule  to  provide  for  cases  in 


209 


BOOK  II.  CHAPTER  I.  § 3 


wliicli  it  would  operate  harshly,  are  not  problems  to  which  human 
intelligence,  guided  by  a sense  of  justice,  would  be  inadequate. 
And  the  worst  and  most  unjust  arrangement  which  could  be  made 
of  these  points,  under  a system  aiming  at  equality,  would  be  so 
far  short  of  the  inequality  and  injustice  with  which  labour  (not  to 
speak  of  remuneration)  is  now  apportioned,  as  to  be  scarcely  worth 
counting  in  the  comparison.  We  must  remember  too,  that  Com- 
munism, as  a system  of  society,  exists  only  in  idea ; that  its 
difficulties,  at  present,  are  much  better  understood  than  its  resources  ; 
and  that  the  intellect  of  mankind  is  only  beginning  to  contrive 
the  means  of  organizing  it  in  detail,  so  as  to  overcome  the  one 
and  derive  the  greatest  advantage  from  the  other.i 

If,  therefore,  the  choice  were  to  be  made  between  Communism 
with  all  its  chances,  and  the  present  [1852]  state  of  society  with 
all  its  sufferings  and  injustices  ; if  the  institution  of  private  property 
necessarily  carried  with  it  as  a consequence,  that  the  produce  of 
labour  should  be  apportioned  as  we  now  see  it,  almost  in  an  inverse 
ratio  to  the  labour — the  largest  portions  to  those  who  have  ne'ver 
worked  at  all,  the  next  largest  to  those  whose  work  is  almost  nominal, 
and  so  in  a descending  scale,  the  remuneration  dwindling  as  the 
work  grows  harder  and  more  disagreeable,  imtil  the  most  fatiguing 
and  exhausting  bodily  labour  cannot  count  with  certainty  on  being 
able  to  earn  even  the  necessaries  of  life;  if  this  or  Communism 
were  the  alternative,  aU  the  difficulties,  great  or  small,  of  Communism 
would  be  but  as  dust  in  the  balance.  But  to  make  the  comparison 
applicable,  we  must  compare  Communism  at  its  best,  with  the 
regime  of  individual  property,  not  as  it  is,  but  as  it  might  be  made. 
The  principle  of  private  property  has  never  yet  had  a fair  trial 
in  any  country ; and  less  so,  perhaps,  in  this  country  than  in  some 
others.  The  social  arrangements  of  modern  Europe  commenced 
from  a distribution  of  property  which  was  the  result,  not  of  just 
partition,  or  acquisition  by  industry,  but  of  conquest  and  violence  : 
and  notwithstanding  what  industry  has  been  doing  for  many 
centuries  to  modify  the  work  of  force,  the  system  stiff  retains  many 
and  large  traces  of  its  origin.  The  laws  of  property  have  never  yet 
conformed  to  the  principles  on  which  the  justification  of  private 
property  rests.  They  have  made  property  of  things  which  never 
ought  to  be  property,  and  absolute  property  where  only  a qualified 

^ [The  last  sentence  of  this  paragraph  (“  The  impossibility  of  foreseeing  and 
prescribing  the  exact  mode  in  which  its  difficulties  should  be  dealt  with,  does  not 
prove  that  it  may  not  be  the  best  and  the  ultimate  form  of  human  society  ”) 
was  omitted  in  the  4th  ed.  (1857).] 


COMMUNISM 


209 


property  ought  to  exist.  They  have  not  held  the  balance  fairly 
between  human  beings,  but  have  heaped  impediments  upon 
some,  to  give  advantage  to  others ; they  have  purposely  fostered 
inequahties,  and  prevented  all  from  starting  fair  in  the  race.  That 
all  should  indeed  start  on  perfectly  equal  terms  is  inconsistent  with 
any  law  of  private  property : but  if  as  much  pains  as  has  been 
taken  to  aggravate  the  inequality  of  chances  arising  from  the  natural  i 
working  of  the  principle,  had  been  taken  to  temper  that  inequality 
by  every  means  not  subversive  of  the  principle  itself ; if  the  tendency 
of  legislation  had  been  to  favour  the  diffusion,  instead  of  the  con- 
centration of  wealth — to  encourage  the  subdivision  of  the  large 
masses,  instead  of  striving  to  keep  them  together ; the  principle  of 
individual  property  would  have  been  found  to  have  no  necessary 
connexion  with  the  physical  and  social  evils  which  almost  all  Socialist 
writers  assume  to  be  inseparable  from  it. 

Private  property,  in  every  defence  made  of  it,  is  supposed  to 
mean  the  guarantee  to  individuals  of  the  fruits  of  their  own  labour 
and  abstinence.  The  guarantee  to  them  of  the  fruits  of  the  labour 
and  abstinence  of  others,  transmitted  to  them  without  any  merit 
or  exertion  of  their  own,  is  not  of  the  essence  of  the  institution, 
but  a mere  incidental  consequence  which,  when  it  reaches  a certain 
height,  does  not  promote,  but  conflicts  with,  the  ends  which  render 
private  property  legitimate.  To  judge  of  the  final  destination  of 
the  institution  of  property,  we  must  suppose  everything  rectified 
which  causes  the  institution  to  work  in  a manner  opposed  to  that 
equitable  principle,  of  proportion  between  remuneration  and  exertion, 
on  „ which  in  every  vindication  of  it  that  will  bear  the  light  it  is 
assumed  to  be  grounded.  We  must  also  suppose  two  conditions 
realized,  without  which  neither  Communism  nor  any  other  laws  or 
institutions  could  make  the  condition  of  the  mass  of  mankind 
other  than  degraded  and  miserable.  One  of  these  conditions  ia\ 
universal  education ; the  other,  a due  limitation  of  the  numbers 
of  the  community.  With  these  there  could  be  no  poverty,  even 
under  the  present  social  institutions  : and  these  being  supposed, 
the  question  of  Socialism  is  not,  as  generally  stated  by  Socialists, 
a question  of  flying  to  the  sole  refuge  against  the  evils  which  now 
bear  down  humanity ; but  a mere  question  of  comparative  advan- 
tages, which  futurity  must  determine.  We  are  too  ignorant  either 
of  what  individual  agency  in  its  best  form,  or  Socialism  in  its  best 
form,  can  accomplish,  to  be  qualified  to  decide  which  of  the  two 
will  be  the  ultimate  form  of  human  society. 


210 


BOOK  II.  CHAPTER  I.  § 3 


If  a conjecture  may  be  hazarded,  the  decision  will  probably 
depend  mainly  on  one  consideration,  viz.  which  of  the  two  systems 
is  consistent  with  the  greatest  amount  of  human  liberty  and  spon- 
taneity. After  the  means  of  subsistence  are  assured,  the  next  in 
strength  of  the  personal  wants  of  human  beings  is  hberty ; and 
(unlike  the  physical  wants,  which  as  civilization  advances  become 
more  moderate  and  more  amenable  to  control)  it  increases  instead 
of  diminishing  in  intensity  as  the  intelligence  and  the  moral  faculties 
are  more  developed.  The  perfection  both  of  social  arrangements 
and  of  practical  morality  would  be,  to  secure  to  all  persons  complete 
independence  and  freedom  of  action,  subject  to  no  restriction 
but  that  of  not  doing  injury  to  others  : and  the  education  which 
taught  or  the  social  institutions  which  required  them  to  exchange 
the  control  of  their  own  actions  for  any  amount  of  comfort  or 
affluence,  or  to  renounce  liberty  for  the  sake  of  equality,  would 
deprive  them  of  one  of  the  most  elevated  characteristics  of  human 
nature.  It  remains  to  be  discovered  how  far  the  preservation 
of  this  characteristic  would  be  found  compatible  with  the  Com- 
munistic organization  of  society.  No  doubt  this,  like  all  the  other 
objections  to  the  Socialist  schemes,  is  vastly  exaggerated.  The 
members  of  the  association  need  not  be  required  to  live  together 
more  than  they  do  now,  nor  need  they  be  controlled  in  the  disposal 
of  their  individual  share  of  the  produce,  and  of  the  probably  large 
amount  of  leisure  which,  if  they  limited  their  production  to  things 
really  worth  producing,  they  would  possess.  Individuals  need 
not  be  chained  to  an  occupation,  or  to  a particular  locality.  The 
restraints  of  Communism  would  be  freedom  in  comparison  with  the 
present  condition  of  the  majority  of  the  human  race.  The  generality 
of  labourers  in  this  and  most  other  countries  have  as  little  choice 
of  occupation  or  freedom  of  locomotion,  are  practically  as  dependent 
on  fixed  rules  and  on  the  will  of  others,  as  they  could  be  on  any 
system  short  of  actual  slavery  ; to  say  nothing  of  the  entire  domestic 
subjection  of  one  half  the  species,  to  which  it  is  the  signal  honour 
of  Owenism  and  most  other  forms  of  Socialism  that  they  assign 
equal  rights,  in  all  respects,  with  those  of  the  hitherto  dominant  sex. 
But  it  is  not  by  comparison  with  the  present  bad  state  of  society  that 
the  claims  of  Communism  can  be  estimated  ; nor  is  it  sufficient  that 
it  should  promise  greater  personal  and  mental  freedom  than  is 
now  enjoyed  by  those  who  have  not  enough  of  either  to  deserve 
the  name.  The  question  is,  whether  there  would  be  any  asylum 
left  for  individuality  of  character ; whether  public  opinion  would 


COMMUNISM 


211 


not  be  a tyrannical  yoke ; whether  the  absolute  dependence  of 
each  on  all,  and  surveillance  of  each  by  all,  would  not  grind  all 
down  into  a tame  uniformity  of  thoughts,  feelings,  and  actions. 
This  is  already  one  of  the  glaring  evils  of  the  existing  state  of  society, 
notwithstanding  a much  greater  diversity  of  education  and  pursuits, 
and  a much  less  absolute  dependence  of  the  individual  on  the  mass, 
than  would  exist  in  the  Communistic  regime.  No  society  in  which 
eccentricity  is  a matter  of  reproach  can  be  in  a wholesome  state. 
It  is  yet  to  be  ascertained  whether  the  Communistic  scheme  would 
be  consistent  with  that  multiform  development  of  human  nature, 
those  manifold  unhkenesses,  that  diversity  of  tastes  and  talents, 
and  variety  of  intellectual  points  of  view,  which  not  only  form  a 
great  part  of  the  interest  of  human  life,  but  by  bringing  intellects 
into  stimulating  collision,  and  by  presenting  to  each  innumerable 
notions  that  he  would  not  have  conceived  of  himself,  are  the  main- 
spring of  mental  and  moral  progression. 

§ 4.  I have  thus  far  confined  my  observations  to  the  Com- 
munistic doctrine,  which  forms  the  extreme  limit  of  Socialism  ; 
according  to  which  not  only  the  instruments  of  production,  the 
land  and  capital,  are  the  joint  property  of  the  community,  but 
the  produce  is  divided  and  the  labour  apportioned,  as  far  as  possible, 
equally.  The  objections,  whether  well  or  ill  grounded,  to  which 
Socialism  is  hable,  apply  to  this  form  of  it  in  their  greatest  force. 
The  other  varieties  of  Socialism  mainly  differ  from  Communism  in 
not  relying  solely  on  what  M.  Louis  Blanc  calls  the  point  of  honour 
of  industry,  but  retaining  more  or  less  of  the  incentives  to  labour 
derived  from  private  pecuniary  interest.  Thus  it  is  already  a modi- 
fication of  the  strict  theory  of  Communism  when  the  principle  is 
professed  of  proportioning  remuneration  to  labour.  The  attempts 
which  have  been  made  in  France  to  carry  Socialism  into  practical 
effect,  by  associations  of  workmen  manufacturing  on  their  own 
account,!  mostly  began  by  sharing  the  remuneration  equally, 
without  regard  to  the  quantity  of  work  done  by  the  individual : 
but  in  almost  every  case  this  plan  was  after  a short  time  abandoned, 
and  recourse  was  had  to  working  by  the  piece.  The  original  prin- 
ciple appeals  to  a higher  standard  of  justice,  and  is  adapted  to  a 
much  higher  moral  condition  of  human  nature.  The  proportioning 
of  remuneration  to  work  done  is  really  just  only  in  so  far  as  the 

' [The  words  “which  are  now,”  i.e.  1852,  “very  numerous,  and  in  some 
cases  very  successful  ” were  omitted  in  the  4th  ed.  (1857).] 


212 


BOOK  IL  CHAPTER  I.  § 4 


more  or  less  of  tlie  work  is  a matter  of  choice  : when  it  depends  on 
natural  difference  of  strength  or  capacity,  this  principle  of  remunera- 
tion is  in  itself  an  injustice  : it  is  giving  to  those  who  have  ; assigning 
most  to  those  who  are  already  most  favoured  by  nature.  Con- 
sidered, however,  as  a compromise  with  the  selfish  type  of  character 
formed  by  the  present  standard  of  morality,  and  fostered  by  the 
existing  social  institutions,  it  is  highly  expedient ; and  until  educa- 
tion shall  have  been  entirely  regenerated,  is  far  more  likely  to  prove 
immediately  successful,  than  an  attempt  at  a higher  ideal. 

The  two  elaborate  forms  of  non-communistic  Socialism  known 
as  St.  Simonism  and  Fourierism  are  totally  free  from  the  objections 
usually  urged  against  Communism  ; and  though  they  are  open  to 
others  of  their  own,  yet  by  the  great  intellectual  power  which  in 
many  respects  distinguishes  them,  and  by  their  large  and  philosophic 
treatment  of  some  of  the  fundamental  problems  of  society  and 
morality,  they  may  justly  be  counted  among  the  most  remarkable 
productions  of  the  past  and  present  age. 

The  St.  Simonian  scheme  does  not  contemplate  an  equal,  but 
an  unequal,  division  of  the  produce ; it  does  not  propose  that  all 
should  be  occupied  alike,  but  differently,  according  to  their  vocation 
or  capacity ; the  function  of  each  being  assigned,  like  grades  in 
a regiment,  by  the  choice  of  the  directing  authority,  and  the 
remuneration  being  by  salary,  proportioned  to  the  importance,  in  the 
eyes  of  that  authority,  of  the  function  itself,  and  the  merits  of  the 
person  who  fulfils  it.  For  the  constitution  of  the  ruling  body, 
different  plans  might  be  adopted,  consistently  with  the  essentials  of 
the  system.  It  might  be  appointed  by  popular  suffrage.  In  the 
idea  of  the  original  authors,  the  rulers  were  supposed  to  be  persons 
of  genius  and  virtue,  who  obtained  the  voluntary  adhesion  of  the  rest 
by  the  force  of  mental  superiority.^  That  the  scheme  might  in  some 
peculiar  states  of  society  work  with  advantage  is  not  improbable. 
There  is  indeed  a successful  experiment,  of  a somewhat  similar  kind, 
on  record,  to  which  I have  once  alluded;  that  of  the  Jesuits  in 
Paraguay.  A race  of  savages,  belonging  to  a portion  of  mankind 
more  averse  to  consecutive  exertion  for  a distant  object  than  any 
other  authentically  known  to  us,  was  brought  under  the  mental 
dominion  of  civihzed  and  instructed  men  who  were  united  among 

^ [The  next  sentence  of  the  original  was  omitted  in  the  3rd  ed.  (1852). 
**  Society,  thus  constituted,  would  wear  as  diversified  a face  as  it  does  now ; 
would  be  still  fuller  of  interest  and  excitement,  would  hold  out  even  more 
abundant  stimulus  to  individual  exertion,  and  would  nourish,  it  is  to  be  feared, 
even  more  of  rivalries  and  of  animosities  than  at  present.”] 


ST.  SIMONISM 


213 


tliemselvcB  by  a system  of  community  of  goods.  To  the  absolute 
authority  of  these  men  they  reverentially  submitted  themselves, 
and  were  induced  by  them  to  learn  the  arts  of  civilized  life,  and  to 
practise  labours  for  the  community,  which  no  inducement  that 
could  have  been  offered  would  have  prevailed  on  them  to  practise 
for  themselves.  This  social  system  was  of  short  duration,  being 
prematurely  destroyed  by  diplomatic  arrangements  and  foreign 
force.  That  it  could  be  brought  into  action  at  all  was  probably 
owing  to  the  immense  distance  in  point  of  knowledge  and  intellect 
which  separated  the  few  rulers  from  the  whole  body  of  the  ruled, 
without  any  intermediate  orders,  either  social  or  intellectual.  In 
any  other  circumstances  it  would  probably  have  been  a complete 
failure.  It  supposes  an  absolute  despotism  in  the  heads  of  the 
association ; which  would  probably  not  be  much  improved  if  the 
depositaries  of  the  despotism  (contrary  to  the  views  of  the  authors 
of  the  system)  were  varied  from  time  to  time  according  to  the  result 
of  a popular  canvass.  But  to  suppose  that  one  or  a few  human 
beings,  howsoever  selected,  could,  by  whatever  machinery  of 
subordinate  agency,  be  qualified  to  adapt  each  person’s  work  to 
his  capacity,  and  proportion  each  person’s  remuneration  to  his 
merits — to  be,  in  fact,  the  dispensers  of  distributive  justice  to  every 
member  of  a community ; or  that  any  use  which  they  coiild  make 
of  this  power  would  give  general  satisfaction,  or  would  be  submitted 
to  without  the  aid  of  force — is  a supposition  almost  too  chimerical 
to  be  reasoned  against.  A fixed  rule,  like  that  of  equality,  might 
be  acquiesced  in,  and  so  might  chance,  or  an  external  necessity  ; but 
that  a handful  of  human  beings  should  weigh  everybody  in  the 
balance,  and  give  more  to  one  and  less  to  another  at  their  sole 
pleasure  and  judgment  would  not  be  borne,  unless  from  persons 
believed  to  be  more  than  men,  and  backed  by  supernatural  terrors. 

1 The  most  skilfully  combined,  and  with  the  greatest  foresight 
of  objections,  of  all  the  forms  of  Socialism,  is  that  commonly  known 
as  Fourierism.  This  system  does  not  contemplate  the  abolition  of 
private  property,  nor  even  of  inheritance ; on  the  contrary,  it 
avowedly  takes  into  consideration,  as  an  element  in  the  distribution 
of  the  produce,  capital  as  weU  as  labour.  It  proposes  that  the 
operations  of  industry  should  be  carried  on  by  associations  of  about 
two  thousand  members,  combining  their  labour  on  a district  of  about 
a square  league  in  extent,  under  the  guidance  of  chiefs  selected  by 

* [The  account  of  Fourierism,  in  this  and  the  next  three  paragraphs,  was 
addexl  in  the  2nd  ed.  (1849).] 


214 


BOOK  II.  CHAPTER  I.  § 4 


themselves.  In  the  distribution,  a certain  minimum  is  first  assigned 
for  the  subsistence  of  every  member  of  the  community,  whether 
capable  or  not  of  labour.  The  remainder  of  the  produce  is  shared  in 
certain  proportions,  to  be  determined  beforehand,  among  the  three 
elements.  Labour,  Capital,  and  Talent.  The  capital  of  the  com- 
munity may  be  owned  in  unequal  shares  by*  different  members, 
who  would  in  that  case  receive,  as  in  any  other  joint-stock  company, 
proportional  dividends.  The  claim  of  each  person  on  the  share 
of  the  produce  apportioned  to  talent,  is  estimated  by  the  grade  or 
rank  which  the  individual  occupies  in  the  several  groups  of  labourers 
to  which  he  or  she  belongs  ; these  grades  being  in  all  cases  conferred 
by  the  choice  of  his  or  her  companions.  The  remuneration,  when 
received,  would  not  of  necessity  be  expended  or  enjoyed  in  common  ; 
there  would  be  separate  manages  for  all  who  preferred  them,  and  no 
other  community  of  living  is  contemplated,  than  that  all  the  members 
of  the  association  should  reside  in  the  same  pile  of  buildings ; for 
saving  of  labour  and  expense,  not  only  in  building,  but  in  every 
branch  of  domestic  economy ; and  in  order  that,  the  whole  of  the 
buying  and  selling  operations  of  the  community  being  performed 
by  a single  agent,  the  enormous  portion  of  the  produce  of  industry 
now  carried  off  by  the  profits  of  mere  distributors  might  be  reduced 
to  the  smallest  amount  possible. 

This  system,  unlike  Communism,  does  not,  in  theory  at  least, 
withdraw  any  of  the  motives  to  exertion  which  exist  in  the  present 
state  of  society.  On  the  contrary,  if  the  arrangement  worked 
according  to  the  intentions  of  its  contrivers,  it  would  even  strengthen 
those  motives  ; since  each  person  would  have  much  more  certainty 
of  reaping  individually  the  fruits  of  increased  skill  or  energy,  bodily 
or  mental,  than  under  the  present  social  arrangements  can  be  felt 
by  any  but  those  who  are  in  the  most  advantageous  positions,  or 
to  whom  the  chapter  of  accidents  is  more  than  ordinarily  favour- 
able. The  Fourierists,  however,  have  still  another  resource.  They 
believe  that  they  have  solved  the  great  and  fundamental  problem 
of  rendering  labour  attractive.  That  this  is  not  impracticable, 
they  contend  by  very  strong  arguments ; in  particular  by  one 
which  they  have  in  common  with  the  Owenites,  viz.,  that  scarcely 
any  labour,  however  severe,  undergone  by  human  beings  for  the 
sake  of  subsistence,  exceeds  in  intensity  that  which  other  human 
beings,  whose  subsistence  is  already  provided  for,  are  found  ready  and 
even  eager  to  undergo  for  pleasure.  This  certainly  is  a most  signi- 
ficant fact,  and  one  from  which  th<>  student  in  social  philosophy 


FOURIERISM 


216 


may  draw  important  instruction.  But  the  argument  founded  on 
it  may  easily  be  stretched  too  far.  If  occupations  full  of  dis- 
comfort and  fatigue  are  freely  pursued  by  many  persons  as  amuse- 
ments, who  does  not  see  that  they  are  amusements  exactly  because 
they  are  pursued  freely,  and  may  be  discontinued  at  pleasure  ? 
The  liberty  of  quitting  a position  often  makes  the  whole  difference 
between  its  being  painful  and  pleasurable.  Many  a person  remains 
in  the  same  town,  street,  or  house  from  January  to  December, 
without  a wish  or  a thought  tending  towards  removal,  who,  if 
confined  to  that  same  place  by  the  mandate  of  authority,  would 
find  the  imprisonment  absolutely  intolerable. 

According  to  the  Fourierists,  scarcely  any  kind  of  useful  labour 
is  naturally  and  necessarily  disagreeable,  unless  it  is  either  regarded 
as  dishonourable,  or  is  immoderate  in  degree,  or  destitute  of  the 
stimulus  of  sympathy  and  emulation.  Excessive  toil  needs  not, 
they  contend,  be  undergone  by  any  one,  in  a society  in  which  there 
would  be  no  idle  class,  and  no  labour  wasted,  as  so  enormous  an 
amount  of  labour  is  now  wasted,  in  useless  things ; and  where  full 
advantage  would  be  taken  of  the  power  of  association,  both  in 
increasing  the  efficiency  of  production,  and  in  economizing  con- 
sumption. The  other  requisites  for  rendering  labour  attractive 
would,  they  think,  be  found  in  the  execution  of  all  labour  by  social 
groups,  to  any  number  of  which  the  same  individual  might  simulta- 
neously belong,  at  his  or  her  own  choice  : their  grade  in  each  being 
determined  by  the  degree  of  service  which  they  were  foimd  capable 
of  rendering,  as  appreciated  by  the  suffrages  of  their  comrades. 
It  is  inferred  from  the  diversity  of  tastes  and  talents,  that  every 
member  of  the  community  would  be  attached  to  several  groups, 
employing  themselves  in  various  kinds  of  occupation,  some  bodily 
others  mental,  and  would  be  capable  of  occupying  a high  place  in 
some  one  or  more ; so  that  a real  equahty,  or  something  more 
nearly  approaching  to  it  than  might  at  first  be  supposed,  would 
practically  result : not,  from  the  compression,  but,  on  the  contrary 
from  the  largest  possible  development,  of  the  various  natural 
superiorities  residing  in  each  individual. 

Even  from  so  brief  an  outhne,  it  must  be  evident  that  this 
system  does  no  violence  to  any  of  the  general  laws  by  which  human 
action,  even  in  the  present  imperfect  state  of  moral  and  intellectual 
cultivation,  is  influenced ; ^ and  that  it  would  be  extremely  rash  to 

* [The  remainder  of  the  paragraph  as  it  now  stands  dates  from  the  3rd  ecL 
(1852).  In  the  2nd  ed.  (1849)  the  paragraph  went  on  from  “ influenced  ” as 


216 


BOOK  II.  CHAPTER  I.  § 4 


pronounce  it  incapable  of  success,  or  unfitted  to  realize  a great  part 
of  the  hopes  founded  on  it  by  its  partisans.  With  regard  to  this,  as  to 
all  other  varieties  of  Socialism,  the  thing  to  be  desired,  and  to  which 
they  have  a just  claim,  is  opportunity  of  trial.  They  are  all  capable 
of  being  tried  on  a moderate  scale,  and  at  no  risk,  either  personal  or 
pecuniary,  to  any  except  those  who  try  them.  It  is  for  experience 
to  determine  how  far  or  how  soon  any  one  or  more  of  the  possible 
systems  of  community  of  property  will  be  fitted  to  substitute  itseK 
for  the  “ organization  of  industry  ” based  on  private  ownership  of 

follows  : All  persons  would  have  a prospect  of  deriving  individual  advantage 

from  every  degree  of  labour,  of  abstinence,  and  of  talent,  which  they  individually 
exercised.  The  impediments  to  success  would  not  be  in  the  principles  of  the 
system,  but  in  the  unmanageable  nature  of  its  machinery.  Before  large  bodies 
of  human  beings  could  be  fit  to  live  together  in  such  close  union,  and  still  more, 
before  they  would  be  capable  of  adjusting,  by  peaceful  arrangement  among 
themselves,  the  relative  claims  of  every  class  or  Idnd  of  labour  and  talent,  and 
of  every  individual  in  every  class,  a vast  improvement  in  human  character 
must  be  presupposed.  When  it  is  considered  that  each  person  who  would  have 
a voice  in  this  adjustment  would  be  a party  interested  in  it,  in  every  sense  of  the 
term — that  each  would  be  called  on  to  take  part  by  vote  in  fixing  both  the 
relative  remuneration,  and  the  relative  estimation,  of  himself  as  compared  with 
all  other  labourers,  and  of  his  own  class  of  labour  or  talent  as  compared  with 
all  others  ; the  degree  of  disinterestedness  and  of  freedom  from  vanity  and 
irritability  which  would  be  required  in  such  a community  from  every  individual 
in  it,  would  be  such  as  is  now  only  found  in  the  41ite  of  humanity  : while  if  those 
qualities  fell  much  short  of  the  required  standard,  either  the  adjustment  could 
not  be  made  at  all,  or,  if  made  by  a majority,  would  engender  jealousies  and 
disappointments  destructive  of  the  internal  harmony  on  which  the  whole 
worHng  of  the  system  avowedly  depends.  These,  it  is  true,  are  difficulties,  not 
impossibilities  : and  the  Fourierists,  who  alone  among  Socialists  are  in  a great 
degree  alive  to  the  true  conditions  of  the  problem  which  they  undertake  to  solve, 
are  not  without  ways  and  means  of  contending  against  these.  With  every 
advance  in  education  and  improvement,  their  system  tends  to  become  less 
impracticable,  and  the  very  attempt  to  make  it  succeed  would  cultivate,  in 
those  making  the  attempt,  many  of  the  virtues  which  it  requires.  But  we  have 
only  yet  considered  the  case  of  a single  Fourierist  community.  When  we 
remember  that  the  communities  themselves  are  to  be  the  constituent  units  of 
an  organised  whole,  (otherwise  competition  would  rage  as  actively  between 
rival  communities  as  it  now  does  between  individual  merchants  or  manufacturers, ) 
and  that  nothing  less  would  be  requisite  for  the  complete  success  of  the  scheme 
than  the  organisation  from  a single  centre  of  the  whole  industry  of  a nation, 
and  even  of  the  world ; we  may,  without  attempting  to  limit  the  ultimate 
capabihties  of  human  nature,  affirm,  that  the  political  economist,  for  a con- 
siderable time  to  come,  will  be  chiefly  concerned  with  the  conditions  of  existence 
and  progress  belonging  to  a society  founded  on  private  property  and  individual 
competition ; and  that,  rude  as  is  the  manner  in  which  those  two  principles 
apportion  reward  to  exertion  and  to  merit,  they  must  form  the  basis  of  the 
principal  improvements  which  can  for  the  present  be  looked  for  in  the  econo- 
mical condition  of  humanity.” 

Then  began  a new  section  : “ And  those  improvements  will  be  found  to  be 
far  more  considerable  than  the  adherents  of  the  various  Socialist  systems  are 
willing  to  allow.  Whatever  may  be  the  merit  or  demerit  of  their  own  schemes 


FOURIERISM 


217 


land  and  capital.  In  the  meantime  we  may,  without  attempting 
to  limit  the  ultimate  capabilities  of  human  nature,  affirm,  that  the 
political  economist,  for  a considerable  time  to  come,  will  be  chiefly 
concerned  with  the  conditions  of  existence  and  progress  belonging 
to  a society  founded  on  private  property  and  individual  competition  ; 
and  that  the  object  to  be  principally  aimed  at,  in  the  present  stage 
of  human  improvement,  is  not  the  subversion  of  the  system  of  in- 
dividual property,  but  the  improvement  of  it,  and  the  full  participa- 
tion of  every  member  of  the  community  in  its  benefits.^ 

of  society,  they  have  hitherto  shown  themselves  extremely  ill  acquainted  with 
the  economical  laws  of  the  existing  social  system  ; and  have,  in  consequence, 
habitually  assumed  as  necessary  effects  of  competition,  evils  which  are  by  no 
means  inevitably  attendant  on  it.  It  is  from  the  influence  of  this  erroneous 
interpretation  of  existing  facts,  that  many  Socialists  of  high  principles  and 
attainments  are  led  to  regard  the  competitive  system  as  radically  incompatible 
with  the  economical  well-being  of  the  mass. 

“ The  principle  of  private  property  has  never  yet  had  a fair  trial,”  &c.,  as 
now,  supra,  p.  208,  and  the  remainder  of  that  paragraph. 

The  chapter  ended  with  the  following  paragraph,  of  which  the  first  sentence 
was  retained  later  (supra,  p.  209) : “ We  are  as  yet  too  ignorant  either  of  what 
individual  agency  in  its  best  form,  or  Socialism  in  its  best  form,  can  accomplish, 
to  be  qualified  to  decide  which  of  the  two  will  be  the  ultimate  form  of  human 
society.  In  the  present  stage  of  human  improvement  at  least,  it  is  not  (I 
conceive)  the  subversion  of  the  system  of  individual  property  that  should  be 
aimed  at,  but  the  improvement  of  it,  and  the  participation  of  every  member 
of  the  community  in  its  benefits.  Far,  however,  from  looking  upon  the  various 
classes  of  Socialists  with  any  approach  to  disrespect,  I honour  the  intentions  of 
almost  all  who  are  publicly  known  in  that  character,  the  acquirements  and 
talents  of  several,  and  I regard  them,  taken  collectively,  as  one  of  the  most 
valuable  elements  of  human  improvement  now  existing  ; both  from  the  impulse 
they  give  to  the  reconsideration  and  discussion  of  all  the  most  important 
questions,  and  from  the  ideas  they  have  contributed  to  many  ; ideas  from  which 
the  most  advanced  supporters  of  the  existing  order  of  society  have  still  much 
to  learn.”] 

* [See  Appendix  K,  Mill's  earlier  and  later  writings  on  Socialism,  and 
Appendix  L,  The  later  history  of  Socialism.} 


CHAPTER  II 


THE  SAME  SUBJECT  CONTINUED 

§ 1.  It  is  next  to  be  considered,  what  is  included  in  the  idea 
of  private  property,  and  by  what  considerations  the  application  of 
the  principle  should  be  bounded. 

The  institution  of  property,  when  limited  to  its  essential  elements, 
consists  in  the  recognition,  in  each  person,  of  a right  to  the  exclusive 
disposal  of  what  he  or  she  have  produced  by  their  own  exertions, 
or  received  either  by  gift  or  by  fair  agreement,  without  force  or  fraud, 
from  those  who  produced  it.  The  foundation  of  the  whole  is  the 
right  of  producers  to  what  they  themselves  have  produced.  It  may 
be  objected,  therefore,  to  the  institution  as  it  now  exists,  that  it 
recognises  rights  of  property  in  individuals  over  things  which  they 
have  not  produced.  For  example  (it  may  be  said)  the  operatives  in 
a manufactory  create,  by  their  labour  and  skiU,  the  whole  produce  ; 
yet,  instead  of  its  belonging  to  them,  the  law  gives  them  only  their 
stipulated  hire,  and  transfers  the  produce  to  some  one  who  has 
merely  supplied  the  funds,  without  perhaps  contributing  anything 
to  the  work  itself,  even  in  the  form  of  superintendence.  The  answer 
to  this  is,  that  the  labour  of  manufacture  is  only  one  of  the  conditions 
which  must  combine  for  the  production  of  the  commodity.  The 
labour  cannot  be  carried  on  without  materials  and  machinery,  nor 
without  a stock  of  necessaries  provided  in  advance  to  maintain  the 
labourers  during  the  production.  All  these  things  are  the  fruits  of 
previous  labour.  If  the  labourers  were  possessed  of  them,  they 
would  not  need  to  divide  the  produce  with  any  one ; but  while 
they  have  them  not,  an  equivalent  must  be  given  to  those  who 
have,  both  for  the  antecedent  labour,  and  for  the  abstinence  by 
which  the  produce  of  that  labour,  instead  of  being  expended  on 
indulgences,  has  been  reserved  for  this  use.  The  capital  may  not 
have  been,  and  in  most  cases  was  not,  created  by  the  labour  and 
abstinence  of  the  present  possessor;  but  it  was  created  by  the 


PROPERTY 


219 


labour  and  abstinence  of  some  former  person,  who  may  indeed  have 
been  wrongfully  dispossessed  of  it,^  but  who,  in  the  present  age  of  the 
world,  much  more  probably  transferred  his  claims  to  the  present 
capitalist  by  gift  or  voluntary  contract : and  the  abstinence  at 
least  must  have  been  continued  by  each  successive  owner,  down 
to  the  present.  ^ If  it  be  said,  as  it  may  with  truth,  that  those 
who  have  inherited  the  savings  of  others  have  an  advantage  which 
they  may  have  in  no  way  deserved,  over  the  industrious  whose  pre- 
decessors have  not  left  them  anything ; I not  only  admit,  but 
strenuously  contend,  that  this  unearned  advantage  should  be  cur- 
tailed, as  much  as  is  consistent  with  justice  to  those  who  thought 
fit  to  dispose  of  their  savings  by  giving  them  to  their  descendants. 
But  while  it  is  true  that  the  labourers  are  at  a disadvantage  com- 
pared with  those  whose  predecessors  have  saved,  it  is  also  true 
that  the  labourers  are  far  better  ofi  than  if  those  predecessors  had 
not  saved.  They  share  in  the  advantage,  though  not  to  an  equal 
extent  with  the  inheritors.  The  terms  of  co-operation  between 
present  labour  and  the  fruits  of  past  labour  and  saving,  are  a subject 
for  adjustment  between  the  two  parties.  Each  is  necessary  to  the 
other.  The  capitalists  can  do  nothing  without  labourers,  nor  the 
labourers  without  capital.®  If  the  labourers  compete  for  employ- 
ment, the  capitalists  on  their  part  compete  for  labour  to  the  full 
extent  of  the  circulating  capital  of  the  country.  ^ Competition  is 
often  spoken  of  as  if  it  were  necessarily  a cause  of  misery  and 

^ [This  was  added  in  the  3rd  ed.  (1852).  The  original  ran : The  labour 

and  abstinence  of  some  former  person,  who,  by  gift  or  contract,  transferred 
his  claims  to  the  present  capitalist.**] 

* [This  and  the  next  two  sentences  were  added  in  the  3rd  ed.] 

* [Here  was  omitted  in  the  3rd  ed.  the  following  passage  of  the  original : 
“ It  may  be  said,  they  do  not  meet  on  an  equal  footing : the  capitalist,  as  the 
richer,  can  take  advantage  of  the  labourer*s  necessities,  and  make  his  conditions 
as  he  pleases.  He  could  do  so,  undoubtedly,  if  he  were  but  one.  The  capitalists 
collectively  could  do  so,  if  they  were  not  too  numerous  to  combine,  and  act  as 
a body.  But,  as  things  are,  they  have  no  such  advantage.  Where  combination 
is  impossible,  the  terms  of  the  contract  depend  on  competition,  that  is,  on  the 
amount  of  capital  which  the  collective  abstinence  of  society  has  provided, 
compared  with  the  number  of  the  labourers.*’] 

* [The  next  two  sentences,  down  to  the  word  “ Ireland,**  replaced  in  the  2nd 
ed.  (1849)  the  following  passage  of  the  original : 

“ A joint  administration  on  account  of  the  state  would  not  make  the  fund  go 
further,  or  afford  better  terms  to  the  labourers,  unless  either  by  enforcing,  on 
the  society  collectively,  greater  abstinence,  or  by  limiting  more  strictly  the 
number  of  the  labouring  population.  It  is  impossible  to  increase  the  quotient 
that  falls  to  the  share  of  each  labourer,  without  either  augmenting  the  dividend, 
or  diminishing  the  divisor.** 

To  the  substituted  passage,  the  words  “ and  much  . . . England  **  were 
added  in  the  3rd  ed.] 


220 


BOOK  IL  CHAPTER  II.  § 2 


degradation  to  the  labouring  class ; as  if  high  wages  were  not  precisely 
as  much  a product  of  competition  as  low  wages.  The  remuneration 
of  labour  is  as  much  the  result  of  the  law  of  competition  in  the 
United  States,  as  it  is  in  Ireland,  and  much  more  completely  so 
than  in  England. 

The  right  of  property  includes  then,  the  freedom  of  acquiring 
by  contract.  The  right  of  each  to  what  he  has  produced  implies 
a right  to  what  has  been  produced  by  others,  if  obtained  by  their 
free  consent ; since  the  producers  must  either  have  given  it  from 
good  will,  or  exchanged  it  for  what  they  esteemed  an  equivalent, 
and  to  prevent  them  from  doing  so  would  be  to  infringe  their  right 
of  property  in  the  product  of  their  own  industry. 

§ 2.  Before  proceeding  to  consider  the  things  which  the  principle 
of  individual  property  does  not  include,  we  must  specify  one  more 
thing  which  it  does  include  : and  this  is  that  a title,  after  a certain 
period,  should  be  given  by  prescription.  According  to  the  funda- 
mental idea  of  property,  indeed,  nothing  ought  to  be  treated  as 
such,  which  has  been  acquired  by  force  or  fraud,  or  appropriated  in 
ignorance  of  a prior  title  vested  in  some  other  person ; but  it  is 
necessary  to  the  security  of  rightful  possessors,  that  they  should  not 
be  molested  by  charges  of  wrongful  acquisition,  when  by  the  lapse 
of  time  witnesses  must  have  perished  or  been  lost  sight  of,  and  the 
real  character  of  the  transaction  can  no  longer  be  cleared  up. 
Possession  which  has  not  been  legally  questioned  within  a moderate 
number  of  years,  ought  to  be,  as  by  the  laws  of  all  nations  it  is, 
a complete  title.  Even  when  the  acquisition  was  wrongful,  the  dis- 
possession, after  a generation  has  elapsed,  of  the  probably  hond  fide 
possessors,  by  the  revival  of  a claim  which  had  been  long  dormant, 
would  generally  be  a greater  injustice,  and  almost  always  a greater 
private  and  public  mischief,  than  leaving  the  original  wrong  without 
atonement.  It  may  seem  hard  that  a claim,  originally  just,  should 
be  defeated  by  mere  lapse  of  time  ; but  there  is  a time  after  which 
(even  looking  at  the  individual  case,  and  without  regard  to  the 
general  effect  on  the  security  of  possessors),  the  balance  of  hardship 
turns  the  other  way.  With  the  injustices  of  men,  as  with  the  con- 
vulsions and  disasters  of  nature,  the  longer  they  remain  unrepaired, 
the  greater  become  the  obstacles  to  repairing  them,  arising  from  the 
aftergrowths  which  would  have  to  be  torn  up  or  broken  through. 
In  no  human  transactions,  not  even  in  the  simplest  and  clearest, 
does  it  follow  that  a thing  is  fit  to  be  done  now,  because  it  was  fit 


INHERITANCE 


221 


to  be  done  sixty  years  ago.  It  is  scarcely  needful  to  remark,  that 
these  reasons  for  not  disturbing  acts  of  injustice  of  old  date,  cannot 
apply  to  unjust  systems  or  institutions ; since  a bad  law  or  usage 
is  not  one  bad  act,  in  the  remote  past,  but  a perpetual  repetition  of 
bad  acts,  as  long  as  the  law  or  usage  lasts. 

Such,  then,  being  the  essentials  of  private  property,  it  is  now  to 
be  considered,  to  what  extent  the  forms  in  which  the  institution  has 
existed  in  different  states  of  society,  or  still  exists,  are  necessary 
consequences  of  its  principle,  or  are  recommended  by  the  reasons 
on  which  it  is  grounded. 

§ 3.  Nothing  is  implied  in  property  but  the  right  of  each  to  his 
(or  her)  own  faculties,  to  what  he  can  produce  by  them,  and  to  what- 
ever he  can  get  for  them  in  a fair  market ; together  with  his  right 
to  give  this  to  any  other  person  if  he  chooses,  and  the  right  of  that 
other  to  receive  and  enjoy  it. 

It  follows,  therefore,  that  although  the  right  of  bequest,  or  gift 
after  death,  forms  part  of  the  idea  of  private  property,  the  right  of 
inheritance,  as  distinguished  from  bequest,  does  not.  That  the  pro- 
perty of  persons  who  have  made  no  disposition  of  it  during  their 
lifetime,  should  pass  first  to  their  children,  and  failing  them,  to  the 
nearest  relations,  may  be  a proper  arrangement  or  not,  but  is  no 
consequence  of  the  principle  of  private  property.  Although  there 
belong  to  the  decision  of  such  questions  many  considerations  besides 
those  of  political  economy,  it  is  not  foreign  to  the  plan  of  this  work  to 
suggest,  for  the  judgment  of  thinkers,  the  view  of  them  which  most 
recommends  itself  to  the  writer’s  mind. 

No  presumption  in  favour  of  existing  ideas  on  this  subject  is  to 
be  derived  from  their  antiquity.  In  early  ages,  the  property  of  a 
deceased  person  passed  to  his  children  and  nearest  relatives  by  so 
natural  and  obvious  an  arrangement,  that  no  other  was  likely  to  be 
even  thought  of  in  competition  with  it.  In  the  first  place,  they  were 
usually  present  on  the  spot : they  were  in  possession,  and  if  they  had 
no  other  title,  had  that,  so  important  in  an  early  state  of  society,  of 
first  occupancy.  Secondly,  they  were  already,  in  a manner,  joint 
owners  of  his  property  during  his  life.  If  the  property  was  in  land, 
it  had  generally  been  conferred  by  the  State  on  a family  rather  than 
on  an  individual : if  it  consisted  of  cattle  or  moveable  goods,  it  had 
probably  been  acquired,  and  was  certainly  protected  and  defended, 
by  the  united  efforts  of  all  members  of  the  family  who  were  of  an 
age  to  work  or  fight.  Exclusive  individual  property  in  the  modem 


222 


BOOK  II.  CHAPTER  II.  § 3 


sense,  scarcely  entered  into  the  ideas  of  the  time ; and  when  the 
first  magistrate  of  the  association  died,  he  really  left  nothing  vacant 
but  his  own  share  in  the  division,  which  devolved  on  the  member 
of  the  family  who  succeeded  to  his  authority.  To  have  disposed 
of  the  property  otherwise,  would  have  been  to  break  up  a little 
commonwealth,  united  by  ideas,  interest,  and  habits,  and  to  cast 
them  adrift  on  the  world.  These  considerations,  though  rather  felt 
than  reasoned  about,  had  so  great  an  influence  on  the  minds  of  man- 
kind, as  to  create  the  idea  of  an  inherent  right  in  the  children  to  the 
possessions  of  their  ancestor ; a right  which  it  was  not  competent  to 
himself  to  defeat.  Bequest,  in  a primitive  state  of  society,  was 
seldom  recognised  ; a clear  proof,  were  there  no  other,  that  property 
was  conceived  in  a manner  totally  different  from  the  conception  of  it 
in  the  present  time.* 

But  the  feudal  family,  the  last  historical  form  of  patriarchal  life, 
has  long  perished,  and  the  unit  of  society  is  not  now  the  family  or 
clan,  composed  of  all  the  reputed  descendants  of  a common  ancestor, 
but  the  individual ; or  at  most  a pair  of  individuals,  with  their 
unemancipated  children.  Property  is  now  inherent  in  individuals, 
not  in  families  : the  children  when  grown  up  do  not  follow  the  occu- 
pations or  fortunes  of  the  parent : if  they  participate  in  the  parent’s 
pecuniary  means  it  is  at  his  or  her  pleasure,  and  not  by  a voice  in  the 
ownership  and  government  of  the  whole,  but  generally  by  the  exclu- 
sive enjoyment  of  a part ; and  in  this  country  at  least  (except  as  far 
as  entails  or  settlements  are  an  obstacle)  it  is  in  the  power  of  parents 
to  disinherit  even  their  children,  and  leave  their  fortune  to  strangers. 
More  distant  relatives  are  in  general  almost  as  completely  detached 
from  the  family  and  its  interests  as  if  they  were  in  no  way  connected 
with  it.  The  only  claim  they  are  supposed  to  have  on  their  richer 
relations,  is  to  a preference,  cceteris  paribus,  in  good  offices,  and  some 
aid  in  case  of  actual  necessity. 

So  great  a change  in  the  constitution  of  society  must  make  a 
considerable  difference  in  the  grounds  on  which  the  disposal  of  pro- 
perty by  inheritance  should  rest.  The  reasons  usually  assigned 
by  modern  writers  for  giving  the  property  of  a person  who  dies 
intestate  to  the  children,  or  nearest  relatives,  are,  first,  the  supposi- 
tion that,  in  so  disposing  of  it,  the  law  is  more  likely  than  in  any  other 
mode  to  do  what  the  proprietor  would  have  done,  if  he  had  done 
anything  ; and  secondly,  the  hardship,  to  those  who  lived  with  their 

♦ [1862]  See,  for  admirable  illustrations  of  this  and  many  kindred  points, 
Mr.  Maine’s  profound  work  on  Ancient  Law  and  its  Relation  to  Modern  Ideas. 


INHERITANCE 


223 


parents  and  partook  in  their  opulence,  of  being  cast  down  from  the 
enjoyments  of  wealth  into  poverty  and  privation. 

There  is  some  force  in  both  these  arguments.  The  law  ought, 
no  doubt,  to  do  for  the  children  or  dependents  of  an  intestate, 
whatever  it  was  the  duty  of  the  parent  or  protector  to  have  done,i 
so  far  as  this  can  be  known  by  any  one  besides  himself.  Since,  how- 
ever, the  law  cannot  decide  on  individual  claims,  but  must  proceed  by 
general  rules,  it  is  next  to  be  considered  what  these  rules  should  be. 

We  may  first  remark,  that  in  regard  to  collateral  relatives,  it 
is  not,  unless  on  grounds  personal  to  the  particular  individual, 
the  duty  of  any  one  to  make  a pecuniary  provision  for  them.  No  one 
now  expects  it,  unless  there  happen  to  be  no  direct  heirs  ; nor  would 
it  be  expected  even  then,  if  the  expectation  were  not  created  by  the 
provisions  of  the  law  in  case  of  intestacy.  I see,  therefore,  no  reason 
why  collateral  inheritance  should  exist  at  all.  Mr.  Bentham 
long  ago  proposed,  and  other  high  authorities  have  agreed  in  the 
opinion,  that  if  there  are  no  heirs  either  in  the  descending  or  in  the 
ascending  fine,  the  property,  in  case  of  intestacy,  should  escheat  to 
the  State.  With  respect  to  the  more  remote  degrees  of  collateral 
relationship,  the  point  is  not  very  likely  to  be  disputed.  Few  will 
maintain  that  there  is  any  good  reason  why  the  accumulations 
of  some  childless  miser  should  on  his  death  (as  every  now  and  then 
happens)  go  to  enrich  a distant  relative  who  never  saw  him,  who 
perhaps  never  knew  himself  to  be  related  to  him  until  there  was 
something  to  be  gained  by  it,  and  who  had  no  moral  claim  upon  him 
of  any  kind,  more  than  the  most  entire  stranger.  But  the  reason  of 
the  case  applies  ahke  to  all  collaterals,  even  in  the  nearest  degree. 
Collaterals  have  no  real  claims,  but  such  as  may  be  equally  strong 
in  the  case  of  non-relatives ; and  in  the  one  case  as  in  the  other, 
where  valid  claims  exist,  the  proper  mode  of  paying  regard  to  them 
is  by  bequest.2 

1 [The  rest  of  this  paragraph  replaced  in  the  3rd  ed.  (1852)  the  following 
original  text : “ but  from  accident  or  negligence  or  worse  causes  he  failed  to 
do.  Whether  it  would  be  possible,  by  means  of  a public  administrator  of 
intestate  estates,  to  take  cognizance  of  special  claims  and  see  justice  done  in 
detail,  is  a question  of  some  difficulty  into  which  I forbear  to  enter.  I shall 
only  consider  what  might  with  best  reason  be  laid  down  as  a general  rule.”] 

2 [From  the  3rd  ed.  (1852)  was  omitted  the  following  passage  of  the  original : 
**  If  any  near  relatives,  known  to  be  such,  were  in  a state  of  indigence,  a donatit  n. 
or  a small  pension,  according  to  circumstances,  might,  in  case  of  intestacy,  be 
assigned  to  them  when  the  State  appropriated  the  inheritance.  This  would 
be  a justice,  or  a generosity,  which  they  do  not  experience  from  the  present  law, 
since  that  gives  all  to  the  nearest  collaterals,  however  great  may  be  the  neces- 
sities of  those  more  distant.”] 


224 


BOOK  II.  CHAPTER  II.  § 3 


The  claims  of  children  are  of  a different  nature  : they  are  real, 
and  indefeasible.  But  even  of  these,  I venture  to  think  that  the 
measure  usually  taken  is  an  erroneous  one  : what  is  due  to  children 
is  in  some  respects  underrated,  in  others,  as  it  appears  to  me,  exagger- 
ated. One  of  the  most  binding  of  all  obligations,  that  of  not  bringing 
children  into  the  world  unless  they  can  be  maintained  in  comfort 
during  childhood,  and  brought  up  with  a likelihood  of  supporting 
themselves  when  of  full  age,  is  both  disregarded  in  practice  and  made 
light  of  in  theory  in  a manner  disgraceful  to  human  intelligence. 
On  the  other  hand,  when  the  parent  possesses  property,  the  claims  of 
4ihe  children  upon  it  seem  to  me  to  be  the  subject  of  an  opposite 
error.  Whatever  fortune  a parent  may  have  inherited,  or,  still  more, 
may  have  acquired,  I cannot  admit  that  he  owes  to  his  children, 
merely  because  they  are  his  children,  to  leave  them  rich,  without  the 
necessity  of  any  exertion.  I could  not  admit  it,  even  if  to  be  so 
left  were  always,  and  certainly,  for  the  good  of  the  children  them- 
selves. But  this  is  in  the  highest  degree  uncertain.  It  depends  on 
individual  character.  Without  supposing  extreme  cases,  it  may  be 
affirmed  that  in  a majority  of  instances  the  good  not  only  of  society 
but  of  the  individuals  would  be  better  consulted  by  bequeathing  to 
them  a moderate,  than  a large  provision.  This,  which  is  a common- 
place of  moralists  ancient  and  modern,  is  felt  to  be  true  by  many 
intelligent  parents,  and  would  be  acted  upon  much  more  frequently, 
if  they  did  not  allow  themselves  to  consider  less  what  really  is, 
than  what  will  be  thought  by  others  to  be,  advantageous  to  the 
children. 

The  duties  of  parents  to  their  children  are  those  which  are 
indissolubly  attached  to  the  fact  of  causing  the  existence  of  a human 
being.  The  parent  owes  to  society  to  endeavour  to  make  the  child 
a good  and  valuable  member  of  it,  and  owes  to  the  children  to  provide, 
so  far  as  depends  on  him,  such  education,  and  such  appliances  and 
means,  as  will  enable  them  to  start  with  a fair  chance  of  achieving 
by  their  own  exertions  a successful  life.  To  this  every  child  has  a 
claim  ; and  I cannot  admit  that,  as  a child,  he  has  a claim  to  more. 
There  is  a case  in  which  these  obligations  present  themselves  in  their 
true  light,  without  any  extrinsic  circumstances  to  disguise  or  confuse 
them  : it  is  that  of  an  illegitimate  child.  To  such  a child  it  is  gener- 
ally felt  that  there  is  due  from  the  parent,  the  amount  of  provision 
for  his  welfare  which  will  enable  him  to  make  his  life  on  the  whole  a 
desirable  one.  I hold  that  to  no  child,  merely  as  such,  anything  more 
is  due,  than  what  is  admitted  to  be  due  to  an  illegitimate  child : 


INHERITANCE 


225 


and  that  no  child  for  whom  thus  much  has  been  done,  has,  unless  on 
the  score  of  previously  raised  expectations,  any  grievance,  if  the 
remainder  of  the  parent’s  fortune  is  devoted  to  public  uses,  or  to  the 
benefit  of  individuals  on  whom  in  the  parent’s  opinion  it  is  better 
bestowed. 

In  order  to  give  the  children  that  fair  chance  of  a desirable 
existence,  to  which  they  are  entitled,  it  is  generally  necessary  that 
they  should  not  be  brought  up  from  childhood  in  habits  of  luxury 
which  they  will  not  have  the  means  of  indulging  in  after-life.  This, 
again,  is  a duty  often  flagrantly  violated  by  possessors  of  terminable 
incomes,  who  have  little  property  to  leave.  When  the  children  of 
rich  parents  have  lived,  as  it  is  natural  they  should  do,  in  habits 
corresponding  to  the  scale  of  expenditure  in  which  the  parents 
indulge,  it  is  generally  the  duty  of  the  parents  to  make  a greater 
provision  for  them,  than  would  suffice  for  children  otherwise  brought 
up.  I say  generally,  because  even  here  there  is  another  side  to  the 
question.  It  is  a proposition  quite  capable  of  being  maintained, 
that  to  a strong  nature  which  has  to  make  its  way  against  narrow 
circumstances,  to  have  known  early  some  of  the  feelings  and  experi- 
ences of  wealth,  is  an  advantage  both  in  the  formation  of  character 
and  in  the  happiness  of  life.  But  allowing  that  children  have  a just 
ground  of  complaint,  who  have  been  brought  up  to  require  luxuries 
which  they  are  not  afterwards  Hkely  to  obtain,  and  that  their  claim, 
therefore,  is  good  to  a provision  bearing  some  relation  to  the  mode 
of  their  bringing  up  ; this,  too,  is  a claim  which  is  particularly  liable 
to  be  stretched  further  than  its  reasons  warrant.  The  case  is  exactly 
that  of  the  younger  children  of  the  nobility  and  landed  gentry,  the 
bulk  of  whose  fortune  passes  to  the  eldest  son.  The  other  sons,  who 
are  usually  numerous,  are  brought  up  in  the  same  habits  of  luxury 
as  the  future  heir,  and  they  receive  as  a younger  brother’s  portion, 
generally  what  the  reason  of  the  case  dictates,  namely,  enough  to 
support,  in  the  habits  of  life  to  which  they  are  accustomed,  them- 
selves, but  not  a wife  or  children.  It  really  is  no  grievance  to  any 
man,  that  for  the  means  of  marrying  and  of  supporting  a family, 
he  has  to  depend  on  his  own  exertions. 

A provision,  then,  such  as  is  admitted  to  be  reasonable  in  the  case 
of  illegitimate  children,  for  younger  children,  wherever  in  short  the 
justice  of  the  case,  and  the  real  interests  of  the  individuals  and  of 
society,  are  the  only  things  considered,  is,  I conceive,  all  that  parents 
owe  to  their  children,  and  all,  therefore,  which  the  State  owes  to  the 
children  of  those  who  die  intestate.  The  surplus,  if  any,  I hold  that 


226 


BOOK  II.  CHAPTER  II.  § 4 


it  may  rightly  appropriate  to  the  general  purposes  of  the  community. 
I would  not,  however,  be  supposed  to  recommend  that  parents  should 
never  do  more  for  their  children  than  what,  merely  as  children,  they 
have  a moral  right  to.  In  some  cases  it  is  imperative,  in  many  laud- 
able, and  in  all  allowable,  to  do  much  more.  For  this,  however, 
the  means  are  afforded  by  the  hberty  of  bequest.  It  is  due,  not  to 
the  children  but  to  the  parents,  that  they  should  have  the  power  of 
showing  marks  of  affection,  of  requiting  services  and  sacrifices, 
and  of  bestowing  their  wealth  according  to  their  own  preferences, 
or  their  own  judgment  of  fitness. 

§ 4.  Whether  the  power  of  bequest  should  itself  be  subject 
to  limitation,  is  an  ulterior  question  of  great  importance.  Unlike 
inheritance  ah  intestato,  bequest  is  one  of  the  attributes  of  property  : 
the  ownership  of  a thing  cannot  be  looked  upon  as  complete  without 
the  power  of  bestowing  it,  at  death  or  during  life,  at  the  owner’s 
pleasure  : and  all  the  reasons,  which  recommend  that  private  pro- 
perty should  exist,  recommend  pro  tanto  this  extension  of  it.  But 
property  is  only  a means  to  an  end,  not  itself  the  end.  Like  all  other 
proprietary  rights,  and  even  in  a greater  degree  than  most,  the  power 
of  bequest  may  be  so  exercised  as  to  conflict  with  the  permanent 
interests  of  the  human  race.  It  does  so,  when,  not  content  with 
bequeathing  an  estate  to  A,  the  testator  prescribes  that  on  A’s  death 
it  shall  pass  to  his  eldest  son,  and  to  that  son’s  son,  and  so  on  for 
ever.  No  doubt,  persons  have  occasionally  exerted  themselves  more 
strenuously  to  acquire  a fortune  from  the  hope  of  founding  a family 
in  perpetuity  ; but  the  mischiefs  to  society  of  such  perpetuities  out- 
weigh the  value  of  this  incentive  to  exertion,  and  the  incentives 
in  the  case  of  those  who  have  the  opportunity  of  making  large 
fortunes  are  strong  enough  without  it.  A similar  abuse  of  the 
power  of  bequest  is  committed  when  a person  who  does  the 
meritorious  act  of  leaving  property  for  public  uses,  attempts  to  pre- 
scribe the  details  of  its  application  in  perpetuity ; when  in  founding  a 
place  of  education  (for  instance)  he  dictates,  for  ever,  what  doctrines 
shall  be  taught.  It  being  impossible  that  any  one  should  know 
what  doctrines  will  be  fit  to  be  taught  after  he  has  been  dead  for 
centuries,  the  law  ought  not  to  give  effect  to  such  dispositions  of 
property,  unless  subject  to  the  perpetual  revision  (after  a certain 
interval  has  elapsed)  of  a fitting  authority. 

There  are  , obvious  limitations.  But  even  the  simplest  exercise 
of  the  right  of  bequest,  that  of  determining  the  person  to  whom 


BEQUEST 


227 


property  shall  pass  immediately  on  the  death  of  the  testator,  has 
always  been  reckoned  among  the  privileges  which  might  be  limited 
or  varied,  according  to  views  of  expediency.  The  limitations, 
hitherto,  have  been  almost  solely  in  favour  of  children.  In  England 
the  right  is  in  principle  unlimited,  almost  the  only  impediment  being 
that  arising  from  a settlement  by  a former  proprietor,  in  which  case 
the  holder  for  the  time  being  cannot  indeed  bequeath  his  possessions, 
but  only  because  there  is  nothing  to  bequeath,  he  having  merely 
a hfe  interest.  By  the  Roman  law,  on  which  the  civil  legislation  of 
the  Continent  of  Europe  is  principally  founded,  bequest  originally 
was  not  permitted  at  all,  and  even  after  it  was  introduced,  a legitima 
fortio  was  compulsorily  reserved  for  each  child  ; and  such  is  still  the 
law  in  some  of  the  Continental  nations.  By  the  French  law  since 
the  Revolution,  the  parent  can  only  dispose  by  will,  of  a portion 
equal  to  the  share  of  one  child,  each  of  the  children  taking  an  equal 
portion.  This  entail,  as  it  may  be  called,  of  the  bulk  of  every  one’s 
property  upon  the  children  collectively,  seems  to  me  as  little  defen- 
sible in  principle  as  an  entail  in  favour  of  one  child,  though  it  does  not 
shock  so  directly  the  idea  of  justice.  I cannot  admit  that^  parents 
should  be  compelled  to  leave  to  their  children  even  that  provision 
which,  as  children,  I have  contended  that  they  have  a moral  claim  to. 
Children  may  forfeit  that  claim  by  general  unworthiness,  or  parti- 
cular ill-conduct  to  the  parents  : they  may  have  other  resources 
or  prospects  : what  has  been  previously  done  for  them,  in  the  way 
of  education  and  advancement  in  hfe,  may  fully  satisfy  their  moral 
claim  ; or  others  may  have  claims  superior  to  theirs.^ 

The  extreme  restriction  of  the  power  of  bequest  in  French  law 
was  adopted  as  a democratic  expedient,  to  break  down  the  custom 
of  primogeniture,  and  counteract  the  tendency  of  inherited  property 
to  collect  in  large  masses.  I agree  in  thinking  these  obj  ects  eminently 
desirable  ; but  the  means  used  are  not,  I think,  the  most  judicious. 
Were  I framing  a code  of  laws  according  to  what  seems  to  me  best 
in  itself,  without  regard  to  existing  opinions  and  sentiments,  I 
should  prefer  to  restrict,  not  what  any  one  might  bequeath,  but  what 
any  one  should  be  permitted  to  acquire,  by  bequest  or  inheritance. 

^ [So  since  the  3rd  ed.  (1852).  The  original  ran  “ It  is  questionable  whether,** 
&c.] 

2 [From  the  3rd  ed.  was  here  omitted  the  following  passage  of  the  original : 

“ But  however  the  case  may  be  as  to  a mere  provision,  I hold  that  justice  and 
expediency  are  wholly  against  compelling  anything  beyond.  That  a person 
should  be  certain  from  childhood  of  succeeding  to  a large  fortune  independently 
of  the  good  will  and  affection  of  any  human  being,  is,  unless  under  very  favour- 
able influences  of  other  kinds,  almost  a fatal  circumstance  in  his  education.”] 


228 


BOOK  II.  CHAPTER  II.  § 4 


Each  person  should  have  power  to  dispose  by  will  of  his  or  her  whole 
property ; but  not  to  lavish  it  in  enriching  some  one  individual, 
beyond  a certain  maximum,  which  shoidd  be  fixed  sufficiently  high 
to  afford  the  means  of  comfortable  independence.  The  inequalities 
of  property  which  arise  from  unequal  industry,  frugality,  persever- 
ance, talents,  and  to  a certain  extent  even  opportunities,  are  insepar- 
able from  the  principle  of  private  property,  and  if  we  accept  the 
principle,  we  must  bear  with  these  consequences  of  it : but  I see 
nothing  objectionable  in  fixing  a limit  to  what  any  one  may  acquire 
by  the  mere  favour  of  others,  without  any  exercise  of  his  faculties, 
and  in  requiring  that  if  he  desires  any  further  accession  of  fortune, 
he  shall  work  for  it.*  I do  not  conceive  that  the  degree  of  limitation 
which  this  would  impose  on  the  right  of  bequest,  would  be  felt  as  a 
burthensome  restraint  by  any  testator  who  estimated  a large  fortune 
at  its  true  value,  that  of  the  pleasures  and  advantages  that  can  be 
purchased  with  it : on  even  the  most  extravagant  estimate  of  which 
it  must  be  apparent  to  every  one,  that  the  difference  to  the  happiness 
of  the  possessor  between  a moderate  independence  and  five  times  as 
much  is  insignificant  when  weighed  against  the  enjoyment  that 
might  be  given,  and  the  permanent  benefits  diffused,  by  some  other 
disposal  of  the  four-fifths.  So  long  indeed  as  the  opinion  practically 
prevails,  that  the  best  thing  which  can  be  done  for  objects  of  affection 
is  to  heap  on  them  to  satiety  those  intrinsically  worthless  things 
on  which  large  fortunes  are  mostly  expended,  there  might  be  little 
use  in  enacting  such  a law,  even  if  it  were  possible  to  get  it  passed, 
since  if  there  were  the  inclination,  there  would  generally  be  the  power 
of  evading  it.  The  law  would  be  unavailing  unless  the  popular 
sentiment  went  energetically  along  with  it ; which  (judging  from  the 
tenacious  adherence  of  public  opinion  in  France  to  the  law  of 
compulsory  division)  it  would  in  some  states  of  society  and  govern- 
ment be  very  likely  to  do,  however  much  the  contrary  may  be  the 
fact  in  England  and  at  the  present  time.  If  the  restriction  could  be 

* [1865]  In  the  case  of  capital  employed  in  the  hands  of  the  owner  himself 
in  carrying  on  any  of  the  operations  of  industry,  there  are  strong  grounds  for 
leaving  to  him  the  power  of  bequeathing  to  one  person  the  whole  of  the  funds 
actually  engaged  in  a single  enterprise.  It  is  well  that  he  should  be  enabled 
to  leave  the  enterprise  under  the  control  of  whichever  of  his  heirs  he  regards 
as  best  fitted  to  conduct  it  virtuously  and  efficiently : and  the  necessity  (very 
frequent  and  inconvenient  under  the  French  law)  would  be  thus  obviated,  of 
breaking  up  a manufacturing  or  commercial  establishment  at  the  death  of  its 
chief.  In  like  manner,  it  should  be  allowed  to  a proprietor  who  leaves  to  one 
of  his  successors  the  moral  burthen  of  keeping  up  an  ancestral  mansion  and 
park  or  pleasure-ground,  to  bestow  along  with  them  as  much  other  property 
as  is  required  for  their  sufficient  maintenance. 


PROPERTY  IN  LAND 


229 


made  practically  effectual,  the  benefit  would  be  great.  Wealth 
which  could  no  longer  be  employed  in  over  ^ -enriching  a few,  would 
either  be  devoted  to  objects  of  public  usefulness,  or  if  bestowed  on 
individuals,  would  be  distributed  among  a larger  number.  While 
those  enormous  fortunes  which  no  one  needs  for  any  personal  purpose 
but  ostentation  or  improper  power,  would  become  much  less  nume- 
rous, there  would  be  a great  multiplication  of  persons  in  easy 
circumstances,  with  the  advantages  of  leisure,  and  all  the  real  enjoy- 
ments which  wealth  can  give,  except  those  of  vanity ; a class  by 
whom  the  services  which  a nation  having  leisured  classes  is  entitled 
to  expect  from  them,  either  by  their  direct  exertions  or  by  the  tone 
they  give  to  the  feehngs  and  tastes  of  the  public,  would  be  rendered 
in  a much  more  beneficial  manner  than  at  present.  A large  portion 
also  of  the  accumulations  of  successful  industry  would  probably 
be  devoted  to  pubhc  uses,  either  by  direct  bequests  to  the  State, 
or  by  the  endowment  of  institutions  ; as  is  already  done  very  largely 
in  the  United  States,  where  the  ideas  and  practice  in  the  matter  of 
inheritance  seem  to  be  unusually  rational  and  beneficial.* 

§ 5.  The  next  point  to  be  considered  is,  whether  the  reasons 
on  which  the  institution  of  property  rests  are  applicable  to  all  things 
in  which  a right  of  exclusive  ownership  is  at  present  recognised ; 
and  if  not,  on  what  other  grounds  the  recognition  is  defensible. 

The  essential  principle  of  property  being  to  assure  to  all  persons 
what  they  have  produced  by  their  labour  and  accumulated  by  their 

^ [“  Over  ” was  added  in  the  3rd  ed.  (1852).] 

* “ Munificent  bequests  and  donations  for  public  purposes,  whether  chari- 
table or  educational,  form  a striking  feature  in  the  modern  history  of  the 
United  States,  and  especially  of  New  England.  Not  only  is  it  common  for  rich 
capitalists  to  leave  by  will  a portion  of  their  fortune  towards  the  endowment 
of  national  institutions,  but  individuals  during  their  lifetime  make  magnificent 
grants  of  money  for  the  same  objects.  There  is  here  no  compulsory  law  for 
the  equal  partition  of  property  among  children,  as  in  France,  and  on  the  other 
hand  no  custom  of  entail  or  primogeniture,  as  in  England,  so  that  the  affluent 
feel  themselves  at  liberty  to  share  their  wealth  between  their  kindred  and  the 
public  ; it  being  impossible  to  found  a family,  and  parents  having  frequently 
the  happiness  of  seeing  all  their  children  well  provided  for  and  independent 
long  before  their  death.  I have  seen  a list  of  bequests  and  donations  made  during 
the  last  thirty  years  for  the  benefit  of  religious,  charitable,  and  literary  institu- 
tions in  the  state  of  Massachusetts  alone,  and  they  amounted  to  no  less  a sum 
than  six  millions  of  dollars,  or  more  than  a million  sterling.’ — Ly ell’s  Travels 
in  America,  vol.  i.  p.  263. 

[1852]  In  England,  whoever  leaves  anything  beyond  trifling  legacies  for 
public  or  beneficent  objects  when  he  has  any  near  relatives  living,  does  so  at 
the  risk  of  being  declared  insane  by  a jury  after  his  death,  or  at  the  least,  of 
having  the  property  wasted  in  a Chancery  suit  to  set  aside  the  will. 


230 


BOOK  II.  CHAPTER  II.  § 5 


abstinence,  this  principle  cannot  apply  to  what  is  not  the  produce  ol 
labour,  the  raw  material  of  the  earth.  If  the  land  derived  its  pro- 
ductive power  wholly  from  nature,  and  not  at  all  from  industry, 
or  if  there  were  any  means  of  discriminating  what  is  derived  from 
each  source,  it  not  only  would  not  be  necessary,  but  it  would  be  the 
height  of  injustice,  to  let  the  gift  of  nature  be  engrossed  by  indi- 
viduals. The  use  of  the  land  in  agriculture  must  indeed,  for  the  time 
being,  be  of  necessity  exclusive  ; the  same  person  who  has  ploughed 
and  sown  must  be  permitted  to  reap  : but  the  land  might  be  occupied 
for  one  season  only,  as  among  the  ancient  Germans ; or  might  be 
periodically  redivided  as  population  increased  : or  the  State  might 
be  the  universal  landlord,  and  the  cultivators  tenants  under  it, 
either  on  lease  or  at  will. 

But  though  land  is  not  the  produce  of  industry,  most  of  its 
valuable  quahties  are  so.  Labour  is  not  only  requisite  for  using, 
but  almost  equally  so  for  fashioning,  the  instrument.  Considerable 
labour  is  often  required  at  the  commencement,  to  clear  the  land  fcr 
cultivation.  In  many  cases,  even  when  cleared,  its  productiveness 
is  wholly  the  effect  of  labour  and  art.  The  Bedford  Level  produced 
httle  or  nothing  until  artificially  drained.  The  bogs  of  Ireland, 
until  the  same  thing  is  done  to  them,  can  produce  httle  besides  fuel. 
One  of  the  barrenest  soils  in  the  world,  composed  of  the  materia] 
of  the  Goodwin  Sands,  the  Pays  de  Waes  in  Flanders,  has  been  so 
fertihzed  by  industry,  as  to  have  become  one  of  the  most  productive 
in  Europe.  Cultivation  also  requires  buildings  and  fences,  which  are 
wholly  the  produce  of  labour.  The  fruits  of  this  industry  cannot 
be  reaped  in  a short  period.  The  labour  and  outlay  are  immediate, 
the  benefit  is  spread  over  many  years,  perhaps  over  all  future  time. 
A holder  will  not  incur  this  labour  and  outlay  when  strangers  and 
not  himself  will  be  benefited  by  it.  If  he  undertakes  such  improve- 
ments, he  must  have  a sufficient  period  before  him  in  which  to  profit 
by  them  ; and  he  is  in  no  way  so  sure  of  having  always  a sufficient 
period  as  when  his  tenure  is  perpetual.* 

• What  endowed  man  with  intelligence  and  perseverance  in  labour,  what 
made  him  direct  all  his  efforts  towards  an  end  useful  to  his  race,  was  the 
sentiment  of  perpetuity.  The  lands  which  the  streams  have  deposited  along 
their  course  are  always  the  most  fertile,  but  are  also  those  which  they  menace 
with  their  inundations  or  corrupt  by  marshes.  Under  the  guarantee  of  perpe- 
tuity men  undertook  long  and  painful  labours  to  give  the  marshes  an  outlet,  to 
erect  embankments  against  inundations,  to  distribute  by  irrigation-channels 
fertilizing  waters  over  the  same  fields  which  the  same  waters  had  condemned 
to  steriUty.  Under  the  same  guarantee,  man,  no  longer  contenting  himself  with 
the  annual  products  of  the  earth,  distinguished  among  the  wild  vegetation  the 


PROPERTY  IN  LAND 


231 


§ 6.  These  are  the  reasons  which  form  the  justification,  in  an 
economical  point  of  view,  of  property  in  land.  It  is  seen,  that  they 
are  only  valid,  in  so  far  as  the  proprietor  of  land  is  its  improver. 
Whenever,  in  any  country,  the  proprietor,  generally  speaking,  ceases 
to  be  the  improver,  political  economy  has  nothing  to  say  in 
defence  of  landed  property,  as  there  established.  In  no  sound 
theory  of  private  property  was  it  ever  contemplated  that  the 
proprietor  of  land  should  be  merely  a sinecurist  quartered  on  it. 

In  Great  Britain,  the  landed  proprietor  is  not  unfrequently 
an  improver.  But  it  cannot  be  said  that  he  is  generally  so.  And 
in  the  majority  of  cases  he  grants  the  liberty  of  cultivation  [1848] 
on  such  terms,  as  to  prevent  improvements  from  being  made  by  any 
one  else.  In  the  southern  parts  of  the  island,  as  there  are  usually 
no  leases,  permanent  improvements  can  scarcely  be  made  except 
by  the  landlord’s  capital ; accordingly  the  South,  compared  with  the 
North  of  England,  and  with  the  Lowlands  of  Scotland,  is  still 
extremely  backward  in  agricultural  improvement.  The  truth  is, 
that  any  very  general  improvement  of  land  by  the  landlords  is 
hardly  compatible  with  a law  or  custom  of  primogeniture.  When 
the  land  goes  wholly  to  the  heir,  it  generally  goes  to  him  severed 
from  the  pecuniary  resources  which  would  enable  him  to  improve  it, 
the  personal  property  being  absorbed  by  the  provision  for  younger 
children,  and  the  land  itself  often  heavily  burthened  for  the  same 
purpose.  There  is  therefore  but  a small  proportion  of  landlords 
who  have  the  means  of  making  expensive  improvements,  unless 
they  do  it  with  borrowed  money,  and  by  adding  to  the  mortgages 
with  which  in  most  cases  the  land  was  already  burthened  when  they 

perennial  plants,  shrubs,  and  trees  which  would  be  useful  to  him,  improved 
them  by  culture,  changed,  it  may  almost  be  said,  their  very  nature,  and  multi- 
plied their  amount.  There  are  fruits  which  it  required  centuries  of  cultivation 
to  bring  to  their  present  perfection,  and  others  which  have  been  introduced 
from  the  most  remote  regions.  Men  have  opened  the  earth  to  a great  depth  to 
renew  the  soil,  and  fertilize  it  by  the  mixture  of  its  parts  and  by  contact  with 
the  air ; they  have  fixed  on  the  hillsides  the  soil  which  would  have  slid  off, 
and  have  covered  the  face  of  the  country  with  a vegetation  everywhere  abundant, 
and  everywhere  useful  to  the  human  race.  Among  their  labours  there  are  some 
of  which  the  fruits  can  only  be  reaped  at  the  end  of  ten  or  of  twenty  years  ; 
there  are  others  by  which  their  posterity  will  still  benefit  after  several  centuries. 
All  have  concurred  in  augmenting  the  productive  force  of  nature,  in  giving  to 
mankind  a revenue  infinitely  more  abundant,  a revenue  of  which  a considerable 
part  is  consumed  by  those  who  have  no  share  in  the  ownership  of  the  land, 
but  who  would  not  have  found  a maintenance  but  for  that  appropriation 
ot  the  soil  by  which  they  seem,  at  first  sight,  to  have  been  disinherited.” — 
Sismondi,  Etude  sur  VEconomie  Politique^  Troisieme  Essai,  De  la  Riohesse 
Territoriale. 


232 


BOOK  II.  CHAPTER  II.  § 6 


received  it.  But  the  position  of  the  owner  of  a deeply  mortgaged 
estate  is  so  precarious  ; economy  is  so  unwelcome  to  one  whose 
apparent  fortune  greatly  exceeds  his  real  means,  and  the  vicissitudes 
of  rent  and  price,  which  only  trench  upon  the  margin  of  his  income, 
are  so  formidable  to  one  who  can  call  little  more  than  the  margin  his 
own,  that  it  is  no  wonder  if  few  landlords  find  themselves  in  a 
condition  to  make  immediate  sacrifices  for  the  sake  of  future  profit. 
Were  they  ever  so  much  inclined,  those  alone  can  prudently  do  it, 
who  have  seriously  studied  the  principles  of  scientific  agriculture  : 
and  great  landlords  have  seldom  seriously  studied  anything.  They 
might  at  least  hold  out  inducements  to  the  farmers  to  do  what 
they  will  not  or  cannot  do  themselves  ; but  even  in  granting  leases, 
it  is  in  England  a general  complaint  [1848]  that  they  tie  up  their 
tenants  by  covenants  grounded  on  the  practices  of  an  obsolete 
and  exploded  agriculture ; while  most  of  them,  by  withholding 
leases  altogether,  and  giving  the  farmer  no  guarantee  of  possession 
beyond  a single  harvest,  keep  the  land  on  a footing  little  more 
favourable  to  improvement  than  in  the  time  of  our  barbarous 
ancestors, 

immetata  quibus  jugera  liberas 

Fruges  et  Cererem  ferunt, 

Neo  cultura  placet  longior  annua. 

Landed  property  in  England  is  thus  very  far  from  completely 
fulfilling  the  conditions  which  render  its  existence  economically 
justifiable.  But  if  insuflSciently  realized  even  in  England,  in  Ireland 
those  conditions  are  [1848]  not  complied  with  at  all.  With  individual 
exceptions  (some  of  them  very  honourable  ones),  the  owners  of 
Irish  estates  do  nothing  for  the  land  but  drain  it  of  its  produce. 
What  has  been  epigrammatically  said  in  the  discussions  on  “ peculiar 
burthens  ” is  literally  true  when  applied  to  them,  that  the  greatest 
“ burthen  on  land  ” is  the  landlords.  Returning  nothing  to  the 
soil,  they  consume  its  whole  produce,  minus  the  potatoes  strictly 
necessary  to  keep  the  inhabitants  from  dying  of  famine  ; and  when 
they  have  any  purpose  of  improvement,  the  preparatory  step 
usually  consists  in  not  leaving  even  this  pittance,,  but  turning  out 
the  people  to  beggary  if  not  to  starvation.*  When  landed  property 

* [1862]  I must  beg  the  reader  to  bear  in  mind  that  this  paragraph  was 
written  fifteen  years  ago.  So  wonderful  are  the  changes,  both  moral  and 
economical,  taking  place  in  our  age,  that,  without  perpetually  re-writing  a 
work  like  the  present,  it  is  impossible  to  keep  up  with  them.  [In  ed.  1866, 
“ eighteen  years  in  ed.  1871,  “ more  than  twenty.”] 


PROPERTY  IN  LAND 


233 


has  placed  itself  upon  this  footing  it  ceases  to  be  defensible,  and 
the  time  has  come  for  making  some  new  arrangement  of  the  matter. 

When  the  “ sacredness  of  property  ” is  talked  of,  it  should  always 
be  remembered,  that  any  such  sacredness  does  not  belong  in  the  same 
degree  to  landed  property.  No  man  made  the  land.  It  is  the 
original  inheritance  of  the  whole  species.  Its  appropriation  is  wholly  a 
question  of  general  expediency.  When  private  property  in  land  is  not 
expedient,  it  is  unjust.^  It  is  no  hardship  to  any  one  to  be  excluded 
from  what  others  have  produced  : they  were  not  bound  to  produce 
it  for  his  use,  and  he  loses  nothing  by  not  sharing  in  what  otherwise 
would  not  have  existed  at  all.  But  it  is  some  hardship  to  be  born 
into  the  world  and  to  find  all  nature’s  gifts  previously  engrossed, 
and  no  place  left  for  the  new-comer.  To  reconcile  people  to  this, 
after  they  have  once  admitted  into  their  minds  the  idea  that  any 
moral  rights  belong  to  them  as  human  beings,  it  will  always  be 
necessary  to  convince  them  that  the  exclusive  appropriation  is 
good  for  mankind  on  the  whole,  themselves  included.  But  this  is 
what  no  sane  human  being  could  be  persuaded  of,  if  the  relation 
between  the  landowner  and  the  cultivator  were  the  same  everywhere 
as  it  has  been  in  Ireland. 

Landed  property  is  felt,  even  by  those  most  tenacious  of  its 
rights,  to  be  a different  thing  from  other  property ; and  where  the 
bulk  of  the  community  have  been  disinherited  of  their  share  of  it, 
and  it  has  become  the  exclusive  attribute  of  a small  minority,  men 
have  generally  tried  to  reconcile  it,  at  least  in  theory,  to  their  sense 
of  justice,  by  endeavouring  to  attach  duties  to  it,  and  erecting 
it  into  a sort  of  magistracy,  either  moral  or  legal.  But  if  the  state 
is  at  hberty  to  treat  the  possessors  of  land  as  public  functionaries,  it 
is  only  going  one  step  further  to  say  that  it  is  at  liberty  to  discard 
them.  The  claim  of  the  landowners  to  the  land  is  altogether 
subordinate  to  the  general  policy  of  the  state.  The  principle  of  pro- 
perty gives  them  no  right  to  the  land,  but  only  a right  to  compensation 
for  what  ever  portion  of  their  interest  in  the  land  it  may  be  the  policy 
of  the  state  to  deprive  them  of.  To  that,  their  claim  is  indefeasible. 
It  is  due  to  landowners,  and  to  owners  of  any  property  whatever, 
recognised  as  such  by  the  state,  that  they  should  not  be  dispossessed 
of  it  without  receiving  its  pecuniary  value,  or  an  annual  income 
equal  to  what  they  derived  from  it.  This  is  due  on  the  general 

* [This,  and  the  previous  sentence  replaced  in  the  3rd  ed.  (1852)  the  original 
text : “ Public  reasons  exist  for  its  being  appropriated.  But  if  those  reasons 
lost  their  force,  the  thing  would  be  unjust.”] 


234 


BOOK  II.  CHAPTER  II.  § 6 


principles  on  which  property  rests.  If  the  land  was  bought  with  the 
produce  of  the  labour  and  abstinence  of  themselves  or  their  ancestors, 
compensation  is  due  to  them  on  that  ground ; even  if  otherwise, 
it  is  still  due  on  the  ground  of  prescription.  Nor  can  it  ever  be 
necessary  for  accomplishing  an  object  by  which  the  community 
altogether  will  gain,  that  a particular  portion  of  the  community 
should  be  immolated.  When  the  property  is  of  a kind  to  which 
peculiar  affections  attach  themselves,  the  compensation  ought  to 
exceed  a bare  pecuniary  equivalent.  But,  subject,  to  this  proviso, 
the  state  is  at  hberty  to  deal  with  landed  property  as  the  general 
interests  of  the  community  may  require,  even  to  the  extent,  if  it 
so  happen,  of  doing  with  the  whole,  what  is  done  with  a part  when- 
ever a bill  is  passed  for  a railroad  or  a new  street.^  The  com- 
munity has  too  much  at  stake  in  the  proper  cultivation  of  the  land, 
and  in  the  conditions  annexed  to  the  occupancy  of  it,  to  leave 
these  things  to  the  discretion  of  a class  of  persons  called  landlords, 
when  they  have  shown  themselves  unfit  for  the  trust.  The  legisla- 
ture, which  if  it  pleased  might  convert  the  whole  body  of  landlords 
into  fundholders  or  pensioners,  might,  a fortiori,  commute  the 
average  receipts  ot  Irish  landowners  into  a fixed  rent  charge,  and 
raise  the  tenants  into  proprietors  ; supposing  always  ^ that  the  fuU 
market  value  of  the  land  was  tendered  to  the  landlords,  in  case  they 
preferred  that  to  accepting  the  conditions  proposed. 

There  will  be  another  place  for  discussing  the  various  modes  of 
landed  property  and  tenure,  and  the  advantages  and  inconveniences 
of  each ; in  this  chapter  our  concern  is  with  the  right  itself,  the 
grounds  which  justify  it,  and  ^as  a corollary  from  these)  the  condi- 
tions by  which  it  should  be  limited.  To  me  it  seems  almost  an 
axiom  that  property  in  land  should  be  interpreted  strictly,  and  that 
the  balance  in  all  cases  of  doubt  should  incline  against  the  proprietor. 
The  reverse  is  the  case  with  property  in  moveables,  and  in  all  things 
the  product  of  labour . over  these,  the  owner’s  power  both  of  use 
and  ot  exclusion  should  be  absolute,  except  where  positive  evil 

1 [In  the  3rd  ed.  the  following  passage  of  the  original  was  here  omitted  : 
“ I do  not  pretend  that  occasions  can  often  arise  on  which  so  drastic  a measure 
would  be  fit  to  be  taken  into  serious  consideration.  But  even  if  this  ultimate 
prerogative  of  the  state  should  never  require  to  be  actually  exercised,  it  ought 
nevertheless  to  be  asserted,  because  the  principle  which  permits  the  greater  of 
two  things  permits  the  less,  and  though  to  do  all  which  the  principle  would 
sanction  should  never  be  advisable,  to  do  much  less  than  all  not  only  may  be 
so,  but  often  is  so  in  a very  high  degree.”  ] 

2 [The  parenthesis  “ (without  which  these  acts  would  be  nothing  better 
than  robbery)  ” was  omitted  from  the  3rd  ed.  (1852).] 


PROPERTY  IN  LAND 


235 


to  others  would  result  from  it : but  in  the  case  of  land,  no  exclusive 
right  should  be  permitted  in  any  individual,  which  cannot  be  shown 
to  be  productive  of  positive  good.  To  be  allowed  any  exclusive 
right  at  all,  over  a portion  of  the  common  inheritance,  while  there 
are  others  who  have  no  portion,  is  already  a privilege.  No  quantity 
of  moveable  goods  which  a person  can  acquire  by  his  labour,  prevents 
others  from  acquiring  the  like  by  the  same  means ; but  from  the 
very  nature  of  the  case,  whoever  owns  land,  keeps  others  out  of  the 
enjoyment  of  it.  The  privilege,  or  monopoly,  is  only  defensible  as  a 
necessary  evil ; it  becomes  an  injustice  when  carried  to  any  point 
to  which  the  compensating  good  does  not  follow  it. 

For  instance,  the  exclusive  right  to  the  land  for  purposes  of 
cultivation  does  not  imply  an  exclusive  right  to  it  for  purposes 
of  access ; and  no  such  right  ought  to  be  recognised,  except  to  the 
extent  necessary  to  protect  the  produce  against  damage,  and  the 
owner’s  privacy  against  invasion.  The  pretension  of  two  Dukes 
[1848]  to  shut  up  a part  of  the  Highlands,  and  exclude  the  rest  of 
mankind  from  many  square  miles  of  mountain  scenery  to  prevent 
disturbance  to  wild  animals,  is  an  abuse ; it  exceeds  the  legitimate 
bounds  of  the  right  of  landed  property.  When  land  is  not  intended 
to  be  cultivated,  no  good  reason  can  in  general  be  given  for  its  being 
private  property  at  all ; and  if  any  one  is  permitted  to  call  it  his, 
he  ought  to  know  that  he  holds  it  by  sufferance  of  the  community,  and 
on  an  implied  condition  that  his  ownership,  since  it  cannot  possibly 
do  them  any  good,  at  least  shall  not  deprive  them  of  any,  which 
they  could  have  derived  from  the  land  if  it  had  been  unappropriated. 
Even  in  the  case  of  cultivated  land,  a man  whom,  though  only  one 
among  millions,  the  law  permits  to  hold  thousands  of  acres  as  his 
single  share,  is  not  entitled  to  think  that  all  this  is  given  to  him 
to  use  and  abuse,  and  deal  with  as  if  it  concerned  nobody  but  himself. 
The  rents  or  profits  which  he  can  obtain  from  it  are  at  his  sole  dis- 
posal ; but  with  regard  to  the  land,  in  everything  which  he  does 
with  it,  and  in  everything  which  he  abstains  from  doing,  he  is  morally 
bound,  and  should  whenever  the  case  admits  be  legally  compelled, 
to  make  his  interest  and  pleasure  consistent  with  the  pubhc  good. 
The  species  at  large  still  retains,  of  its  original  claim  to  the  soil  of 
the  planet  which  it  inhabits,  as  much  as  is  compatible  with  the 
purposes  for  which  it  has  parted  with  the  remainder. 

§ 7.  Besides  property  in  the  produce  of  labour,  and  property 
in  land,  there  are  other  things  which  are  or  have  been  subjects  of 


BOOK  II.  CHAPTER  II.  § 7 


property,  in  wliicli  no  proprietary  rights  ought  to  exist  at  all.  But 
as  the  civilized  world  has  in  general  made  up  its  mind  on  most 
of  these,  there  is  no  necessity  for  dwelling  on  them  in  this  place. 
At  the  head  of  them,  is  property  in  human  beings.  It  is  almost 
superfluous  to  observe,  that  this  institution  can  have  no  place  in 
any  society  even  pretending  to  be  founded  on  justice,  or  on  fellow- 
ship between  human  creatures.  But,  iniquitous  as  it  is,  yet  when 
the  state  has  expressly  legalized  it,  and  human  beings  for  generations 
have  been  bought,  sold,  and  inherited  under  sanction  of  law,  it  if 
another  wrong,  in  abohshing  the  property,  not  to  make  full  compen- 
sation. This  wrong  was  avoided  by  the  great  measure  of  justice 
in  1833,  one  of  the  most  virtuous  acts,  as  well  as  the  most  practically 
beneficent,  ever  done  collectively  by  a nation.  Other  examples  of 
property  which  ought  not  to  have  been  created  are  properties  in 
public  trusts  ; such  as  judicial  offices  under  the  old  French  regime, 
and  the  heritable  jurisdictions  which,  in  countries  not  wholly 
emerged  from  feudality,  pass  with  the  land.  Our  own  country 
affords,  as  cases  in  point,  that  of  a commission  in  the  army  [1848], 
and  of  an  advowson,  or  right  of  nomination  to  an  ecclesiastical 
benefice.  A property  is  also  sometimes  created  in  a right  of  taxing 
the  public  ; in  a monopoly,  for  instance,  or  other  exclusive  privilege. 
These  abuses  prevail  most  in  semibarbarous  countries,  but  are  not 
without  example  in  the  most  civilized.  In  France  there  are 
[1848]  several  important  trades  and  professions,  including  notaries, 
attorneys,  brokers,  appraisers,  printers,  and  (until  lately)  ^ bakers  and 
butchers,  of  which  the  numbers  are  limited  by  law.  The  hrevet 
or  privilege  of  one  of  the  permitted  number  consequently  brings  a 
high  price  in  the  market.  When  such  is  the  case,  compensation 
probably  could  not  with  justice  be  refused,  on  the  abolition  of  the 
privilege.  There  are  other  cases  in  which  this  would  be  more  doubt- 
ful. The  question  would  turn  upon  what,  in  the  peculiar  circum- 
stances, was  sufficient  to  constitute  prescription ; and  whether 
the  legal  recognition  which  the  abuse  had  obtained,  was  sufficient 
to  constitute  it  an  institution,  or  amounted  only  to  an  occasional 
licence.  It  would  be  absurd  to  claim  compensation  for  losses  caused 
by  changes  in  a tariff,  a thing  confessedly  variable  from  year  to  year ; 
or  for  monopolies  like  those  granted  to  individuals  by  the  Tudors, 
favours  of  a despotic  authority,  which  the  power  that  gave  was 
competent  at  any  time  to  recall. 


^ [Parenthesis  added  in  6th  ed.  (1862).] 


PROPERTY  IN  LAND 


237 


So  much  on  the  institution  of  property,  a subject  of  which,  for 
the  purposes  of  political  economy,  it  was  indispensable  to  treat, 
but  on  which  we  could  not  usefully  confine  ourselves  to  economical 
considerations.  We  have  now  to  inquire  on  what  principles  and 
with  what  results  the  distribution  of  the  produce  of  land  and  labour 
is  effected,  under  the  relations  which  this  institution  creates  among 
the  different  members  of  the  community. 


CHAPTER  m 


OF  THE  CLASSES  AMONG  WHOM  THE  PRODUCE  18  DISTRIBUTED 

§ 1.  Private  property  being  assumed  as  a fact,  we  have 
next  to  enumerate  the  diJSerent  classes  of  persons  to  whom  it  gives 
rise  : whose  concurrence,  or  at  least  whose  permission,  is  necessary 
to  production,  and  who  are  therefore  able  to  stipulate  for  a share  of 
the  produce.  We  have  to  inquire,  according  to  what  laws  the  pro- 
duce distributes  itself  among  these  classes,  by  the  spontaneous  action 
of  the  interests  of  those  concerned  : after  which,  a further  question 
will  be,  what  effects  are  or  might  be  produced  by  laws,  institutions, 
and  measures  of  government,  in  superseding  or  modifying  that 
spontaneous  distribution. 

The  three  requisites  of  production,  as  has  been  so  often  repeated, 
are  labour,  capital,  and  land  : imderstanding  by  capital,  the  meano 
and  appliances  which  are  the  accumulated  results  of  previous  labour, 
and  by  land,  the  materials  and  instruments  supphed  by  nature, 
whether  contained  in  the  interior  of  the  earth,  or  constituting  its 
surface.  Since  each  of  these  elements  of  production  may  be 
separately  appropriated,  the  industrial  community  may  be  con- 
sidered as  divided  into  landowners,  capitahsts,  and  productive 
labourers.  Each  of  these  classes,  as  such,  obtains  a share  of  the 
produce  : no  other  person  or  class  obtains  anything  except  by 
concession  from  them.  The  remainder  of  the  community  is,  in  fact, 
supported  at  their  expense,  giving,  if  any  equivalent,  one  consisting 
of  unproductive  services.  These  three  classes,  therefore,  are 
considered  in  political  economy  as  making  up  the  whole  community. 

§ 2.  But  although  these  three  sometimes  exist  as  separate 
classes,  dividing  the  produce  among  them,  they  do  not  necessarily 
or  always  so  exist.  The  fact  is  so  much  otherwise,  that  there  are  only 
one  or  two  communities  in  which  the  complete  separation  of  these 
plasses  is  the  general  rule,  England  and  Scotland,  with  parts 


CLASSES  WHO  DIVIDE  THE  PRODUCE 


23l) 

of  Belgium  and  Holland,  are  almost  the  only  countries  in  the  world, 
where  the  land,  capital,  and  labour  employed  in  agriculture  are 
generally  the  property  of  separate  owners.  The  ordinary  case  is, 
that  the  same  person  owns  either  two  of  these  requisites,  or  all  three. 

The  case  in  which  the  same  person  owns  all  three,  embraces  the 
two  extremes  of  existing  society,  in  respect  to  the  independence  and 
dignity  of  the  labouring  class.  First,  when  the  labourer  himself  is 
the  proprietor.  This  is  the  commonest  case  in  the  Northern  States 
of  the  American  Union  ; one  of  the  commonest  in  France,  Switzer- 
land, the  three  Scandinavian  kingdoms,  and  parts  of  Germany ; * 
and  a common  case  in  parts  of  Italy  and  in  Belgium.  In  all  these 
countries  there  are,  no  doubt,  large  landed  properties,  and  a still 
greater  number  which,  without  being  large,  require  the  occasional 
or  constant  aid  of  hired  labourers.  Much,  however,  of  the  land  is 
owned  in  portions  too  small  to  require  any  other  labour  than  that 
of  the  peasant  and  his  family  or  fully  to  occupy  even  that.  The 
capital  employed  is  not  always  that  of  the  peasant  proprietor,  many 
of  these  small  properties  being  mortgaged  to  obtain  the  means 
of  cultivating ; but  the  capital  is  invested  at  the  peasant’s  risk, 
and  though  he  pays  interest  for  it,  it  gives  to  no  one  any  right  of 
interference,  except,  perhaps,  eventually  to  take  possession  of  tha 
land,  if  the  interest  ceases  to  be  paid. 

The  other  case  in  which  the  land,  labour,  and  capital,  belong 
to  the  same  person,  is  the  case  of  slave  countries,  in  which  the 

* The  Norwegian  return  (say  the  Commissioners  of  Poor  Law  Enquiry, 
to  whom  information  was  furnished  from  nearly  every  country  in  Europe  and 
America  by  the  ambassadors  and  consuls  there)  “ states  that  at  the  last  census  in 
1825,  out  of  a population  of  1,051,318  persons,  there  were  59,464  freeholders. 
As  by  59,464  freeholders  must  be  meant  59,464  heads  of  families,  or  about 
300,000  individuals,  the  freeholders  must  form  more  than  a fourth  of  the  whole 
population.  Mr.  Macgregor  states  that  in  Denmark  (by  which  Zealand  and 
the  adjoining  islands  are  probably  meant)  out  of  a population  of  926,110,  the 
number  of  landed  proprietors  and  farmers  is  415,110,  or  nearly  one-half.  In 
Sles wick- Holstein,  out  of  a population  of  604,085,  it  is  196,017,  or  about  one- 
third.  The  proportion  of  proprietors  and  farmers  to  the  whole  population  is 
not  given  in  Sweden  ; but  the  Stockholm  return  estimates  the  average  quantity 
of  land  annexed  to  a labourer’s  habitation  at  from  one  to  five  acres  ; and  though 
the  Gottenburg  return  gives  a lower  estimate,  it  adds  that  the  peasants  possess 
much  of  the  land.  In  Wurtemburg  we  are  told  that  more  than  two- thirds  of 
the  labouring  population  are  the  proprietors  of  their  own  habitations,  and  that 
almost  all  own  at  least  a garden  of  from  three-quarters  of  an  acre  to  an  acre 
and  a half.”  In  some  of  these  statements,  proprietors  and  farmers  are  not  dis- 
criminated ; but  “ all  the  returns  concur  in  stating  the  number  of  day-labourers 
to  be  very  small.” — {Preface  to  Foreign  Communications ^ p.  xxxviii.)  As  the 
general  status  of  the  labouring  people,  the  condition  of  a workman  for  hire  is 
[1848]  almost  peculiar  to  Great  Britain. 


240 


BOOK  II.  CHAPTER  III.  § 3 


labourers  themselves  are  owned  by  the  landowner.  Our  Wesi  India 
colonies  before  emancipation,  and  the  sugar  colonies  of  the  nations 
by  whom  a similar  act  of  justice  is  still  unperformed  [1848],  are 
examples  of  large  establishments  for  agricultural  and  manufacturing 
labour  (the  production  of  sugar  and  rum  is  a combination  of  both) 
in  which  the  land,  the  factories  (if  they  may  be  so  called),  the 
machinery,  and  the  degraded  labourers,  are  all  the  property  of  a 
capitalist.  In  this  case,  as  well  as  in  its  extreme  opposite,  the  case  of 
the  peasant  proprietor,  there  is  no  division  of  the  produce. 

§ 3.  When  the  three  requisites  are  not  all  owned  by  the  same 
person,  it  often  happens  that  two  of  them  are  so.  Sometimes  the 
same  person  owns  the  capital  and  the  land,  but  not  the  labour.  The 
landlord  makes  his  engagement  directly  with  the  labourer,  and  sup- 
plies the  whole  or  part  of  the  stock  necessary  for  cultivation.  This 
system  is  the  usual  one  in  those  parts  of  Continential  Europe,  in 
which  the  labourers  are  neither  serfs  on  the  one  hand,  nor  proprietors 
on  the  other.  It  was  very  common  in  France  before  the  Revolution, 
and  is  still  much  practised  in  some  parts  of  that  country,  when  the 
land  is  not  the  property  of  the  cultivator.  It  prevails  generally  in 
the  level  districts  of  Italy,  except  those  principally  pastoral,  such 
as  the  Maremma  of  Tuscany  and  the  Campagna  of  Rome.  On  this 
system  the  division  of  the  produce  is  between  two  classes,  the 
landowner  and  the  labourer. 

In  other  cases  again,  the  labourer  does  not  own  the  land,  but 
owns  the  little  stock  employed  on  it,  the  landlord  not  being  in 
the  habit  of  supplying  any.  This  system  generally  prevails  [1848] 
in  Ireland.  It  is  nearly  universal  in  India,  and  in  most  countries 
of  the  East ; whether  the  government  retains,  as  it  generally  does, 
the  ownership  of  the  soil,  or  allows  portions  to  become,  either 
absolutely  or  in  a qualified  sense,  the  property  of  individuals.  In 
India,  however,  things  are  so  far  better  than  in  Ireland,  that  the 
owner  of  land  is  in  the  habit  of  making  advances  to  the  cultivators, 
if  they  cannot  cultivate  without  them.  For  these  advances  the 
native  landed  proprietor  usually  demands  high  interest ; but  the 
principal  landowner,  the  government,  makes  them  gratuitously, 
recovering  the  advance  after  the  harvest,  together  with  the  rent. 
The  produce  is  here  divided  as  before,  between  the  same  two  classes, 
the  landowner  and  the  labourer. 

These  are  the  principal  variations  in  the  classification  of  those 
among  whom  the  produce  of  agricultural  labour  is  distributed.  In 


CLASSES  WHO  DIVIDE  THE  PRODUCE 


241 


the  case  of  manufacturing  industry  there  never  are  more  than  two 
classes,  the  labourers  and  the  capitalists.  The  original  artisans 
in  all  countries  were  either  slaves,  or  the  women  of  the  family. 
In  the  manufacturing  establishments  of  the  ancients,  whether  on 
a large  or  on  a small  scale,  the  labourers  were  usually  the  property 
of  the  capitalist.  In  general,  if  any  manual  labour  was  thought 
compatible  with  the  dignity  of  a freeman,  it  was  only  agricultural 
labour.  The  converse  system,  in  which  the  capital  was  owned 
by  the  labourer,  was  coeval  with  free  labour,  and  under  it  the  first 
great  advances  of  manufacturing  industry  were  achieved.  The 
artisan  owned  the  loom  or  the  few  tools  he  used,  and  worked  on  his 
own  account ; or  at  least  ended  by  doing  so,  though  he  usually 
worked  for  another,  first  as  apprentice  and  next  as  journeyman, 
for  a certain  number  of  years,  before  he  could  be  admitted  a master. 
But  the  status  of  a permanent  journeyman,  all  his  life  a hired  labourer 
and  nothing  more,  had  no  place  in  the  crafts  and  guilds  of  the 
Middle  Ages.  In  country  villages,  where  a carpenter  or  a black- 
smith cannot  live  and  support  hired  labourers  on  the  returns  of 
his  business,  he  is  even  now  his  own  workman  ; and  shopkeepers  in 
similar  circumstances  are  their  own  shopmen  or  shop  women.  But 
wherever  the  extent  of  the  market  admits  of  it,  the  distinction  is 
now  fully  established  between  the  class  of  capitalists,  or  employers 
of  labour,  and  the  class  of  labourers ; the  capitahsts,  in  general, 
contributing  no  other  labour  than  that  of  direction  and  superin- 
tendence. 


CHAPTER  IV 


OF  COMPETITION  AND  CUSTOM 

§ 1.  Under  the  rule  of  individual  property,  the  division  of 
the  produce  is  the  result  of  two  determining  agencies  : Competition 
and  Custom.  It  is  important  to  ascertain  the  amount  of  influence 
which  belongs  to  each  of  these  causes,  and  in  what  manner  the 
operation  of  one  is  modified  by  the  other. 

Political  economists  generally,  and  English  political  economists 
above  others,  have  been  accustomed  to  lay  almost  exclusive  stress 
upon  the  first  of  these  agencies  ; to  exaggerate  the  efiect  of  com- 
petition, and  to  take  into  little  account  the  other  and  conflicting 
principle.  They  are  apt  to  express  themselves  as  if  they  thought 
that  competition  actually  does,  in  all  cases,  whatever  it  can  be 
shown  to  be  the  tendency  of  competition  to  do.  This  is  partly 
intelligible,  if  we  consider  that  only  through  the  principle  of  com- 
petition has  political  economy  any  pretension  to  the  character 
of  a science.  So  far  as  rents,  profits,  wages,  prices,  are  determined 
by  competition,  laws  may  be  assigned  for  them.  Assume  com- 
petition to  be  their  exclusive  regulator,  and  principles  of  broad 
generality  and  scientific  precision  may  be  laid  down,  according  to 
which  they  will  be  regulated.  The  political  economist  justly 
deems  this  his  proper  business  : and  as  an  abstract  or  hypothetical 
science,  political  economy  cannot  be  required  to  do,  and  indeed  cannot 
do,  anything  more.  But  it  would  be  a great  misconception  of  the 
actual  course  of  human  affairs,  to  suppose  that  competition  exercises 
in  fact  this  unlimited  sway.  I am  not  speaking  of  monopohes, 
either  natural  or  artificial,  or  of  any  interferences  of  authority  with 
the  liberty  of  production  or  exchange.  Such  disturbing  causes 
have  always  been  allowed  for  by  political  economists.  I speak 
of  cases  in  which  there  is  nothing  to  restrain  competition ; no 
hindrance  to  it  either  in  the  nature  of  the  case  or  in  artificial  ob- 
stacles ; yet  in  which  the  result  is  not  determined  by  competition. 


-J 


COMPETITION  AND  CUSTOM 


243 


but  by  custom  or  usage  ; competition  either  not  taking  place  at  all, 
or  producing  its  effect  in  quite  a different  manner  from  that  which 
is  ordinarily  assumed  to  be  natural  to  it. 

§ 2.  Competition,  in  fact,  has  only  become  in  any  considerable 
degree  the  governing  principle  of  contracts,  at  a comparatively 
modern  period.  The  farther  we  look  back  into  history,  the  more 
we  see  all  transactions  and  engagements  under  the  influence  of 
fixed  customs.  The  reason  is  evident.  Custom  is  the  most  powerful 
protector  of  the  weak  against  the  strong  : their  sole  protector  where 
there  are  no  laws  or  government  adequate  to  the  purpose.  Custom 
is  a barrier  which,  even  in  the  most  oppressed  condition  of  mankind, 
tyranny  is  forced  in  some  degree  to  respect.  To  the  industrious 
population,  in  a turbulent  military  community,  freedom  of  com- 
petition is  a vain  phrase ; they  are  never  in  a condition  to  make 
terms  for  themselves  by  it : there  is  always  a master  who  throws 
his  sword  into  the  scale,  and  the  terms  are  such  as  he  imposes. 
But  though  the  law  of  the  strongest  decides,  it  is  not  the  interest 
nor  in  general  the  practice  of  the  strongest  to  strain  that  law  to  the 
utmost,  and  every  relaxation  of  it  has  a tendency  to  become  a 
custom,  and  every  custom  to  become  a right.  Eights  thus  originat- 
ing, and  not  competition  in  any  shape,  determine,  in  a rude  state 
of  society,  the  share  of  the  produce  enjoyed  by  those  who  produce 
it.  The  relations,  more  especially,  between  the  landowner  and 
the  cultivator,  and  the  payments  made  by  the  latter  to  the  former, 
are,  in  all  states  of  society  but  the  most  modern,  determined  by 
the  usage  of  the  country.  Never  until  late  times  have  the  con- 
ditions of  the  occupancy  of  land  been  (as  a general  rule)  an  affair 
of  competition.  The  occupier  for  the  time  has  very  commonly 
been  considered  to  have  a right  to  retain  his  holding,  while  he 
fulfils  the  customary  requirements ; and  has  thus  become,  in  a 
certain  sense,  a co-proprietor  of  the  soil.  Even  where  the  holder 
has  not  acquired  this  fixity  of  tenure,  the  terms  of  occupation 
have  often  been  fixed  and  invariable. 

In  India,  for  example,  and  other  Asiatic  commimities  similarly 
constituted,  the  ryots,  or  peasant-farmers,  are  not  regarded  as 
tenants  at  will,  nor  even  as  tenants  by  virtue  of  a lease.  In  most 
villages  there  are  indeed  some  ryots  on  this  precarious  footing, 
consisting  of  those,  or  the  descendants  of  those,  who  have  settled 
in  the  place  at  a known  and  comparatively  recent  period  : but  all 
who  are  looked  upon  as  descendants  or  representatives  of  the  original 


244 


BOOK  II.  CHAPTER  IV.  § 2 


inhabitants,  and  even  many  mere  tenants  of  ancient  date,  are 
thought  entitled  to  retain  their  land,  as  long  as  they  pay  the  custo- 
mary rents.  What  these  customary  rents  are,  or  ought  to  be,  has 
indeed,  in  most  cases,  become  a matter  of  obscurity ; usurpation, 
tyranny,  and  foreign  conquest  having  to  a great  degree  obliterated 
the  evidences  of  them.  But  when  an  old  and  purely  Hindoo  prin- 
cipality falls  under  the  dominion  of  the  British  Government,  or 
the  management  of  its  officers,  and  when  the  details  of  the  revenue 
system  come  to  be  inquired  into,  it  is  usually  found  that-  though  the 
demands  of  the  great  landholder,  the  State,  have  been  swelled  by 
fiscal  rapacity  until  all  limit  is  practically  lost  sight  of,  it  has  yet 
been  thought  necessary  to  have  a distinct  name  and  a separate 
pretext  for  each  increase  of  exaction ; so  that  the  demand  has 
sometimes  come  to  consist  of  thirty  or  forty  different  items,  in 
addition  to  the  nominal  rent.  This  circuitous  mode  of  increasing 
the  payments  assuredly  would  not  have  been  resorted  to,  if  there 
had  been  an  acknowledged  right  in  the  landlord  to  increase  the  rent. 
Its  adoption  is  a proof  that  there  was  once  an  effective  limitation, 
a real  customary  rent ; and  that  the  understood  right  of  the  ryot  to 
the  land,  so  long  as  he  paid  rent  according  to  custom,  was  at  some 
time  or  other  more  than  nominal.*  The  British  Government  of 
India  always  simplifies  the  tenure  by  consolidating  the  various 
assessments  into  one,  thus  making  the  rent  nominally  as  well  as 
really  an  arbitrary  thing,  or  at  least  a matter  of  specific  agreement : 
but  it  scrupulously  respects  the  right  of  the  ryot  to  the  land,  though 
until  the  reforms  of  the  present  generation  (reforms  even  now 
only  partially  carried  into  effect)  it  seldom  left  him  much  more  than 
a bare  subsistence.^ 

In  modern  Europe  the  cultivators  have  gradually  emerged  from 
a state  of  personal  slavery.  The  barbarian  conquerors  of  the 
Western  Empire  found  that  the  easiest  mode  of  managing  their 
conquests  would  be  to  leave  the  occupation  of  the  land  in  the  hands 
in  which  they  found  it,  and  to  save  themselves  a labour  so  uncon- 
genial as  the  superintendence  of  troops  of  slaves,  by  allowing  the 
slaves  to  retain  in  a certain  degree  the  control  of  their  own  actions, 
under  an  obligation  to  furnish  the  lord  with  provisions  and  labour, 

♦ The  ancient  law  books  of  the  Hindoos  mention  in  some  cases  one-sixth, 
in  others  one-fourth  of  the  produce,  as  a proper  rent ; but  there  is  no  evidence 
that  the  rules  laid  down  in  those  books  were,  at  any  period  of  history,  really 
acted  upon. 

^ [So  since  the  6th  ed.  (1865).  The  original  (1848)  ran  : “ though  it  seldoin 
leaves  him  much  more  than  a bare  subsistence.”] 


COMPETITION  AND  CUSTOM 


245 


A common  expedient  was  to  assign  to  the  serf,  for  his  exclusive 
use,  as  much  land  as  was  thought  sufficient  for  his  support,  and  to 
make  him  work  on  the  other  lands  of  his  lord  whenever  required. 
By  degrees  these  indefinite  obligations  were  transformed  into  a 
definite  one,  of  supplying  a fixed  quantity  of  provisions  or  a fixed 
quantity  of  labour  : and  as  the  lords,  in  time,  became  inclined  to 
employ  their  income  in  the  purchase  of  luxuries  rather  than  in  the 
maintenance  of  retainers,  the  payments  in  kind  were  commuted  for 
payments  in  money.  Each  concession,  at  first  voluntary  and 
revocable  at  pleasure,  gradually  acquired  the  force  of  custom,  and 
was  at  last  recognised  and  enforced  by  the  tribunals.  In  this  manner 
the  serfs  progressively  rose  into  a free  tenantry,  who  held  their 
land  in  perpetuity  on  fixed  conditions.  The  conditions  were 
sometimes  very  onerous,  and  the  people  very  miserable.  But  their 
obligations  were  determined  by  the  usage  or  law  of  the  country, 
and  not  by  competition. 

Where  the  cultivators  had  never  been,  strictly  speaking,  in 
personal  bondage,  or  after  they  had  ceased  to  be  so,  the  exigencies  of  a 
poor  and  little  advanced  society  gave  rise  to  another  arrangement, 
which  in  some  parts  of  Europe,  even  highly  improved  parts,  has 
been  found  sufficiently  advantageous  to  be  continued  to  the  present 
day.  I speak  of  the  metayer  system.  Under  this,  the  land  is 
divided,  in  small  farms,  among  single  famihes,  the  landlord  generally 
supplying  the  stock  which  the  agricultural  system  of  the  country 
is  considered  to  require,  and  receiving,  in  lieu  of  rent  and  profit, 
a fixed  proportion  of  the  produce.  .This  proportion,  which  is 
generally  paid  in  kind,  is  usually,  (as  is  implied  in  the  words  mdayer^ 
mezzaiuolo,  and  medietarius,)  one-half.  There  are  places,  however, 
such  as  the  rich  volcanic  soil  of  the  province  of  Naples,  where  the 
landlord  takes  two-thirds,  and  yet  the  cultivator  by  means  of  an 
excellent  agriculture  contrives  to  live.  But  whether  the  proportion 
is  two-thirds  or  one-half,  it  is  a fixed  proportion,  not  variable 
from  farm  to  farm,  or  from  tenant  to  tenant.  The  custom  of  the 
country  is  the  universal  rule ; nobody  thinks  of  raising  or  lowering 
rents,  or  of  letting  land  on  other  than  the  customary  conditions. 
Competition,  as  a regulator  of  rent,  has  no  existence. 

§ 3.  Prices,  whenever  there  was  no  monopoly,  came  earher 
under  the  influence  of  competition,  and  are  much  more  universally 
subject  to  it,  than  rents  : but  that  influence  is  by  no  means,  even 
in  the  present  activity  of  mercantile  competition,  so  absolute  as  is 


246 


BOOK  II.  CHAPTER  IV.  § 3 


sometimes  assumed.  There  is  no  proposition  which  meets  us  in 
the  field  of  political  economy  oftener  than  this — that  there  cannot 
be  two  prices  in  the  same  market.  Such  undoubtedly  is  the  natural 
effect  of  unimpeded  competition  ; yet  every  one  knows  that  there 
are,  almost  always, ^ two  prices  in  the  same  market.  Not  only  are 
there  in  every  large  town,  and  in  almost  every  trade,  cheap  shops 
and  dear  shops,  but  the  same  shop  often  sells  the  same  article  at 
different  prices  to  different  customers  : and,  as  a general  rule, 
each  retailer  adapts  his  scale  of  prices  to  the  class  of  customers 
whom  he  expects.  The  wholesale  trade,  in  the  great  articles  of 
commerce,  is  really  under  the  dominion  of  competition.  There,  the 
buyers  as  well  as  sellers  are  traders  or  manufacturers,  and  thSir 
purchases  are  not  influenced  by  indolence  or  vulgar  finery,  nor 
depend  on  the  smaller  motives  of  personal  convenience,  but  are 
business  transactions.  In  the  wholesale  markets  therefore  it  is  true, 
as  a general  proposition,  that  there  are  not  two  prices  at  one  time 
for  the  same  thing  : there  is  at  each  time  and  place  a market  price, 
which  can  be  quoted  in  a price-current.  But  retail  price,  the  price 
paid  by  the  actual  consumer,  seems  to  feel  very  slowly  and  imper- 
fectly the  effect  of  competition  ; and  when  competition  does  exist, 
it  often,  instead  of  lowering  prices,  merely  divides  the  gains  of  the 
high  price  among  a greater  number  of  dealers.  Hence  it  is  that, 
of  the  price  paid  by  the  consumer,  so  large  a proportion  is  absorbed 
by  the  gains  of  retailers  ; and  any  one  who  inquires  into  the  amount 
which  reaches  the  hands  of  those  who  made  the  things  he  buys, 
will  often  be  astonished  at  its  smallness.  When  indeed  the  market, 
being  that  of  a great  city,  holds  out  a sufficient  inducement  to  large 
capitalists  to  engage  in  retail  operations,  it  is  generally  found  a 
better  speculation  to  attract  a large  business  by  underselling  others, 
than  merely  to  divide  the  field  of  employment  with  them.  This 
influence  of  competition  is  making  itself  felt  more  and  more  through 
the  principal  branches  of  retail  trade  in  the  large  towns  ; and  the 
rapidity  and  cheapness  of  transport,  by  making  consumers  less 
dependent  on  the  dealers  in  their  immediate  neighbourhood,  are 
tending  to  assimilate  more  and  more  the  whole  country  to  a large 
town : but  hitherto  [1848]  it  is  only  in  the  great  centres  of 
business  that  retail  transactions  have  been  chiefly,  or  even  much, 
determined,  by  competition.  Elsewhere  it  rather  acts,  when  it 
acts  at  all,  as  an  occasional  disturbing  influence ; the  habitual 
regulator  is  custom,  modified  from  time  to  time  by  notions  existing 
^ [Substituted  in  the  3rd  ed.  (1852)  for  the  original  “ very  often.”] 


COMPETITION  AND  CUSTOM 


247 


in  the  minds  of  purchasers  and  sellers  of  some  kind  of  equity  or 
justice. 

In  many  trades  the  terms  on  which  business  is  done  are  a matter 
of  positive  arrangement  among  the  trade,  who  use  the  means  they 
always  possess  of  making  the  situation  of  any  member  of  the  body, 
who  departs  from  its  fixed  customs,  inconvenient  or  disagreeable. 
It  is  well  known  that  the  bookselling  trade  was,  until  lately,  one  of 
these,  and  that  notwithstanding  the  active  spirit  of  rivalry  in  the 
trade,  competition  did  not  produce  its  natural  effect  in  breaking 
down  the  trade  rules.i  All  professional  remuneration  is  regulated 
by  custom.  The  fees  of  physicians,  surgeons,  and  barristers,  the 
charges  of  attorneys,  are  nearly  invariable.  Not  certainly  for  want 
of  abundant  competition  in  those  professions,  but  because  the 
competition  operates  by  diminishing  each  competitor’s  chance  of 
fees,  not  by  lowering  the  fees  themselves. 

Since  custom  stands  its  ground  against  competition  to  so  con- 
siderable an  extent,  even  where,  from  the  multitude  of  competitors 
and  the  general  energy  in  the  pursuit  of  gain,  the  spirit  of  competition 
is  strongest,  we  may  be  sure  that  tliis  is  much  more  the  case  where 
people  are  content  with  smaller  gains,  and  estimate  their  pecuniary 
interest  at  a lower  rate  when  balanced  against  their  ease  or  their 
pleasure.  I believe  it  will  often  be  found,  in  Continental  Europe, 
that  prices  and  charges,  of  some  or  of  all  sorts,  are  much  higher  in 
some  places  than  in  others  not  far  distant,  without  its  being  possible 
to  assign  any  other  cause  than  that  it  has  always  been  so  : the 
customers  are  used  to  it,  and  acquiesce  in  it.  An  enterprising 
competitor,  with  sufficient  capital,  might  force  down  the  charges, 
and  make  his  fortune  during  the  process ; but  there  are  no  enter* 
prising  competitors ; those  who  have  capital  prefer  to  leave  it 
where  it  is,  or  to  make  less  profit  by  it  in  a more  quiet  way 

These  observations  must  be  received  as  a general  correction  to 
be  apphed  whenever  relevant,  whether  expressly  mentioned  or  not, 
to  the  conclusions  contained  in  the  subsequent  portions  of  this 
treatise.  Our  reasonings  must,  in  general,  proceed  as  if  the  known 
and  natural  effects  of  competition  were  actually  produced  by  it,  in 
all  cases  in  which  it  is  not  restrained  by  some  positive  obstacle. 
Where  competition,  though  free  to  exist,  does  not  exist,  or  where  it 
exists,  but  has  its  natural  consequences  overruled  by  any  other 
agency,  the  conclusions  will  fail  more  or  less  of  being  applicable. 

^ [Until  the  4th  ed.  (1857)  the  text  ran  : “ the  bookselling  trade  is  one  of 
these  . . . competition  does  not  produce  ” &c.] 


248 


BOOK  II.  CHAPTER  IV.  § 3 


To  escape  error,  we  ought,  in  applying  the  conclusions  of  political 
economy  to  the  actual  affairs  of  life,  to  consider  not  only  what  will 
happen  supposing  the  maximum  of  competition,  but  how  far  the 
result  will  be  affected  if  competition  falls  short  of  the  maximum. 

The  states  of  economical  relation  which  stand  first  in  order  to 
be  discussed  and  appreciated,  are  those  in  which  competition  has 
no  part,  the  arbiter  of  transactions  being  either  brute  force  or 
established  usage.  These  will  be  the  subject  of  the  next  four  chapters. 


CHAPTER  V 


OF  SLAVERY 

§ 1.  Among  the  forms  which  society  assumes  under  the  in- 
fluence of  the  institution  of  property,  there  are,  as  I have  already 
remarked,  two,  otherwise  of  a widely  dissimilar  character,  but 
resembling  in  this,  that  the  ownership  of  the  land,  the  labour,  and 
the  capital,  is  in  the  same  hands.  One  of  these  cases  is  that  of 
slavery,  the  other  is  that  of  peasant  proprietors.  In  the  one  the 
landowner  owns  the  labour,  in  the  other  the  labourer  owns  the  land. 
We  begin  with  the  first. 

In  this  system  all  the  produce  belongs  to  the  landlord.  The 
food  and  other  necessaries  of  his  labourers  are  part  of  his  expenses. 
The  labourers  possess  nothing  but  what  he  thinks  fit  to  give  them, 
and  until  he  thinks  fit  to  take  it  back  : and  they  work  as  hard  as  he 
chooses,  or  is  able,  to  compel  them.  Their  wretchedness  is  only 
limited  by  his  humanity,  or  his  pecuniary  interest.  With  the  first 
consideration  we  have  on  the  present  occasion  nothing  to  do.  What 
the  second  in  so  detestable  a constitution  of  society  may  dictate, 
depends  on  the  facilities  for  importing  fresh  slaves.  If  full-grown, 
able-bodied  slaves  can  be  procured  in  sufficient  numbers,  and 
imported  at  a moderate  expense,  self-interest  will  recommend  working 
the  slaves  to  death,  and  replacing  them  by  importation,  in  preference 
to  the  slow  and  expensive  process  of  breeding  them.  Nor  are  the 
slave-owners  generally  backward  in  learning  this  lesson.  It  is 
notorious  that  such  was  the  practice  in  our  slave  colonies,  while  the 
slave  trade  was  legal ; and  it  is  said  to  be  so  still  in  Cuba.' 

When,  as  among  the  ancients,  the  slave-market  could  only  be 
supplied  by  captives  either  taken  in  war,  or  kidnapped  from  thinly 
scattered  tribes  on  the  remote  confines  of  the  known  world,  it  was 

* [The  original  text  ran  on : “ and  in  those  States  of  the  American  Union 
V hich  receive  a regular  supply  of  negroes  from  other  States.”  These  latter  words 
Were  omitted  from  the  4th  ed.  (1857).] 


250 


BOOR  II.  CHAPTER  V.  § 2 


generally  more  profitable  to  keep  up  the  number  by  breeding,  which 
necessitates  a far  better  treatment  of  them ; and  for  this  reason, 
joined  with  several  others,  the  condition  of  slaves,  notwithstanding 
occasional  enormities,  was  probably  much  less  bad  in  the  ancient 
world,  than  in  the  colonies  of  modem  nations.  The  Helots  are 
usually  cited  as  the  type  of  the  most  hideous  form  of  personal 
slavery,  but  with  how  little  tmth  appears  from  the  fact  that  they 
were  regularly  armed  (though  not  with  the  panoply  of  the  hophte) 
and  formed  an  integral  part  of  the  military  strength  of  the  State. 
They  were  doubtless  an  inferior  and  degraded  caste,  but  their  slavery 
seems  to  have  been  one  of  the  least  onerous  varieties  of  serfdom. 
Slavery  appears  in  far  more  frightful  colours  among  the  Romans, 
during  the  period  in  which  the  Roman  aristocracy  was  gorging 
itself  with  the  plunder  of  a newly-conquered  world.  The  Romans 
were  a cruel  people,  and  the  worthless  nobles  sported  with  the  lives 
of  their  myriads  of  slaves  with  the  same  reckless  prodigahty  with 
which  they  squandered  any  other  part  of  their  ill-acquired  possessions. 
Yet,  slavery  is  divested  of  one  of  its  worst  features  when  it  is 
compatible  with  hope : enfranchisement  was  easy  and  common  : 
enfranchised  slaves  obtained  at  once  the  full  rights  of  citizens,  and 
instances  were  frequent  of  their  acquiring  not  only  riches,  but 
latterly  even  honours.  By  the  progress  of  milder  legislation  under 
the  Emperors,  much  of  the  protection  of  law  was  thrown  round  the 
slave ; he  became  capable  of  possessing  property ; and  the  evil 
altogether  assumed  a considerably  gentler  aspect.  Until,  however, 
slavery  assumes  the  mitigated  form  of  villenage,  in  which  not  only 
the  slaves  have  property  and  legal  rights,  but  their  obligations  are 
more  or  less  limited  by  usage,  and  they  partly  labour  for  their  own 
benefit ; their  condition  is  seldom  such  as  to  produce  a rapid 
growth  either  of  population  or  of  production.^ 

§ 2.  So  long  as  slave  countries  are  underpeopled  in  proportion 
to  their  cultivable  land,  the  labour  of  the  slaves,  under  any  tolerable 

1 [“  Or  of  production  ” was  added  in  the  3rd  ed.  (1852),  and  the  following 
passage  of  the  original  omitted ; “ This  ” (i.e.  slow  growth  of  population)  “ cannot 
be  from  physical  privation,  for  no  slave-labourers  are  worse  fed,  clothed,  or 
lodged,  than  the  free  peasantry  of  Ireland.  The  cause  usually  assigned  is  the 
great  disproportion  of  the  sexes  which  almost  always  exists  where  slaves  are  not 
bred  but  imported ; this  cannot  however  be  the  sole  cause,  as  the  negro  population 
of  our  West  India  colonies  continued  nearly  stationary,  after  the  slave-trade 
to  those  colonies  was  suppressed.  Whatever  be  the  causes,  a slave  population 
is  seldom  a rapidly  increasing  one.”  The  text  of  the  next  sentence  was  slightly 
readjusted.] 


SLAVERY 


261 


management,  produces  much  more  than  is  sufficient  for  their 
support ; especially  as  the  great  amount  of  superintendence  which 
their  labour  requires,  preventing  the  dispersion  of  the  population, 
insures  some  of  the  advantages  of  combined  labour.  Hence,  in 
a good  soil  and  chmate,  and  with  reasonable  care  of  his  own  interests, 
the  owner  of  many  slaves  has  the  means  of  being  rich.  The  influence, 
however,  of  such  a state  of  society  on  production  is  perfectly  well 
understood.  It  is  a truism  to  assert,  that  labour  extorted  by  fear 
of  punishment  is  inefficient  and  unproductive.  It  is  true  that  in 
some  circumstances  human  beings  can  be  driven  by  the  lash  to 
attempt,  and  even  to  accomplish,  things  which  they  would  not 
have  undertaken  for  any  payment  which  it  could  have  been  worth 
while  to  an  employer  to  ofier  them.  And  it  is  likely  that  productive 
operations  which  require  much  combination  of  labour,  the  pro- 
duction of  sugar  for  example,  would  not  have  taken  place  so  soon 
in  the  American  colonies  if  slavery  had  not  existed  to  keep  masses 
of  labour  together.  There  are  also  savage  tribes  so  averse  from 
regular  industry,  that  industrial  life  is  scarcely  able  to  introduce 
itself  among  them  until  they  are  either  conquered  and  made  slaves 
of,  or  become  conquerors  and  make  others  so.  But  after  allowing 
the  full  value  of  these  considerations,  it  remains  certain  that  slavery 
is  incompatible  with  any  high  state  of  the  arts  of  hfe,  and  any  great 
efficiency  of  labour.  For  all  products  which  require  much  skill,  slave 
countries  are  usually  i dependent  on  foreigners.  Hopeless  slavery 
effectually  brutifies  the  intellect ; and  inteUigence  in  the  slaves, 
though  often  encouraged  in  the  ancient  world  and  in  the  East,  is 
in  a more  advanced  state  of  society  a source  of  so  much  danger 
and  an  object  of  so  much  dread  to  the  masters,  that  in  some  of  the 
States  of  America  it  was  a highly  penal  offence  to  teach  a slave 
to  read.2  All  processes  carried  on  by  slave  labour  are  conducted 
in  the  rudest  and  most  unimproved  manner.  And  even  the  animal 
strength  of  the  slave  is,  on  an  average,  not  half  exerted.  The 
unproductiveness  and  wastefulness  of  the  industrial  system  in  the 
Slave  States  is  instructively  displayed  in  the  valuable  writings 
of  Mr.  Olmsted.'^  The  mildest  form  of  slavery  is  certainly  the 
condition  of  the  serf,  who  is  attached  to  the  soil,  supports  himself 
from  his  allotment,  and  works  a certain  number  of  days  in  the 
week  for  his  lord.  Yet  there  is  but  one  opinion  on  the  extreme 

1 [“  Usually  ” replaced  “ always  ” in  the  3rd  ed.  (1852).] 

2 [Until  the  6th  ed.  (1865)  the  reference  was  vague  ; “ in  some  countries 
it  is.”  In  the  7th  ed.  (1871)  “ is  ” became  “ was.”] 

3 [This  sentence  was  inserted  in  the  6th  ed.] 


252 


BOOR  n.  CHAPTER  V.  § 2 


inefficiency  of  serf  labour.  The  following  passage  is  from  Professor 
Jones,*  whose  Essay  on  the  Distribution  of  Wealth  (or  rather  on 
Rent),  is  a copious  repertory  of  valuable  facts  on  the  landed  tenures 
of  different  countries. 

“ The  Russians,  or  rather  those  German  writers  who  have  observed 
the  manners  and  habits  of  Russia,  state  some  strong  facts  on  this 
point.  Two  Middlesex  mowers,  they  say,  will  mow  in  a day  as 
much  grass  as  six  Russian  serfs,  and  in  spite  of  the  dearness  of 
provisions  in  England  and  their  cheapness  in  Russia,  the  mowing 
a quantity  of  hay  which  would  cost  an  English  farmer  half  a copeck, 
will  cost  a Russian  proprietor  three  or  four  copecks.f  The  Prussian 
counsellor  of  state,  Jacob,  is  considered  to  have  proved,  that  in  Russia, 
where  everything  is  cheap,  the  labour  of  a serf  is  doubly  as  expensive 
as  that  of  a labourer  in  England.  M.  Schmalz  gives  a startling 
account  of  the  unproductiveness  of  serf  labour  in  Prussia,  from 
his  own  knowledge  and  observation.^  In  Austria,  it  is  distinctly 
stated  that  the  labour  of  a serf  is  equal  to  only  one-third  of  that 
of  a free  hired  labourer.  This  calculation,  made  in  an  able  work 
on  agriculture  (with  some  extracts  from  which  I have  been  favoured), 
is  applied  to  the  practical  purpose  of  deciding  on  the  number  of 
labourers  necessary  to  cultivate  an  estate  of  a given  magnitude. 
So  palpable,  indeed,  are  the  ill  effects  of  labour  rents  on  the  industry 
of  the  agricultural  population,  that  in  Austria  itself,  where  proposals 
of  changes  of  any  kind  do  not  readily  make  their  way,  schemes 
and  plans  for  the  commutation  of  labour  rents  are  as  popular  as 
in  the  more  stirring  German  provinces  of  the  North.”  § 

What  is  wanting  in  the  quahty  of  the  labour  itself,  is  not  made 
up  by  any  excellence  in  the  direction  and  superintendence.  As 
the  same  writer  ||  remarks,  the  landed  proprietors  “ are  necessarily, 
in  their  character  of  cultivators  of  their  own  domains,  the  only 
guides  and  directors  of  the  industry  of  the  agricultural  population,” 
since  there  can  be  no  intermediate  class  of  capitalist  farmers  where 

* Essay  on  the  Distribution  of  Wealth  and  on  the  Sources  of  Taxation.  By  the 
Rev.  Richard  Jones.  Page  60.  [P.  43  of  the  reprint  published  in  1895  under 
the  title  Peasant  Rents.'] 

f “ Schmalz,  Economie  Politiquef  French  translation,  vol.  i.  p.  66.” 

J “ Vol.  ii.  p.  107.” 

§ The  Hungarian  revolutionary  government,  during  its  brief  existence, 
bestowed  on  that  country  one  of  the  greatest  benefits  it  could  receive,  and  one 
which  the  tyranny  that  succeeded  did  not  dare  to  take  away  : it  freed  the 
peasantry  from  what  remained  of  the  bondage  of  serfdom,  the  labour  rents ; 
decreeing  compensation  to  the  landlords  at  the  expense  of  the  state,  and  not  at 
that  of  the  liberated  peasants. 

II  Jones,  pp.  63,  64.  [Peasant  Rents y pp.  46,  47.] 


SLAVERY 


263 


the  labourers  are  the  property  of  the  lord.  Great  landowners  are 
everywhere  an  idle  class,  or  if  they  labour  at  all,  addict  themselves 
only  to  the  more  exciting  kinds  of  exertion  ; that  lion’s  share  which 
superiors  always  reserve  for  themselves.  “ It  would,”  as  Mr.  Jones 
observes,  “ be  hopeless  and  irrational  to  expect,  that  a race  of  noble 
proprietors,  fenced  round  with  privileges  and  dignity,  and  attracted 
to  military  and  political  pursuits  by  the  advantages  and  habits  of 
their  station,  should  ever  become  attentive  cultivators  as  a body.” 
Even  in  England,  if  the  cultivation  of  every  estate  depended  upon  its 
proprietor,  any  one  can  judge  what  would  be  the  result.  There 
would  be  a few  cases  of  great  science  and  energy,  and  numerous 
individual  instances  of  moderate  success,  but  the  general  state  of 
agriculture  would  be  contemptible. 

§ 3.  Whether  the  proprietors  themselves  would  lose  by  the 
emancipation  of  their  slaves,  is  a different  question  from  the  com- 
parative effectiveness  of  free  and  slave  labour  to  the  community. 
There  has  been  much  discussion  of  this  question  as  an  abstract 
thesis  ; as  if  it  could  possibly  admit  of  any  universal  solution. 
Whether  slavery  or  free  labour  is  most  profitable  to  the  employer, 
depends  on  the  wages  of  the  free  labourer.  These,  again,  depend 
on  the  numbers  of  the  labouring  population,  compared  with  the 
capital  and  the  land.  Hired  labour  is  generally  so  much  more 
efficient  than  slave  labour,  that  the  employer  can  pay  a considerably 
greater  value  in  wages,  than  the  maintenance  of  his  slaves  cost 
him  before,  and  yet  be  a gainer  by  the  change  : but  he  cannot  do 
this  without  limit.  The  decline  of  serfdom  in  Europe,  and  its 
destruction  in  the  Western  nations,  were  doubtless  hastened  by  the 
changes  which  the  growth  of  population  must  have  made  in  the 
pecuniary  interests  of  the  master.  As  population  pressed  harder 
upon  the  land,  without  any  improvement  in  agriculture,  the  main- 
tenance of  the  serfs  necessarily  became  more  costly,  and  their 
labour  less  valuable.  With  the  rate  of  wages  such  as  it  is  in  Ireland, 
or  in  England  (where,  in  proportion  to  its  efficiency,  labour  is  quite 
as  cheap  as  in  Ireland),  no  one  can  for  a moment  imagine  that 
slavery  could  be  profitable.  If  the  Irish  peasantry  were  slaves, 
their  masters  would  be  as  wilhng,  as  their  landlords  now  [1848] 
are,  to  pay  large  sums  merely  to  get  rid  of  them.  In  the  rich  and 
underpeopled  soil  of  the  West  India  islands,  there  is  just  as  httle 
doubt  that  the  balance  of  profits  between  free  and  slave  labour 
was  greatly  on  the  side  of  slavery,  and  that  the  compensatiou 


254 


BOOK  II.  CHAPTER  V.  § 3 


granted  to  the  slave-owners  for  its  abolition  was  not  more,  perhaps 
even  less,i  than  an  equivalent  for  their  loss. 

More  needs  not  be  said  here  on  a cause  so  completely  judged  and 
decided  as  that  of  slavery.  2 Xts  demerits  are  no  longer  a question 
requiring  argument ; though  the  temper  of  mind  manifested  by  the 
larger  part  of  the  influential  classes  in  Great  Britain  respecting  the 
struggle  in  America,  shows  how  grievously  the  feelings  of  the  present 
generation  [1865]  of  Englishmen,  on  this  subject,  had  fallen  behind 
the  positive  acts  of  the  generation  which  preceded  them.  That 
the  sons  of  the  deliverers  of  the  West  Indian  Negroes  should  expect 
with  complacency,  and  encourage  by  their  sympathies,  the  estab- 
lishment of  a great  and  powerful  military  commonwealth,  pledged 
by  its  principles  and  driven  by  its  strongest  interests  to  be  the  armed 
propagator  of  slavery  through  every  region  of  the  earth  into  which 
its  power  could  penetrate,  discloses  a mental  state  in  the  leading 
portion  of  our  higher  and  middle  classes  which  it  is  melancholy 
to  see,  and  will  be  a lasting  blot  in  English  history.  Fortunately 
they  stopped  short  of  actually  aiding,  otherwise  than  by  words,  the 
nefarious  enterprise  to  which  they  were  not  ashamed  of  wishing 
success ; and  at  the  expense  of  the  best  blood  of  the  Free  States, 
but  to  their  immeasurable  elevation  in  mental  and  moral  worth, 

' [“  In  all  probability  less,”  until  the  5th  ed.  (1862).] 

* [The  rest  of  the  paragraph  as  here  found  was  written  for  the  6th  ed.  (1865). 
The  original  (1848)  ran  thus  : “ It  will  be  curious  to  see  how  long  the  other 
nations  possessing  slave  colonies  will  be  content  to  remain  behind  England  in 
a matter  of  such  concernment  both  to  justice,  which  decidedly  is  not  at  present 
a fashionable  virtue,  and  to  philanthropy,  which  certainly  is  so.  Europe  is 
far  more  inexcusable  than  America  in  tolerating  an  enormity,  of  which  she 
could  rid  herself  with  so  much  greater  ease.  I speak  of  negro-slavery,  not  of 
the  servage  of  the  Slavonic  nations,  who  have  not  yet  advanced  beyond  a state 
of  civilization  corresponding  to  the  age  of  villenage  in  Western  Europe,  and 
can  only  be  expected  to  emerge  from  it  in  the  same  gradual  manner,  however 
much  accelerated  by  the  salutary  influence  of  the  ideas  of  more  advanced 
countries.” 

To  this,  in  the  2nd  ed.  (1849)  was  added  the  note  : “ Denmark  has  the  honour 
of  being  the  first  Continental  nation  which  followed  the  example  of  England ; 
and  the  emancipation  of  the  slaves  was  one  of  the  earliest  acts  of  the  French 
Provisional  Government.  Still  more  recently,  the  progress  of  the  American 
mind  towards  a determination  to  rid  itself  of  this  odious  stain  has  been  mani- 
fested by  very  gratif5dng  symptoms.” 

In  the  3rd  ed.  (1852)  the  latter  part  of  the  reference  to  the  Slavonic  nations 
was  made  to  read  : “ who,  to  all  appearance,  will  be  indebted  for  their  liberation 
from  this  great  evil  to  the  influence  of  the  ideas  of  the  more  advanced  countries, 
rather  than  to  the  rapidity  of  their  own  progress  in  improvement.”  In  the 
note,  “ heroic  and  calumniated  ” was  inserted  before  “ French  Provisional 
Government.”  In  the  5th  ed.  (1862)  the  second  sentence  of  the  note  was 
replaced  by  “ The  Dutch  Government  is  now  seriously  engaged  in  the  same 
beneficent  enterprise.”] 


SLAVERY 


265 


the  curse  of  slavery  has  been  cast  out  from  the  great  American 
republic,  to  find  its  last  temporary  refuge  in  Brazil  and  Cuba.  No 
European  country,  except  Spain  alone,  any  longer  participates  in 
the  enormity.  Even  serfage  has  now  ceased  to  have  a legal  existence 
in  Europe.  Denmark  has  the  honour  of  being  the  first  Continental 
nation  which  imitated  England  in  liberating  its  colonial  slaves  ; 
and  the  abolition  of  slavery  was  one  of  the  earliest  acts  of  the  heroic 
and  calumniated  Provisional  Government  of  France.  The  Dutch 
Government  was  not  long  behind,  and  its  colonies  and  dependencies 
are  now,  I believe  without  exception,  free  from  actual  slavery, 
though  forced  labour  dor  the  pubhc  authorities  is  still  [1865]  a 
recognised  institution  in  Java,  soon,  we  may  hope,  to  be  exchanged 
for  complete  personal  freedom. 


CHAPTER  VI 


OF  PEASANT  PROPRIETORS 

§ 1.  In  the  regime  of  peasant  properties,  as  in  that  of  slavery, 
the  whole  produce  belongs  to  a single  owner,  and  the  distinction 
of  rent,  profits,  and  wages,  does  not  exist.  In  all  other  respects,  the 
two  states  of  society  are  the  extreme  opposites  of  each  other.  The 
one  is  the  state  of  greatest  oppression  and  degradation  to  the  labour- 
ing class.  The  other  is  that  in  which  they  are  the  most  uncontrolled 
arbiters  of  their  own  lot. 

The  advantage,  however,  of  small  properties  in  land,  is  one  of 
the  most  disputed  questions  in  the  range  of  political  economy.  On 
the  Continent,  though  there  are  some  dissentients  from  the  prevailing 
opinion,  the  benefit  of  having  a numerous  proprietary  population 
exists  in  the  minds  of  most  people  in  the  form  of  an  axiom.  But 
English  authorities  are  either  unaware  of  the  judgment  of  Continental 
agriculturists,  or  are  content  to  put  it  aside,  on  the  plea  of  their 
having  no  experience  of  large  properties  in  favourable  circumstances  : 
the  advantage  of  large  properties  being  only  felt  where  there  are 
also  large  farms ; and  as  this,  in  arable  districts,  imphes  a greater 
accumulation  of  capital  than  usually  exists  on  the  Continent,  the 
great  Continental  estates,  except  in  the  case  of  grazing  farms,  are 
mostly  let  out  for  cultivation  in  small  portions.  There  is  some  truth 
in  this ; but  the  argument  admits  of  being  retorted ; for  if  the 
Continent  knows  httle,  by  experience,  of  cultivation  on  a large 
scale  and  by  large  capital,  the  generahty  of  English  writers  are  no 
better  acquainted  practically  with  peasant  proprietors,  and  have 
almost  always  the  most  erroneous  ideas  of  their  social  condition 
and  mode  of  fife.  Yet  the  old  traditions  even  of  England  are  on  the 
same  side  with  the  general  opinion  of  the  Continent.  The  “ yeo- 
manry ” who  were  vaunted  as  the  glory  of  England  while  they 
existed,  and  have  been  so  much  mourned  over  since  they  disappeared, 
were  either  small  proprietors  or  small  farmers,  and  if  they  were  mostly 


PEASANT  PROPRIETORS 


257 


the  last,  the  character  they  bore  for  sturdy  independence  is  the  more 
noticeable.  There  is  a part  of  England,  unfortunately  a very  small 
part,  where  peasant  proprietors  are  still  [1848]  common  ; for  such 
are  the  “ statesmen  ” of  Cumberland  and  Westmoreland,  though 
they  pay,  I believe,  generally  if  not  universally,  certain  customary 
dues,  which,  being  fixed,  no  more  affect  their  character  of  proprietor, 
than  the  land-tax  does.  There  is  but  one  voice,  among  those  ac- 
quainted with  the  country,  on  the  admirable  effects  of  this  tenure 
of  land  in  those  counties.  No  other  agricultural  population  in 
England  could  have  furnished  the  originals  of  Wordsworth’s 
peasantry.* 

The  general  system,  however,  of  English  cultivation,  affording 
no  experience  to  render  the  nature  and  operation  of  peasant  pro- 
perties familiar,  and  Englishmen  being  in  general  profoundly 
ignorant  of  the  agricultural  economy  of  other  countries,  the  very 
idea  of  peasant  proprietors  is  strange  to  the  English  mind,  and  does 
not  easily  find  access  to  it.  Even  the  forms  of  language  stand  in 
the  way  : the  familiar  designation  for  owners  of  land  being  “ land- 
lords,” a term  to  which  “ tenants  ” is  always  understood  as  a corre- 
lative. When,  at  the  time  of  the  famine,  the  suggestion  of  peasant 
properties  as  a means  of  Irish  improvement  found  its  way  into 
parliamentary  and  newspaper  discussions,  there  were  writers  of 

* In  Mr.  Wordsworth’s  little  descriptive  work  on  the  scenery  of  the  Lakes, 
he  speaks  of  the  upper  part  of  the  dales  as  having  been  for  centuries  “ a perfect 
republic  of  shepherds  and  agriculturists,  proprietors,  for  the  most  part,  of  the 
lands  which  they  occupied  and  cultivated.  The  plough  of  each  man  was  con- 
fined to  the  maintenance  of  his  own  family,  or  to  the  occasional  accom^iodation 
of  his  neighbour.  Two  or  three  cows  furnished  each  family  with  milk  and 
cheese.  The  chapel  was  the  only  edifice  that  presided  over  these  dwellings, 
the  supreme  head  of  this  pure  commonwealth  ; the  members  of  which  existed 
in  the  midst  of  a powerful  empire,  like  an  ideal  society,  or  an  organized  com- 
munity, whose  constitution  had  been  imposed  and  regulated  by  the  mountains 
which  protected  it.  Neither  high-born  nobleman,  knight,  nor  esquire  was  here  ; 
but  many  of  these  humble  sons  of  the  hills  had  a consciousness  that  the  land 
which  they  walked  over  and  tilled  had  for  more  than  five  hundred  years  been 
possessed  by  men  of  their  name  and  blood  . . . Corn  was  grown  in  these  vales 
sufficient  upon  each  estate  to  furnish  bread  for  each  family,  no  more.  The 
storms  and  moisture  of  the  climate  induced  them  to  sprinkle  their  upland  pro- 
perty with  outhouses  of  native  stone,  as  places  of  shelter  for  their  sheep,  where 
in  tempestuous  weather,  food  was  distributed  to  them.  Every  family  spun 
from  its  own  flock  the  wool  with  which  it  was  clothed  ; a weaver  was  here  and 
there  found  among  them,  and  the  rest  of  their  wants  was  supplied  by  the  produce 
of  the  yarn,  which  they  carded  and  spun  in  their  own  houses,  and  carried  to 
market  either  under  their  arms  or  more  frequently  on  packhorses,  a small 
train  taking  their  way  weekly  down  the  valley,  or  over  the  mountains,  to  the 
most  commodious  town.” — A Description  of  the  Scenery  of  the  Lakes  in  the 
North  of  England^  3rd  edit.  pp.  50  to  53  and  63  to  65. 

R 


258 


BOOK  IL  CHAPTER  VI.  § 2 


pretension  to  whom  the  word  “ proprietor  ” was  so  far  from  con- 
veying any  distinct  idea,  that  they  mistook  the  small  holdings  of 
Irish  cottier  tenants  for  peasant  properties.  The  subject  being 
so  little  understood,  I think  it  important,  before  entering  into  the 
theory  of  it,  to  do  something  towards  showing  how  the  case  stands 
as  to  matter  of  fact ; by  exhibiting,  at  greater  length  than  would 
otherwise  be  admissible,  some  of  the  testimony  which  exists  respect- 
ing the  state  of  cultivation,  and  the  comfort  and  happiness  of  the 
cultivators,  in  those  countries  and  parts  of  countries,  in  which  the 
greater  part  of  the  land  has  neither  landlord  nor  farmer,  other  than 
the  labourer  who  tills  the  soil. 

§ 2.  I lay  no  stress  on  the  condition  of  North  America,  where, 
as  is  well  known,  the  land,  except  in  the  former  Slave  States,^  is 
almost  universally  owned  by  the  same  person  who  holds  the  plough. 
A country  combining  the  natural  fertility  of  America  with  the 
knowledge  and  arts  of  modern  Europe,  is  so  peculiarly  circum- 
stanced, that  scarcely  anything,  except  insecurity  of  property  or  a 
tyrannical  government,  could  materially  impair  the  prosperity  of 
the  industrious  classes.  I might,  with  Sismondi,  insist  more  strongly 
on  the  case  of  ancient  Italy,  especially  Latium,  that  Campagna 
which  then  swarmed  with  inhabitants  in  the  very  regions  which  under 
a contrary  regime  have  become  uninhabitable  from  malaria.  But 
I prefer  taking  the  evidence  of  the  same  writer  on  things  known 
to  him  by  personal  observation. 

“ It  is  especially  Switzerland,”  says  M.  de  Sismondi,  “ which 
should  be  traversed  and  studied  to  judge  of  the  happiness  of  peasant 
proprietors.  It  is  from  Switzerland  we  learn  that  agriculture  prac- 
tised by  the  very  persons  who  enjoy  its  fruits,  sufi&ces  to  procure 
great  comfort  for  a very  numerous  population  ; a great  independence 
of  character,  arising  from  independence  of  position ; a great  com- 
merce of  consumption,  the  result  of  the  easy  circumstances  of  all  the 
inhabitants,  even  in  a coimtry  whose  climate  is  rude,  whose  soil  is  but 
moderately  fertile,  and  where  late  frosts  and  inconstancy  of  seasons 
often  blight  the  hopes  of  the  cultivator.  It  is  impossible  to  see 
without  admiration  those  timber  houses  of  the  poorest  peasant,  so 
vast,  so  well  closed  in,  so  covered  with  carvings.  In  the  interior, 
spacious  corridors  separate  the  different  chambers  of  the  numerous 
family ; each  chamber  has  but  one  bed,  which  is  abundantly  furnished 

' [Suljstituted  in  the  7th  ed.  (1871)  for  “wherever  free  from  the  curse  of 
slavery.”! 


PEASANT  PROPRIETORS 


25d 


with  curtains,  bedclothes,  and  the  whitest  linen ; carefully  kept 
furniture  surrounds  it ; the  wardrobes  are  filled  with  linen ; the 
dairy  is  vast,  well  aired,  and  of  exquisite  cleanness ; under  the  same 
roof  is  a great  provision  of  corn,  salt  meat,  cheese  and  wood  ; in  the 
cow-houses  are  the  finest  and  most  carefully  tended  cattle  in  Europe  ; 
the  garden  is  planted  with  flowers,  both  men  and  women  are  cleanly 
and  warmly  clad,  the  women  preserve  with  pride  their  ancient 
costume  ; all  carry  in  their  faces  the  impress  of  health  and  strength. 
Let  other  nations  boast  of  their  opulence,  Switzerland  may  always 
point  with  pride  to  her  peasants.”  * 

The  same  eminent  writer  thus  expresses  his  opinion  on  peasant 
proprietorship  in  general. 

“ Wherever  we  find  peasant  proprietors,  we  also  find  the  comfort, 
security,  confidence  in  the  future,  and  independence,  which  assure 
at  once  happiness  and  virtue.  The  peasant  who  with  his  children  does 
all  the  work  of  his  httle  inheritance,  who  pays  no  rent  to  any  one 
above  him,  nor  wages  to  any  one  below,  who  regulates  his  produc- 
tion by  his  consumption,  who  eats  his  own  corn,  drinks  his  own  wine, 
is  clothed  in  his  own  hemp  and  wool,  cares  httle  for  the  prices  of  the 
market ; for  he  has  little  to  sell  and  httle  to  buy,  and  is  never  ruined 
by  revulsions  of  trade.  Instead  of  fearing  for  the  future,  he  sees 
it  in  the  colours  of  hope  ; for  he  employs  every  moment  not  required 
by  the  labours  of  the  year,  on  something  profitable  to  his  children 
and  to  future  generations.  A few  minutes’  work  suffices  him  to  plant 
the  seed  which  in  a hundred  years  will  be  a large  tree,  to  dig  the 
channel  which  wiU  conduct  to  him  a spring  of  fresh  water,  to  improve 
by  cares  often  repeated,  but  stolen  from  odd  times,  all  the  species 
of  animals  and  vegetables  which  surround  him.  His  httle  patrimony 
is  a true  savings  bank,  always  ready  to  receive  all  his  httle  gains  and 
utihze  ah  his  moments  of  leisure.  The  ever-acting  power  of  nature 
returns  them  a hundred-fold.  The  peasant  has  a hvely  sense  of  the 
happiness  attached  to  the  condition  of  a proprietor.  Accordingly 
he  is  always  eager  to  buy  land  at  any  price.  He  pays  more  for  it 
than  its  value,  more  perhaps  than  it  wiU  bring  him  in  ; but  is  he  not 
right  in  estimating  highly  the  advantage  of  having  always  an  advan- 
tageous investment  for  his  labour,  without  underbidding  in  the 
wages-market — of  being  always  able  to  find  bread,  without  the 
necessity  of  buying  it  at  a scarcity  price  ? 

“ The  peasant  proprietor  is  of  all  cultivators  the  one  who  gets 
most  from  the  soil,  for  he  is  the  one  who  thinks  most  of  the  future,  and 
• Etudes  sur  VEconomxe  Politique^  Esaai  IIL 


260 


BOOK  II.  CHAPTER  VI.  § 2 


who  has  been  most  instructed  by  experience.  He  is  also  the  one 
who  employs  the  human  powers  to  most  advantage,  because  dividing 
his  occupations  among  all  the  members  of  his  family,  he  reserves 
some  for  every  day  of  the  year,  so  that  nobody  is  ever  out  of  work. 
Of  all  cultivators  he  is  the  happiest,  and  at  the  same  time  the  land 
nowhere  occupies,  and  feeds  amply  without  becoming  exhausted, 
BO  many  inhabitants  as  where  they  are  proprietors.  Finally,  of  all 
cultivators  the  peasant  proprietor  is  the  one  who  gives  most  encour- 
agement to  commerce  and  manufactures,  because  he  is  the  richest.”  * 

This  picture  of  unwearied  assiduity,  and  what  may  be  called 
affectionate  interest  in  the  land,  is  borne  out  in  regard  to  the  more 
intelligent  Cantons  of  Switzerland  by  English  observers.  “ In 
walking  anywhere  in  the  neighbourhood  of  Zurich,”  says  Mr.  Inglis, 
“ in  looking  to  the  right  or  to  the  left,  one  is  struck  with  the  extra- 
ordinary industry  of  the  inhabitants  ; and  if  we  learn  that  a pro- 
prietor here  has  a return  of  ten  per  cent,  we  are  inclined  to  say,  ‘ he 
deserves  it.*  I speak  at  present  of  country  labour,  though  I believe 
that  in  every  kind  of  trade  also,  the  people  of  Zurich  are  remarkable 
for  their  assiduity  ; but  in  the  industry  they  show  in  the  cultivation 
of  their  land  I may  safely  say  they  are  unrivalled.  When  I used  to 
open  my  casement  between  four  and  five  in  the  morning  to  look  out 
upon  the  lake  and  the  distant  Alps,  I saw  the  labourer  in  the  fields  ; 
and  when  I returned  from  an  evening  walk,  long  after  sunset,  as  late, 
perhaps,  as  half-past  eight,  there  was  the  labourer  mowing  his  grass, 
or  tying  up  his  vines.  . . It  is  impossible  to  look  at  a field,  a 
garden,  a hedging,  scarcely  even  a tree,  a fiower,  or  a vegetable, 
without  perceiving  proofs  of  the  extreme  care  and  industry  that  are 
bestowed  upon  the  cultivation  of  the  soil.  If,  for  example,  a path 

® And  in  another  work  {Nouveaux  Prineipes  d'Economie  Politique,  liv.  iii. 
ch.  3,)  he  says  : “ When  we  traverse  nearly  the  whole  of  Switzerland,  and  several 
provinces  of  France,  Italy,  and  Germany,  we  need  never  ask,  in  looking  at  any 
piece  of  land,  if  it  belongs  to  a peasant  proprietor  or  to  a farmer.  The  intelligent 
care,  the  enjoyments  provided  for  the  labourer,  the  adornment  which  the 
country  has  received  from  his  hands,  are  clear  indications  of  the  former.  It  is 
true  an  oppressive  government  may  destroy  the  comfort  and  brutify  the  intelli- 
gence which  should  be  the  result  of  property ; taxation  may  abstract  the  best 
produce  of  the  fields,  the  insolence  of  government  officers  may  disturb  the 
security  of  the  peasant,  the  impossibility  of  obtaining  justice  against  a powerful 
neighbour  may  sow  discouragement  in  his  mind,  and  in  the  fine  country  which 
has  been  given  back  to  the  administration  of  the  King  of  Sardinia,  the  pro- 
prietor, equally  with  the  day-labourer,  wears  the  livery  of  indigence.”  He  was 
here  speaking  of  Savoy,  where  the  peasants  were  generally  proprietors,  and, 
according  to  authentic  accounts,  extremely  miserable.  But,  as  M.  de  Sismondi 
continues,  “ it  is  in  vain  to  observe  only  one  of  the  rules  of  political  economy  j 
it  cannot  by  itself  suffice  to  produce  good  ; but  at  least  it  diminishes  evil.” 


PEASANT  PROPRIETORS 


261 


leads  through  or  by  the  side  of  a field  of  grain,  the  corn  is  not,  as  in 
England,  permitted  to  hang  over  the  path,  exposed  to  be  pulled  or 
trodden  down  by  every  passer-by  ; it  is  everywhere  bounded  by  a 
fence,  stakes  are  placed  at  intervals  of  about  a yard,  and,  about  two 
or  three  feet  from  the  ground,  boughs  of  trees  are  passed  longitudin- 
ally along.  If  you  look  into  a field  towards  evening,  where  there 
are  large  beds  of  cauhflower  or  cabbage,  you  will  find  that  every 
single  plant  has  been  watered.  In  the  gardens,  which  around 
Zurich  are  extremely  large,  the  most  punctilious  care  is  evinced  in 
every  production  that  grows.  The  vegetables  are  planted  with 
seemingly  mathematical  accuracy ; not  a single  weed  is  to  be  seen, 
not  a single  stone.  Plants  are  not  earthed  up  as  with  us,  but  are 
planted  in  a small  hollow,  into  each  of  which  a Httle  manure  is  put, 
and  each  plant  is  watered  daily.  Where  seeds  are  sown,  the  earth 
directly  above  is  broken  mto  the  finest  powder  ; every  shrub,  every 
flower  is  tied  to  a stake,  and  where  there  is  wall-fruit  a trelhce  is 
erected  against  the  wall,  to  which  the  boughs  are  fastened,  and  there 
is  not  a single  thing  that  has  not  its  appropriate  resting  place.”  * 

Of  one  of  the  remote  valleys  of  the  High  Alps  the  same  writer 
thus  expresses  himself.f 

“ In  the  whole  of  the  Engadine  the  land  belongs  to  the  peasantry, 
who,  hke  the  inhabitants  of  every  other  place  where  this  state  of 
things  exists,  vary  greatly  in  the  extent  of  their  possessions.  . . , 
Generally  speaking,  an  Engadine  peasant  fives  entirely  upon  the 
produce  of  his  land,  with  the  exception  of  the  few  articles  of  foreign 
growth  required  in  his  family,  such  as  coffee,  sugar,  and  wine.  Flax 
is  grown,  prepared,  spun,  and  woven,  without  ever  leaving  his  house. 
He  has  also  his  own  wool,  which  is  converted  into  a blue  coat,  with- 
out passing  through  the  hands  of  either  the  dyer  or  the  tailor.  The 
country  is  incapable  of  greater  cultivation  than  it  has  received. 
All  has  been  done  for  it  that  industry  and  an  extreme  love  of  gain 
can  devise.  There  is  not  a foot  of  waste  land  in  the  Engadine,  the 
lowest  part  of  which  is  not  much  lower  than  the  top  of  Snowdon. 
Wherever  grass  will  grow,  there  it  is ; wherever  a rock  will  bear  a 
blade,  verdure  is  seen  upon  it ; wherever  an  ear  of  rye  will  ripen, 
there  it  is  to  be  found.  Barley  and  oats  have  also  their  appropriate 
spots  ; and  wherever  it  is  possible  to  ripen  a little  patch  of  wheat,  the 
cultivation  of  it  is  attempted.  In  no  country  in  Europe  will  be  found 

* Switzerland,  the  South  of  France,  and  the  Pyrenees,  in  1830.  By  H,  D, 
Inglis.  Vol.  i.  ch.  2. 

f Ibid.  ch.  8 and  10. 


262 


BOOK  IL  CHAPTER  VI.  § 2 


SO  few  poor  as  in  the  Engadine.  In  the  village  of  Suss,  which 
contains  about  six  hundred  inhabitants,  there  is  not  a single 
individual  who  has  not  wherewithal  to  live  comfortably,  not  a 
single  individual  who  is  indebted  to  others  for  one  morsel  that  he 
eats.” 

Notwithstanding  the  general  prosperity  of  the  Swiss  peasantry, 
this  total  absence  of  pauperism  and  (it  may  almost  be  said)  of 
poverty,  cannot  be  predicated  of  the  whole  country ; the  largest 
and  richest  canton,  that  of  Berne,  being  an  example  of  the  contrary  ; 
for  although,  in  the  parts  of  it  which  are  occupied  by  peasant  pro- 
prietors, their  industry  is  as  remarkable  and  their  ease  and  comfort 
as  conspicuous  as  elsewhere,  the  canton  is  burthened  with  a numer- 
ous pauper  population,  through  the  operation  of  the  worst  regulated 
system  of  poor-law  administration  in  Europe,  except  that  of  Eng- 
land before  the  new  Poor  Law.*  Nor  is  Swdtzerland  in  some  other 
respects  a favourable  example  of  all  that  peasant  properties  might 
effect.  There  exists  a series  of  statistical  accounts  of  the  Swiss 
Cantons,  drawn  up  mostly  with  great  care  and  intelligence, 
containing  detailed  information,  of  tolerably  recent  date,  respecting 
the  condition  of  the  land  and  of  the  people.  From  these,  the  sub- 
division appears  to  be  often  so  minute,  that  it  can  hardly  be  supposed 
not  to  be  excessive  : and  tbe  indebtedness  of  the  proprietors  in  the 
flourishing  canton  of  Zurich  “ borders,”  as  the  writer  expresses  it, 
“ on  the  incredible ; ” f so  that  “ only  the  intensest  industry, 
frugahty,  temperance,  and  complete  freedom  of  commerce  enable 
them  to  stand  their  ground.”  Yet  the  general  conclusion  deducible 
from  these  books  is  that  since  the  beginning  of  the  century,  and 
concurrently  with  the  subdivision  of  many  great  estates  which 
belonged  to  nobles  or  to  the  cantonal  governments,  there  has  been 

* [1852]  There  have  been  considerable  changes  in  the  Poor  Law  adminis- 
tration and  legislation  of  the  Canton  of  Berne  since  the  sentence  in  the  text 
was  written.  But  I am  not  sufficiently  acquainted  with  the  nature  and  opera- 
tion of  these  changes  to  speak  more  particularly  of  them  here. 

f “ Eine  an  das  unglaubliche  granzende  Schuldenmasse  ” is  the  expression. 
{Historisch-geographisch-statistische  Gemalde  der  Schweiz.  Erster  Theil.  Der 
Kanton  Zurich.  Von  Gerold  Meyer  von  Knonau,  1834,  pp.  80-81.)  There 
are  villages  in  Zurich,  he  adds,  in  which  there  is  not  a single  property  un- 
mortgaged. It  does  not,  however,  follow  that  each  individual  proprietor  is 
deeply  involved  because  the  aggregate  mass  of  encumbrances  is  large.  In  the 
Canton  of  Schaffhausen,  for  instance,  it  is  stated  that  the  landed  properties 
are  almost  all  mortgaged,  but  rarely  for  more  than  one-half  their  registered 
value  {Zwolfter  Theil.  Der  Kanton  Schaffhausen^  von  Edward  Im-Thurn, 
1840,  p.  62),  and  the  mortgages  are  often  for  the  improvement  and  enlargement 
of  the  estate.  {Siehenzehnter  Theil.  Der  Kanton  Thurgau,  von  J.  A.  Pupikofer, 
1837,  p.  209.) 


PEASANT  PROPRIETORS 


263 


a striking  and  rapid  improvement  in  almost  every  department  of 
agriculture,  as  well  as  in  the  houses,  the  habits,  and  the  food  of  the 
people.  The  writer  of  the  account  of  Thiirgau  goes  so  far  as  to 
say,  that  since  the  subdivision  of  the  feudal  estates  into  peasant 
properties,  it  is  not  uncommon  for  a third  or  a fourth  part  of  an 
estate  to  produce  as  much  grain,  and  support  as  many  head  of 
cattle,  as  the  whole  estate  did  before.* 

§ 3.  One  of  the  countries  in  which  peasant  proprietors  are  of 
oldest  date,  and  most  numerous  in  proportion  to  the  population,  is 
Norway.  Of  the  social  and  economical  condition  of  that  country 
an  interesting  account  has  been  given  by  Mr.  Laing.  His  testimony 
in  favour  of  small  landed  properties  both  there  and  elsewhere,  is 
given  with  great  decision.  I shall  quote  a few  passages. 

“ If  small  proprietors  are  not  good  farmers,  it  is  not  from  the 
same  cause  here  which  we  are  told  makes  them  so  in  Scotland — 
indolence  and  want  of  exertion.  The  extent  to  which  irrigation  is 
carried  on  in  these  glens  and  valleys  shows  a spirit  of  exertion  and 
co-operation  ” (I  request  particular  attention  to  this  point),  “ to 
which  the  latter  can  show  nothing  similar.  Hay  being  the  principal 
winter  support  of  live  stock,  and  both  it  and  corn,  as  well  as  potatoes, 
liable,  from  the  shallow  soil  and  powerful  reflection  of  sunshine 
from  the  rocks,  to  be  burnt  and  withered  up,  the  greatest  exertions 
are  made  to  bring  water  from  the  head  of  each  glen,  along  such  a 
level  as  will  give  the  command  of  it  to  each  farmer  at  the  head  of  his 
fields.  This  is  done  by  leading  it  in  wooden  troughs  (the  half  of  a 
tree  roughly  scooped)  from  the  highest  perennial  stream  among  the 
hills,  through  woods,  across  ravines,  along  the  rocky,  often  per- 
pendicular, sides  of  the  glens,  and  from  this  main  trough  giving  a 
lateral  one  to  each  farmer  in  passing  the  head  of  his  farm.  He  dis- 
tributes this  supply  by  moveable  troughs  among  the  fields  ; and  at 
this  season  waters  each  rig  successively  with  scoops  like  those  used 
by  bleachers  in  watering  cloth,  laying  his  trough  between  every 
two  rigs.  One  would  not  believe,  without  seeing  it,  how  very  large 
an  extent  of  land  is  traversed  expeditiously  by  these  artificial  showers. 
The  extent  of  the  main  troughs  is  very  great.  In  one  glen  I walked 
ten  miles,  and  found  it  trough ed  on  both  sides  : on  one,  the  chain 
is  continued  down  the  main  valley  for  forty  miles. f Those  may  be 

* Thurgau,  p.  72. 

I [1852]  Reichensperger  {Die  Agrarfrage)  quoted  by  Mr.  Kay  {Social  Con- 
dition and  Education  of  the  People  in  Englxind  and  Europe,)  observes,  “ that 


264 


BOOK  II.  CHAPTER  VI.  § 3 


bad  farmers  who  do  such  things ; but  they  are  not  indolent,  not 
ignorant  of  the  principle  of  working  in  concert,  and  keeping  up 
establishments  for  common  benefit.  They  are  undoubtedly,  in 
these  respects,  far  in  advance  of  any  community  of  cottars  in  our 
Highland  glens.  They  feel  as  proprietors,  who  receive  the  ad- 
vantage of  their  own  exertions.  The  excellent  state  of  the  roads 
and  bridges  is  another  proof  that  the  country  is  inhabited  by  people 
who  have  a common  interest  to  keep  them  under  repair.  There 
are  no  tolls.”  * 

On  the  efiects  of  peasant  proprietorship  on  the  Continent  gener- 
ally, the  same  writer  expresses  himself  as  follows. f . 

“ If  we  listen  to  the  large  farmer,  the  scientific  agriculturist, 
the  ” [English]  “ political  economist,  good  farming  must  perish 
with  large  farms  ; the  very  idea  that  good  farming  can  exist,  unless 
on  large  farms  cultivated  with  great  capital,  they  hold  to  be  absurd. 

the  parts  of  Europe  where  the’most  extensive  and  costly  plans  for  watering  the 
meadows  and  lands  have  been  carried  out  in  the  greatest  perfection,  are  those 
where  the  lands  are  very  much  subdivided,  and  are  in  the  hands  of  small  pro- 
prietors. He  instances  the  plain  round  Valencia,  several  of  the  southern 
departments  of  France,  particularly  those  of  Vaucluse  and  Bouches  du  Rhone, 
Lombardy,  Tuscany,  the  districts  of  Sienna,  Lucca,  and  Bergamo,  Piedmont, 
many  parts  of  Germany,  &c.,  in  all  which  parts  of  Europe  the  land  is  very 
much  subdivided  among  small  proprietors.  In  all  these  parts  great  and  ex- 
pensive systems  and  plans  of  general  irrigation  have  been  carried  out,  and  are 
now  being  supported  by  the  small  proprietors  themselves ; thus  showing  how 
they  are  able  to  accomplish,  by  means  of  combination,  work  requiring  the 
expenditure  of  great  quantities  of  capital.”  Kay,  i.  126. 

* Laing,  Journal  of  a Residence  in  Norway y pp.  36,  37.  [From  the  3rd  ed. 
(1852)  was  omitted  the  following  further  passage  from  Laing,  quoted  in  the 
1st  and  2nd : “ It  is,  I am  aware,  a favourite  and  constant  observation  of  our 
agricultural  writers,  that  these  small  proprietors  make  the  worst  farmers.  It 
may  be  so ; but  a population  may  be  in  a wretched  condition,  although  their 
country  is  very  well  farmed ; or  they  may  be  happy,  although  bad  cultivators. 
. . . Good  farming  is  a phrase  composed  of  two  words  which  have  no  more 
application  to  the  happiness  or  well-being  of  a people  than  good  weaving  or 
good  iron-founding.  That  the  human  powers  should  be  well  applied,  and  not 
misapplied,  in  the  production  of  grain,  or  iron,  or  clothing,  is,  no  doubt,  an 
object  of  great  importance ; but  the  happiness  or  well-being  of  a people  does 
not  entirely  depend  upon  it.  It  has  more  effect  on  their  numbers  than  on  their 
condition.  The  producer  of  grain  who  is  working  for  himself  only,  who  is 
owner  of  his  land,  and  has  not  a third  of  its  produce  to  pay  as  rent,  can  afford 
to  be  a worse  farmer  by  one-third,  than  a tenant,  and  is,  notwithstanding,  in 
a preferable  condition.  Our  agricultural  writers  teU  us,  indeed,  that  labourers 
in  agriculture  are  much  better  off  as  farm-servants  than  they  would  be  as 
small  proprietors.  We  have  only  the  master’s  word  for  this.  Ask  the  servant. 
The  colonists  told  us  the  same  thing  of  their  slaves.  If  property  is  a good  and 
desirable  thing,  I suspect  that  the  smallest  quantity  of  it  is  good  and  desirable  ; 
and  that  the  state  of  society  in  which  it  is  most  widely  diffused  is  the  best 
constituted.”] 

f Notes  of  a Traveller,  pp.  299  et  seqq. 


PEASANT  PROPRIETORS 


2G5 


Draining,  manuring,  economical  arrangement,  cleaning  the  land, 
regular  rotations,  valuable  stock  and  implements,  all  belong  ex- 
clusively to  large  farms,  worked  by  large  capital,  and  by  hired  labour. 
This  reads  very  well ; but  if  we  raise  our  eyes  from  their  books  to 
their  fields,  and  coolly  compare  what  we  see  in  the  best  districts 
farmed  in  large  farms,  with  what  we  see  in  the  best  districts  farmed 
in  small  farms,  we  see,  and  there  is  no  blinking  the  fact,  better 
crops  on  the  ground  in  Flanders,  East  Friesland,  Holstein,  in  short, 
on  the  whole  line  of  the  arable  land  of  equal  quality  of  the  Continent, 
from  the  Sound  to  Calais,  than  we  see  on  the  line  of  British  coast 
opposite  to  this  line,  and  in  the  same  latitudes,  from  the  Frith  of 
Forth  all  round  to  Dover.  Minute  labour  on  small  portions  of 
arable  ground  gives  evidently,  in  equal  soils  and  climates,  a superior- 
productiveness,  where  these  small  portions  belong  in  property,  as 
in  Flanders,  Holland,  Friesland,  and  Ditmarsch  in  Holstein,  to  the 
farmer.  It  is  not  pretended  by  our  agricultural  writers,  that  our 
large  farmers,  even  in  Berwickshire,  Koxburghshire,  or  the  Lothians, 
approach  to  the  garden-like  cultivation,  attention  to  manures, 
drainage,  and  clean  state  of  the  land,  or  in  productiveness  from  a 
small  space  of  soil  not  originally  rich,  which  distinguish  the  small 
farmers  of  Flanders,  or  their  system.  In  the  best-farmed  parish  in 
Scotland  or  England,  more  land  is  wasted  in  the  corners  and  borders 
of  the  fields  of  large  farms,  in  the  roads  through  them,  unnecessarily 
wide  because  they  are  bad,  and  bad  because  they  are  wide,  in 
neglected  commons,  waste  spots,  useless  belts  and  clumps  of  sorry 
trees,  and  such  unproductive  areas,  than  would  maintain  the  poor 
of  the  parish,  if  they  were  all  laid  together  and  cultivated.  But 
large  capital  applied  to  farming  is  of  course  only  applied  to  the  very 
best  of  the  soils  of  a country.  It  cannot  touch  the  small  unpro- 
ductive spots  which  require  more  time  and  labour  to  fertilize 
them  than  is  consistent  with  a quick  return  of  capital.  But  although 
hired  time  and  labour  cannot  be  applied  beneficially  to  such  culti- 
vation, the  owner’s  own  time  and  labour  may.  He  is  working  for 
no  higher  terms  at  first  from  his  land  than  a bare  living.  But  in 
the  course  of  generations  fertility  and  value  are  produced  ; a better 
hving,  and  even  very  improved  processes  of  husbandry,  are  attained. 
Furrow  draining,  stall  feeding  all  summer,  liquid  manures,  are 
universal  in  the  husbandry  of  the  small  farms  of  Flanders,  Lombardy, 
Switzerland.  Our  most  improving  districts  under  large  farms  are 
but  beginning  to  adopt  them.  Dairy  husbandry  even,  and  the 
manufacture  ol  the  largest  cheeses  by  the  co-operation  of  many 


266 


BOOK  II.  CHAPTER  VL  § 4 


small  farmers,*  tlie  mutual  assurance  of  property  against  fire  and 
hail-storms,  by  the  co-operation  of  small  farmers — the  most  scientific 
and  expensive  of  all  agricultural  operations  in  modern  times,  the 
manufacture  of  beet-root  sugar — the  supply  of  the  European  markets 
with  flax  and  hemp,  by  the  husbandry  of  small  farmers— the  abund- 
ance of  legumes,  fruits,  poultry,  in  the  usual  diet  even  of  the  lowest 
classes  abroad,  and  the  total  want  of  such  variety  at  the  tables  even 
of  our  middle  classes,  and  this  variety  and  abundance  essentially 
connected  with  the  husbandry  of  small  farmers — all  these  are 
features  in  the  occupation  of  a country  by  small  proprietor-farmers, 
which  must  make  the  inquirer  pause  before  he  admits  the  dogma 
of  our  land  doctors  at  home,  that  large  farms  worked  by  hired 
labour  and  great  capital  can  alone  bring  out  the  greatest  productive- 
ness of  the  soil  and  furnish  the  greatest  supply  of  the  necessaries 
and  conveniences  of  life  to  the  inhabitants  of  a country.” 

§ 4.  Among  the  many  flourishing  regions  of  Germany  in  which 
peasant  properties  prevail,  I select  the  Palatinate,  for  the  advantage 
of  quoting,  from  an  English  source,  the  results  of  recent  personal 
observation  of  its  agriculture  and  its  people.  Mr.  Howitt,  a writer 
whose  habit  it  is  to  see  all  English  objects  and  English  sociahties 
en  beaUj  and  who,  in  treating  of  the  Ehenish  peasantry,  certainly 
does  not  underrate  the  rudeness  of  their  implements,  and  the 
inferiority  of  their  ploughing,  nevertheless  shows  that  under  the 
invigorating  influence  of  the  feelings  of  proprietorship,  they  make 
up  for  the  imperfections  of  their  apparatus  by  the  intensity  of  their 

♦ The  manner  in  whicli  the  Swiss  peasants  combine  to  carry  on  cheese- 
making by  their  united  capital  deserves  to  be  noted.  “ Each  parish  in  Swit- 
zerland hires  a man,  generally  from  the  district  of  Gruyere  in  the  canton  of 
Freyburg,  to  take  care  of  the  herd,  and  make  the  cheese.  One  cheeseman,  one 
pressman  or  assistant,  and  one  cowherd  are  considered  necessary  for  every 
forty  cows.  The  owners  of  the  cows  get  credit  each  of  them,  in  a book  daily 
for  the  quantity  of  milk  given  by  each  cow.  The  cheeseman  and  his  assistants 
milk  the  cows,  put  the  milk  all  together,  and  make  cheese  of  it,  and  at  the  end 
of  the  season  each  owner  receives  the  weight  of  cheese  proportionable  to  the 
quantity  of  milk  his  cows  have  delivered.  By  this  co-operative  plan,  instead 
of  the  small-sized  unmarketable  cheeses  only,  which  each  could  produce  out  of 
his  three  or  four  cows’  milk,  he  has  the  same  weight  in  large  marketable  cheese 
superior  in  quality,  because  made  by  people  who  attend  to  no  other  business. 
The  cheeseman  and  his  assistants  are  paid  so  much  per  head  of  the  cows,  in 
money  or  h cheese,  or  sometimes  they  hire  the  cows,  and  pay  the  owners  in 
money  or  cheese.”  Notes  of  a Traveller ^ p.  351.  A similar  system  exists  in  the 
French  Jura.  See,  for  full  details,  Lavergne,  Economie  Eurale  de  la  France^  2nd 
ed.,  pp.  139  et  seqq.  One  of  the  most  remarkable  points  in  this  interesting 
case  of  combination  of  labour  is  the  confidence  which  it  supposes,  and  which 
experience  must  justify,  in  the  integrity  of  the  persons  employed. 


PEASANT  PR0PRIET0K8 


267 


application.  “ The  peasant  harrows  and  clears  his  land  till  it  is 
in  the  nicest  order,  and  it  is  admirable  to  see  the  crops  which  he 
obtains.”  * “ The  peasants  f are  the  great  and  ever-present  objects 

of  country  life.  They  are  the  great  population  of  the  country, 
because  they  themselves  are  the  possessors.  This  country  is,  in 
fact,  for  the  most  part,  in  the  hands  of  the  people.  It  is  parcelled 

out  among  the  multitude The  peasants  are  not,  as  with  us, 

for  the  most  part,  totally  cut  off  from  property  in  the  soil  they 
cultivate,  totally  dependent  on  the  labour  afforded  by  others — they 
are  themselves  the  proprietors.  It  is,  perhaps,  from  this  cause  that 
they  are  probably  the  most  industrious  peasantry  in  the  world. 
They  labour  busily,  early  and  late,  because  they  feel  that  they  are 

labouring  for  themselves The  German  peasants  work  hard, 

but  they  have  no  actual  want.  Every  man  has  his  house,  his 
orchard,  his  roadside  trees,  commonly  so  heavy  with  fruit,  that  he 
is  obliged  to  prop  and  secure  them  all  ways,  or  they  would  be  torn 
to  pieces.  He  has  his  corn-plot,  his  plot  for  mangel-wurzel,  for 
hemp,  and  so  on.  He  is  his  own  master  ; and  he,  and  every  member 
of  his  family,  have  the  strongest  motives  to  labour.  You  see  the 
effect  of  this  in  that  unremitting  diligence  which  is  beyond  that  of 
the  whole  world  besides,  and  his  economy,  which  is  still  greater. 
The  Germans,  indeed,  are  not  so  active  and  lively  as  the  English. 
You  never  see  them  in  a bustle,  or  as  though  they  meant  to  knock 

off  a vast  deal  in  a little  time They  are,  on  the  contrary, 

slow,  but  for  ever  doing.  They  plod  on  from  day  to  day,  and  year 
to  year — the  most  patient,  untirable,  and  persevering  of  animals. 
The  English  peasant  is  so  cut  off  from  the  idea  of  property,  that  he 
comes  habitually  to  look  upon  it  as  a thing  from  which  he  is  warned 
by  the  laws  of  the  large  proprietors,  and  becomes,  in  consequence, 

spiritless,  purposeless The  German  bauer,  on  the  contrary, 

looks  on  the  country  as  made  for  him  and  his  fellow-men.  He  feels 
himself  a man  ; he  has  a stake  in  the  country,  as  good-as  that  of  the 
bulk  of  his  neighbours ; no  man  can  threaten  him  with  ejection, 
or  the  workhouse,  so  long  as  he  is  active  and  economical.  He 
walks,  therefore,  with  a bold  step ; he  looks  you  in  the  face  with 
the  air  of  a free  man,  but  of  a respectful  one.” 

Of  their  industry,  the  same  writer  thus  further  speaks  : “ There 
is  not  an  hour  of  the  year  in  which  they  do  not  find  unceasing  occupa- 
tion. In  the  depth  of  winter,  when  the  weather  permits  them  by  any 

♦ Rural  and  Domestic  Life  of  Germany,  p.  27. 

f Ibid.  p.  40. 


268  BOOK  II.  CHAPTER  VI.  § 4 

means  to  get  out  of  doors,  they  are  always  finding  something  to  do. 
They  carry  out  their  manure  to  their  lands  while  the  frost  is  in  them. 
If  there  is  not  frost,  they  are  busy  cleaning  ditches  and  felling  old 
fruit  trees,  or  such  as  do  not  bear  well.  Such  of  them  as  are  too 
poor  to  lay  in  a sufficient  stock  of  wood,  find  plenty  of  work  in  ascend- 
ing into  the  mountainous  woods,  and  bringing  thence  fuel.  It 
would  astonish  the  English  common  people  to  see  the  intense  labour 
with  which  the  Germans  earn  their  firewood.  In  the  depths  of 
frost  arid  snow,  go  into  any  of  their  hills  and  woods,  and  there  you 
win  find  them  hacking  up  stumps,  cutting  off  branches,  and  gather- 
ing, by  all  means  which  the  official  wood-police  will  allow,  boughs, 
stakes,  and  pieces  of  wood,  which  they  convey  home  with  the  most 
incredible  toil  and  patience.”  * After  a description  of  their  careful 
and  laborious  vineyard  culture,  he  continues,!  “ In  England,  writh 
its  great  quantity  of  grass  lands,  and  its  large  farms,  so  soon  as  the 
grain  is  in,  and  the  fields  are  shut  up  for  hay  grass,  the  coimtry 
seems  in  a comparative  state  of  rest  and  quiet.  But  here  they  are 
everywhere,  and  for  ever,  hoeing  and  mowing,  planting  and  cutting, 
weeding  and  gathering.  They  have  a succession  of  crops  like  a 
market-gardener.  They  have  their  carrots,  poppies,  hemp,  flax, 
saintfoin,  lucerne,  rape,  colewort,  cabbage,  rotabaga,  black  turnips, 
Swedish  and  white  turnips,  teazels,  Jerusalem  artichokes,  mangel- 
wurzel,  parsnips,  kidney-beans,  field  beans,  and  peas,  vetches, 
Indian  corn,  buckwheat,  madder  for  the  manufacturer,  potatoes, 
their  great  crop  of  tobacco,  millet — all,  or  the  greater  part,  under  the 
family  management,  in  their  own  family  allotments.  They  have 
had  these  things  first  to  sow,  many  of  them  to  transplant,  to  hoe, 
to  weed,  to  clear  of  insects,  to  top ; many  of  them  to  mow  and 
gather  in  successive  crops.  They  have  their  water-meadows,  of 
which  kind  almost  all  their  meadows  are,  to  flood,  to  mow,  and 
reflood  ; watercourses  to  reopen  and  to  make  anew  : their  early 
fruits  to  gather,  to  bring  to  market  with  their  green  crops  of  vege- 
tables ; their  cattle,  sheep,  calves,  foals,  most  of  them  prisoners, 
and  poultry  to  look  after ; their  vines,  as  they  shoot  rampantly  in 
the  summer  heat,  to  prune,  and  thin  out  the  leaves  when  they  are  too 
thick  : and  any  one  may  imagine  what  a scene  of  incessant  labour 
it  is.” 

This  interesting  sketch,  to  the  general  truth  of  which  any 
observant  traveller  in  that  highly  cultivated  and  populous  region 

♦ Rural  and  Domestic  Life  of  Germany,  p.  44. 

t Ibid.  p.  60. 


PEASANT  PROPRIETORS 


269 


can  beai  witness,  accords  with  the  more  elaborate  delineation  by 
a distinguished  inhabitant,  Professor  Rau,  in  his  little  treatise 
On  the  Agriculture  of  the  Palatinate.*  Dr.  Rau  bears  testimony 
not  only  to  the  industry,  but  to  the  skill  and  intelligence  of  the 
peasantry  ; their  judicious  employment  of  manures,  and  excellent 
rotation  of  crops  ; the  progressive  improvement  of  their  agriculture 
for  generations  past,  and  the  spirit  of  further  improvement  which  is 
still  active.  “ The  indefatigableness  of  the  country  people,  who 
may  be  seen  in  activity  all  the  day  and  all  the  year,  and  are  never 
idle,  because  they  make  a good  distribution  of  their  labours,  and 
find  for  every  interval  of  time  a suitable  occupation,  is  as  well  known 
as  their  zeal  is  praiseworthy  in  turning  to  use  every  circumstance 
which  presents  itself,  in  seizing  upon  every  useful  novelty  which  offers, 
and  even  in  searching  out  new  and  advantageous  methods.  One 
easily  perceives  that  the  peasant  of  this  district  has  reflected  much  on 
nis  occupation  : he  can  give  reasons  for  his  modes  of  proceeding, 
even  if  those  reasons  are  not  always  tenable  ; he  is  as  exact  an 
observer  of  proportions  as  it  is  possible  to  be  from  memory,  without 
the  aid  of  figures  : he  attends  to  such  general  signs  of  the  times  as 
appear  to  augur  him  either  benefit  or  harm.”  f 

1 The  experience  of  all  other  parts  of  Germany  is  similar.  “ In 
Saxony,”  says  Mr.  Kay,  “ it  is  a notorious  fact,  that  during  the  last 
thirty  years,  and  since  the  peasants  became  the  proprietors  of 
the  land,  there  has  been  a rapid  and  continual  improvement  in  the 
condition  of  the  houses,  in  the  manner  of  living,  in  the  dress  of  the 
peasants,  and  particularly  in  the  culture  of  the  land.  I have 
twice  walked  through  that  part  of  Saxony  called  Saxon  Switzerland, 
in  company  with  a German  guide,  and  on  purpose  to  see  the  state 
of  the  villages  and  of  the  farming,  and  I can  safely  challenge  con- 
tradiction when  I affirm  that  there  is  no  farming  in  all  Europe 
superior  to  the  laboriously  careful  cultivation  of  the  valleys  of  that 
part  of  Saxony.  There,  as  in  the  cantons  of  Berne,  Vaud,  and 
Zurich,  and  in  the  Rhine  provinces,  the  farms  are  singularly 
flourishing.  They  are  kept  in  beautiful  condition,  and  are  always 
neat  and  well  managed.  The  ground  is  cleared  as  if  it  were  a 
garden.  No  hedges  or  brushwood  encumber  it.  Scarcely  a rush  or 
thistle  or  a bit  of  rank  grass  is  to  be  seen.  The  meadows  are  well 
watered  every  spring  with  liquid  manure,  saved  from  the  drainings 

* Ueber  die  Landwirthschaft  der  Rheiupfalz,  und  insbesondere  in  der  Heidei* 
berger  Gegend.  Von  Dr.  Karl  Heinrich  Rau.  Heidelberg,  1830. 

f Rau,  pp.  15,  16. 

' [The  rest  of  this  section  was  sodded  in  the  3rd  ed.  (1852),] 


270 


BOOK  II.  CHAPTER  VI.  | 4 


of  the  farm  yards.  The  grass  is  so  free  from  weeds  that  the  Saxon 
meadows  reminded  me  more  of  English  lawns  than  of  anything  else 
I had  seen.  The  peasants  endeavour  to  outstrip  one  another  in 
the  quantity  and  quality  of  the  produce,  in  the  preparation  of  the 
ground,  and  in  the  general  cultivation  of  their  respective  portions. 
All  the  little  proprietors  are  eager  to  find  out  how  to  farm  so  as 
to  produce  the  greatest  results  : they  diligently  seek  after  improve- 
ments ; they  send  their  children  to  the  agricultural  schools  in  order 
to  fit  them  to  assist  their  fathers  ; and  each  proprietor  soon  adopts 
a new  improvement  introduced  by  any  of  his  neighbours.”*  If 
this  be  not  overstated,  it  denotes  a state  of  intelligence  very  different 
not  only  from  that  of  English  labourers  but  of  English  farmers. 

Mr.  Kay’s  book,  published  in  1850,  contains  a mass  of  evidence 
gathered  from  observation  and  inquiries  in  many  different  parts 
of  Europe,  together  with  attestations  from  many  distinguished 
writers,  to  the  beneficial  effects  of  peasant  properties.  Among 
the  testimonies  which  he  cites  respecting  their  effect  on  agriculture, 
I select  the  following. 

“ Eeichensperger,  himself  an  inhabitant  of  that  part  of  Prussia 
where  the  land  is  the  most  subdivided,  has  published  a long  and 
very  elaborate  work  to  show  the  admirable  consequences  of  a 
system  of  freeholds  in  land.  He  expresses  a very  decided  opinion  that 
not  only  are  the  gross  products  of  any  given  number  of  acres  held 
and  cultivated  by  small  or  peasant  proprietors  greater  than  the 
gross  products  of  an  equal  number  of  acres  held  by  a few  great 
proprietors,  and  cultivated  by  tenant  farmers,  but  that  the  net 
products  of  the  former,  after  deducting  all  the  expenses  of  cultiva- 
tion, are  also  greater  than  the  net  products  of  the  latter.  ...  He 
mentions  one  fact  which  seems  to  prove  that  the  fertility  of  the 
land  in  countries  where  the  properties  are  small  must  be  rapidly 
increasing.  He  says  that  the  price  of  the  land  which  is  divided 
into  small  propeities  in  the  Prussian  Rhine  provinces  is  much 
higher,  and  has  been  rising  much  more  rapidly,  than  the  price 
of  land  on  the  great  estates.  He  and  Professor  Rau  both  say  that 
this  rise  in  the  price  of  the  small  estates  would  have  ruined  the 
more  recent  purchasers,  unless  the  productiveness  of  the  small 
estates  had  increased  in  at  least  an  equal  proportion ; and  as 
the  small  pro'prietors  have  been  gradually  becoming  more  and  more 

* The  Social  Condition  and  Education  of  the  People  in  England  and  Europe  ; 
showing  the  results  of  the  Primary  Schools,  and  of  the  division  of  Landed  Property 
in  Foreign  Countries.  By  Joseph  Kay,  M.A.,  Bamster-at-Law,  and  late 
Travelling  Bachelor  of  the  University  ft  Cambridge.  Vol.  i.  pp.  138-40. 


PEASANT  PROPRIETORS 


271 


prosjperous,  notwithstanding  the  increasing  prices  they  have  paid 
for  their  land,  he  argues,  with  apparent  justness,  that  this  would 
seem  to  show  that  not  only  the  gross  profits  of  the  small  estates, 
but  the  net  profits  also  have  been  gradually  increasing,  and  that 
the  net  profits  per  acre  of  land,  when  farmed  by  small  proprietors, 
are  greater  than  the  net  profits  per  acre  of  land  farmed  by  a great 
proprietor.  He  says,  with  seeming  truth,  that  the  increasing  price 
of  land  in  the  small  estates  cannot  be  the  mere  effect  of  competition, 
or  it  would  have  diminished  the  profits  and  the  prosperity  of  the 
small  proprietors,  and  that  this  result  has  not  followed  the  rise. 

“ Albrecht  Thaer,  another  celebrated  German  writer  on  the 
different  systems  of  agriculture,  in  one  of  his  later  works  {Gmnd- 
sdtze  der  rationellen  Landwirthschaft)  expresses  his  decided  con- 
viction, that  the  net  produce  of  land  is  greater  when  farmed  by 
small  proprietors  than  when  farmed  by  great  proprietors  or  their 
tenants.  . . . This  opinion  of  Thaer  is  all  the  more  remarkable 
as,  during  the  early  part  of  his  life,  he  was  very  strongly  in  favour 
of  the  English  system  of  great  estates  and  great  farms.” 

Mr.  Kay  adds  from  his  own  observation,  “ The  peasant  farming 
of  Prussia,  Saxony,  Holland,  and  Switzerland  is  the  most  perfect 
and  economical  farming  I have  ever  witnessed  in  any  country.”* 

§ 5.  But  the  most  decisive  example  in  opposition  to  the  English 
prejudice  against  cultivation  by  peasant  proprietors  is  the  case 
of  Belgium.  The  soil  is  originally  one  of  the  worst  in  Europe. 
“ The  provinces,”  says  Mr.  M‘Culloch,t  “ of  West  and  East  Flanders, 
and  Hainault,  form  a far  stretching  plain,  of  which  the  luxuriant 
vegetation  indicates  the  indefatigable  care  and  labour  bestowed 
upon  its  cultivation  ; for  the  natural  soil  consists  almost  wholly 
of  barren  sand,  and  its  great  fertility  is  entirely  the  result  of  very 
skilful  management  and  judicious  application  of  various  manures.” 
There  exists  a carefully  prepared  and  comprehensive  treatise  on 
Flemish  Husbandry,  in  the  Farmer’s  Series  of  the  Society  for  the 
Diffusion  of  Useful  Knowledge.  The  writer  observes  J that  the 
Flemish  agriculturists §  **  seem  to  want  nothing  but  a space  to  work 
upon  : whatever  be  the  quality  or  texture  of  the  soil,  in  time  they 
will  make  it  produce  something.  The  sands  in  the  Campine  can 
be  compared  to  nothing  but  the  sand  on  the  sea-shore,  which 
they  probably  were  originally.  It  is  highly  interesting  to  follow 
♦ Kay,  i.  116-8. 

t Oeogra'pMcal  Dictionary,  art.  “ Belgium.”  X Bp.  11-14. 


272 


BOOK  II.  CHAPTER  VI.  § 5 


step  by  step  the  progress  of  improvement.  Here  you  see  a cottage 
and  rude  cowshed  erected  on  a spot  of  the  most  unpromising 
aspect.  The  loose  white  sand  blown  into  irregular  mounds  is  only 
kept  together  by  the  roots  of  the  heath  : a small  spot  only  is  levelled 
and  surrounded  by  a ditch  : part  of  this  is  covered  with  young 
broom,  part  is  planted  with  potatoes,  and  perhaps  a small  patch 
of  diminutive  clover  may  show  itself:’*  but  manures,  both  solid 
and  liquid,  are  collecting,  “ and  this  is  the  nucleus  from  which,  in 
a few  years,  a httle  farm  will  spread  around.  ...  If  there  is  no 
manure  at  hand,  the  only  thing  that  can  be  sown,  on  pure  sand,  at 
first  is  broom  : this  grows  in  the  most  barren  soils  ; in  three  years 
it  is  fit  to  cut,  and  produces  some  return  in  faggots  for  the  bakers 
and  brickmakers.  The  leaves  which  have  fallen  have  somewhat 
enriched  the  soil,  and  the  fibres  of  the  roots  have  given  a slight 
degree  of  compactness.  It  may  now  be  ploughed  and  sown  with 
buckwheat,  or  even  with  rye  without  manure.  By  the  time  this 
is  reaped,  some  manure  may  have  been  collected,  and  a regular 
course  of  cropping  may  begin.  As  soon  as  clover  and  potatoes 
enable  the  farmer  to  keep  cows  and  make  manure,  the  improvement 
goes  on  rapidly ; in  a few  years  the  soil  undergoes  a complete 
change  : it  becomes  mellow  and  retentive  of  moisture,  and  enriched 
by  the  vegetable  matter  afforded  by  the  decomposition  of  the 
roots  of  clover  and  other  plants.  . . . After  the  land  has  been 
gradually  brought  into  a good  state,  and  is  cultivated  in  a regular 
manner,  there  appears  much  less  difference  between  the  soils  which 
have  been  originally  good,  and  those  which  have  been  made  so 
by  labour  and  industry.  At  least  the  crops  in  both  appear  more 
nearly  alike  at  harvest,  than  is  the  case  in  soils  of  different  quahties 
in  other  countries.  This  is  a great  proof  of  the  excellency  of  the 
Flemish  system  ; for  it  shows  that  the  land  is  in  a constant  state 
ot  improvement,  and  that  the  deficiency  of  the  soil  is  compensated 
by  greater  attention  to  tillage  and  manuring,  especially  the  latter.” 
The  people  who  labour  thus  intensely  on  their  small  properties 
or  farms,  have  practised  for  centuries  those  principles  of  rotation 
of  crops  and  economy  of  manures,  which  in  England  are  counted 
among  modern  discoveries  : and  even  now  the  superiority  of  their 
agriculture,  as  a whole,  to  that  of  England,  is  admitted  by  competent 
judges.  “ The  cultivation  of  a poor  light  soil,  or  a moderate  soil,” 
says  the  writer  last  quoted,*  “ is  generally  superior  in  Flanders  to 
that  of  the  most  improved  farms  of  the  same  kind  in  Britain.  We 
* Flemish  Husbandry^  p.  3. 


PEASANT  PROPRIETORS 


273 


surpass  the  Flemish  farmer  greatly  in  capital,  in  vsiried  implements 
of  tillage,  in  the  choice  and  breeding  of  cattle  and  sheep,’*  (though, 
according  to  the  same  authority,*  they  are  much  “ before  us  in  the 
feeding  of  their  cows,”)  “ and  the  British  farmer  is  in  general  a 
man  of  superior  education  to  the  Flemish  peasant.  But  in  the 
minute  attention  to  the  qualities  of  the  soil,  in  the  management 
and  application  of  manures  of  different  kinds,  in  the  judicious 
succession  of  crops,  and  especially  in  the  economy  of  land,  so  that 
every  part  of  it  shall  be  in  a constant  state  of  production,  we 
have  still  something  to  learn  from  the  Flemings,”  and  not  from  an 
instructed  and  enterprising  Fleming  here  and  there,  but  from  the 
general  practice. 

Much  of  the  most  highly  cultivated  part  of  the  country  consists 
of  peasant  properties,  managed  by  the  proprietors,  always  either 
wholly  or  partly  by  spade  industry.f  “ When  the  land  is  cultivated 
entirely  by  the  spade,  and  no  horses  are  kept,  a cow  is  kept  for  every 
three  acres  of  land,  and  entirely  fed  on  artificial  grasses  and  roots. 
This  mode  of  cultivation  is  principally  adopted  in  the  Waes  district, 
where  properties  are  very  small.  All  the  labour  is  done  by  the  differ- 
ent members  of  the  family  ; ” children  soon  beginning  “ to  assist  in 
various  minute  operations,  according  to  their  age  and  strength, 
such  as  weeding,  hoeing,  feeding  the  cows.  If  they  can  raise  rye 
and  wheat  enough  to  make  their  bread,  and  potatoes,  turnips, 
carrots  and  clover,  for  the  cows,  they  do  well ; and  the  produce  of 
the  sale  of  their  rape-seed,  their  flax,  their  hemp,  and  their  butter, 
after  deducting  the  expense  of  manure  purchased,  which  is  always 
considerable,  gives  them  a very  good  profit.  Suppose  the  whole 
extent  of  the  land  to  be  six  acres,  which  is  not  an  uncommon  occupa- 
tion, and  which  one  man  can  manage ; ” then  (after  describing  the 
cultivation),  “ if  a man  with  his  wife  and  three  young  children  are 
considered  as  equal  to  three  and  a half  grown  up  men,  the  family 
will  require  thirty-nine  bushels  of  grain,  forty-nine  bushels  of 
potatoes,  a fat  hog,  and  the  butter  and  milk  of  one  cow  : an  acre 
and  a half  of  land  will  produce  the  grain  and  potatoes,  and  allow 
some  corn  to  finish  the  fattening  of  the  hog,  which  has  the  extra 
buttermilk  : another  acre  in  clover,  carrots,  and  potatoes,  together 
with  the  stubble  turnips,  will  more  than  feed  the  cow  ; conse- 
quently two  and  a half  acres  of  land  is  sufficient  to  feed  this  family, 
and  the  produce  of  the  other  three  and  a half  may  be  sold  to  pay 

* Flemish  Husbandry,  p.  13, 

t Ibid.  pp.  73  et  seq. 


274 


BOOK  IL  CHAPTER  VI.  § 6 


the  rent  or  the  interest  of  purchase-money,  wear  and  tear  of  imple- 
ments, extra  manure,  and  clothes  for  the  family.  But  these  acres 
are  the  most  profitable  on  the  farm,  for  the  hemp,  flax,  and  colza 
are  included ; and  by  having  another  acre  in  clover  and  roots, 
a second  cow  can  be  kept,  and  its  produce  sold.  We  have,  therefore, 
a solution  of  the  problem,  how  a family  can  live  and  thrive  on  six 
acres  of  moderate  land.”  After  showing  by  calculation  that  this 
extent  of  land  can  be  cultivated  in  the  most  perfect  manner  by  the 
family  without  any  aid  from  hired  labour,  the  writer  continues, 
“ In  a farm  of  ten  acres  entirely  cultivated  by  the  spade,  the  addition 
of  a man  and  a woman  to  the  members  of  the  family  will  render 
all  the  operations  more  easy  ; and  with  horse  and  cart  to  carry  out 
the  manure,  and  bring  home  the  produce,  and  occasionally  draw  the 
harrows,  -fifteen  acres  may  be  very  well  cultivated.  . . . Thus  it 
will  be  seen,”  (this  is  the  result  of  some  pages  of  details  and  calcula- 
tions,*) “that  by  spade  husbandry,  an  industrious  man  with  a 
small  capital,  occupying  only  fifteen  acres  of  good  light  land,  may 
not  only  live  and  bring  up  a family,  faying  a good  rent,  but  may 
accumuLite  a considerable  sum  in  the  course  of  his  life.”  But 
the  indefatigable  industry  by  which  he  accomplishes  this,  and  of 
which  so  large  a portion  is  expended  not  in  the  mere  cultivation, 
but  in  the  improvement,  for  a distant  return,  of  the  soil  itself — 
has  that  industry  no  connexion  with  not  paying  rent  ? Could  it 
exist,  without  presupposing  either  a virtually  permanent  tenure, 
or  the  certain  prospect,  by  labour  and  economy  on  hired  land,  of 
becoming  one  day  a landed  proprietor  ? 

As  to  their  mode  of  living,  “ the  Flemish  farmers  and  labourers 
live  much  more  economically  than*  the  same  class  in  England  : 
they  seldom  eat  meat,  except  on  Sundays  and  in  harvest : butter- 
milk and  potatoes  with  brown  bread  is  their  daily  food.”  It  is  on 
this  kind  of  evidence  that  English  travellers,  as  they  hurry  through 
Europe,  pronounce  the  peasantry  of  every  Continental  country 
poor  and  miserable,  its  agricultural  and  social  system  a failure, 
and  the  English  the  only  regime  under  which  labourers  are  well 
off.  It  is,  truly  enough,  the  only  regime  under  which  labourers, 
whether  well  off  or  not,  never  attempt  to  be  better.  So  little  are 
English  labourers  accustomed  to  consider  it  possible  that  a labourer 
should  not  spend  all  he  earns,  that  they  habitually  mistake  the  signs 
of  economy  for  those  of  poverty.  Observe  the  true  interpretation 
of  the  phenomena. 


Flemish  Husbandry,  p.  81. 


PEASANT  PROPRIETORS 


276 


'•  Accordingly  they  are  gradually  acquiring  capital,  and  their 
great  ambition  is  to  have  land  of  their  own.  They  eagerly  seize 
every  opportunity  of  purchasing  a small  farm,  and  the  price  is  so 
raised  by  competition,  that  land  pays  httle  more  than  two  per  cent 
interest  for  the  purchase  money.  Large  properties  gradually  dis- 
appear, and  are  divided  into  small  portions,  which  sell  at  a high  rate. 
But  the  wealth  and  industry  of  the  population  is  continually  increas- 
ing, being  rather  difiiised  through  the  masses  than  accumulated  in 
individuals.” 

With  facts  like  these,  known  and  accessible,  it  is  not  a little 
surprising  to  find  the  case  of  Flanders  referred  to  not  in  recommen- 
dation of  peasant  properties,  but  as  a warning  against  them  ; on 
no  better  ground  than  a presumptive  excess  of  population,  inferred 
from  the  distress  which  existed  among  the  peasantry  of  Brabant 
and  East  Flanders  in  the  disastrous  year  1846-47.  The  evidence 
which  I have  cited  from  a writer  conversant  with  the  subject,  and 
having  no  economical  theory  to  support,  shows  that  the  distress, 
whatever  may  have  been  its  severity,  arose  from  no  insufiiciency 
in  these  little  properties  to  supply  abundantly,  in  any  ordinary 
circumstances,  the  wants  of  all  whom  they  have  to  maintain.  It 
arose  from  the  essential  condition  to  which  those  are  subject  who 
employ  land  of  their  own  in  growing  their  own  food,  namely,  that 
the  vicissitudes  of  the  seasons  must  be  borne  by  themselves,  and 
cannot,  as  in  the  case  of  large  farmers,  be  shifted  from  them  to  the 
consumer.  When  we  remember  the  season  of  1846,  a partial  failure 
of  all  kinds  of  grain,  and  an  almost  total  one  of  the  potato,  it  is  no 
wonder  that  in  so  unusual  a calamity  the  produce  of  six  acres,  half  of 
them  sown  with  flax,  hemp,  or  oil  seeds,  should  fall  short  of  a year’s 
provision  for  a family.  But  we  are  not  to  contrast  the  distressed 
Flemish  peasant  with  an  English  capitalist  who  farms  several  hun- 
dred acres  of  land.  If  the  peasant  were  an  Enghshman,  he  would  not 
be  that  capitalist,  but  a day  labourer  under  a capitahst.  And  is 
there  no  distress,  in  times  of  dearth,  among  day  labourers  ? Was 
there  none,  that  year,  in  countries  where  small  proprietors  and  small 
farmers  are  unknown  ? I am  aware  of  no  reason  for  believing 
that  the  distress  was  greater  in  Belgium,  than  corresponds  to  the 
proportional  extent  of  the  failure  of  crops  compared  with  other 
countries.* 

♦ [1849]  As  much  of  the  distress  lately  complained  of  in  Belgium,  as 
partakes  in  any  degree  of  a permanent  character,  appears  to  be  almost  confined 
to  the  portion  of  the  population  who  carry  on  manufacturing  labour,  either  by 


276 


BOOK  II.  CHAPTER  VI.  § 6 


§ 6.1  The  evidence  of  the  beneficial  operation  of  peasant 
properties  in  the  Channel  Islands  is  of  so  decisive  a character, 
that  I cannot  help  adding  to  the  numerous  citations  already  made, 
part  of  a description  of  the  economical  condition  of  those  islands, 
by  a writer  who  combines  personal  observation  with  an  attentive 
study  of  the  information  afforded  by  others.  Mr.  William  Thornton, 
in  his  Plea  for  Peasant  Proprietors,  a book  which,  by  the  excellence 
both  of  its  materials  and  of  its  execution,  deserves  to  be  regarded  as 
the  standard  work  on  that  side  of  the  question,  speaks  of  the  island 
of  Guernsey  in  the  following  terms  : “ Not  even  in  England  is  nearly 
so  large  a quantity  of  produce  sent  to  market  from  a tract  of  such 
limited  extent.  This  of  itself  might  prove  that  the  cultivators  must 
be  far  removed  above  poverty,  for  being  absolute  owners  of  all  the 
produce  raised  by  them,  they  of  course  sell  only  what  they  do  not 
themselves  require.  But  the  satisfactoriness  of  their  condition  is 
apparent  to  every  observer.  ‘ The  happiest  community,’  says  Mr, 
Hill,  ‘ which  it  has  ever  been  my  lot  to  fall  in  with,  is  to  be  found 
in  this  little  island  of  Guernsey.’  ‘ No  matter,’  says  Sir  George 
Head,  ‘ to  what  point  the  traveller  may  choose  to  bend  his  way, 
comfort  everywhere  prevails.’  What  most  surprises  the  English 
visitor  in  his  first  walk  or  drive  beyond  the  bounds  of  St.  Peter’s 
Port  is  the  appearance  of  the  habitations  with  which  the  landscape 
is  thickly  studded.  Many  of  them  are  such  as  in  his  own  country 
would  belong  to  persons  of  middle  rank  ; but  he  is  puzzled  to  guess 
what  sort  of  people  live  in  the  other,  which,  though  in  general  not 
large  enough  for  farmers,  are  almost  invariably  much  too  good  in 
every  respect  for  day  labourers.  . . . Literally,  in  the  whole  island, 
with  the  exception  of  a few  fishermen’s  huts,  there  is  not  one  so 
mean  as  to  be  likened  to  the  ordinary  habitation  of  an  Enghsh 
farm  labourer.  . . . ‘ Look,’  says  a late  Bailiff  of  Guernsey,  Mr. 
De  L’Isle  Brock,  ‘ at  the  hovels  of  the  English,  and  compare  them 
with  the  cottages  of  our  peasantry.’  . . . Beggars  are  utterly 
unknown.  . . . Pauperism,  able-bodied  pauperism  at  least,  is 

itself  or  in  conjunction  with  agricultural ; and  to  be  occasioned  by  a diminished 
demand  for  Belgic  manufactures. 

To  the  preceding  testimonies  respecting  Germany,  Switzerland,  and  Belgium, 
may  be  added  the  following  from  Niebuhr,  respecting  the  Roman  Campagna. 
In  a letter  from  Tivoli,  he  says,  “ Wherever  you  find  hereditary  farmers,  or 
small  proprietors,  there  you  also  find  industry  and  honesty.  I believe  that  a 
man  who  would  employ  a large  fortune  in  establishing  small  freeholds  might 
put  an  end  to  robbery  in  the  mountain  districts.” — Life  and  Letters  of  Niebuhr, 
vol.  ii.  p.  149. 

^ [This  section  was  added  to  the  2nd  ed.  (1849).] 


PEASANT  PROPRIETORS 


277 


nearly  as  rare  as  mendicancy.  The  Savings  Banks  accounts  also 
bear  witness  to  the  general  abundance  enjoyed  by  the  labouring 
classes  of  Guernsey.  In  the  year  1841,  there  were  in  England,  out 
of  a population  of  nearly  fifteen  millions,  less  than  700,000  depositors, 
or  one  in  every  twenty  persons,  and  the  average  amount  of  the 
deposits  was  30Z.  In  Guernsey,  in  the  same  year,  out  of  a population 
of  26,000,  the  number  of  depositors  was  1920,  and  the  average  amount 
of  the  deposits  40Z.”  * The  evidence  as  to  Jersey  and  Alderney  is  of 
a similar  character. 

Of  the  efficiency  and  productiveness  of  agriculture  on  the  small 
properties  of  the  Channel  Islands,  Mr.  Thornton  produces  ample 
evidence,  the  result  of  which  he  sums  up  as  follows  : “ Thus  it 
appears  that  in  the  two  principal  Channel  Islands,  the  agricultural 
population  is,  in  the  one  twice,  and  in  the  other  three  times,  as  dense 
as  in  Britain,  there  being  in  the  latter  country  only  one  cultivator 
to  twenty- two  acres  of  cultivated  land,  while  in  Jersey  there  is  one 
to  eleven,  and  in  Guernsey  one  to  seven  acres.  Yet  the  agriculture 
of  these  islands  maintains,  besides  cultivators,  non-agricultural 
populations,  respectively  four  and  five  times  as  dense  as  that  of 
Britain.  This  difference  does  not  arise  from  any  superiority  of  soil 
or  climate  possessed  by  the  Channel  Islands,  for  the  former  is  naturally 
rather  poor,  and  the  latter  is  not  better  than  in  the  southern  counties 
of  England.  It  is  owing  entirely  to  the  assiduous  care  of  the  farmers, 
and  to  the  abundant  use  of  manure.”!  “ In  the  year  1837,”  he  says 
in  another  place,!  ” average  yield  of  wheat  in  the  large  farms  of 
England  was  only  twenty-one  bushels,  and  the  highest  average  for 
any  one  county  was  no  more  than  twenty-six  bushels.  The  highest 
average  since  claimed  for  the  whole  of  England  is  thirty  bushels. 
In  Jersey,  where  the  average  size  of  farms  is  only  sixteen  acres, 
the  average  produce  of  wheat  per  acre  was  stated  by  Inglis  in  1834 
to  be  thirty-six  bushels  ; but  it  is  proved  by  official  tables  to  have 
been  forty  bushels  in  the  five  years  ending  with  1833.  In  Guernsey, 
where  farms  are  still  smaller,  four  quarters  per  acre,  according  to 
Inghs,  is  considered  a good,  but  still  a very  common  crop.”  “ Thirty 
shilhngs  § an  acre  would  be  thought  in  England  a very  fair  rent  for 
middling  land  ; but  in  the  Channel  Islands,  it  is  only  very  inferior 
land  that  would  not  let  for  at  least  4Z.” 

§ 7.  It  is  from  France  that  impressions  unfavourable  to  peasant 

* A Plea  for  Peasant  Proprietors.  By  William  Thomas  Thornton,  pp.  99-104. 
t Ibid.  p.  38.  J Ibid.  p.  9.  § Ibid.  p.  32. 


278 


BOOK  II.  CHAPTER  VI.  § 7 


properties  are  generally  drawn ; it  is  in  France  that  the  system  is 
so  often  asserted  to  have  brought  forth  its  fruit  in  the  most  wretched 
possible  agriculture,  and  to  be  rapidly  reducing,  if  not  to  have  already 
reduced  the  peasantry,  by  subdivision  of  land,  to  the  verge  of 
starvation.  It  is  difficult  to  account  for  the  general  prevalence  of 
impressions  so  much  the  reverse  of  truth.  The  agriculture  of  France 
was  wretched  and  the  peasantry  in  great  indigence  before  the  Revo- 
lution. At  that  time  they  were  not,  so  universally  as  at  present, 
landed  proprietors.  There  \!vere,  however,  considerable  districts 
of  France  -where  the  land,  even  then,  was  to  a great  extent  the  pro- 
perty of  the  peasantry,  and  among  these  were  many  of  the  most 
conspicuous  exceptions  to  the  general  bad  agriculture  and  to  the 
general  poverty.  An  authority,  on  this  point,  not  to  be  disputed, 
is  Arthur  Young,  the  inveterate  enemy  of  small  farms,  the  cory- 
phaeus of  the  modern  English  school  of  agriculturists ; who  yet, 
travelling  over  nearly  the  whole  of  France  in  1787,  1788,  and  1789, 
when  he  finds  remarkable  excellence  of  cultivation,  never  hesitates 
to  ascribe  it  to  peasant  property.  “ Leaving  Sauve,’*  says  he,* 
“ I was  much  struck  with  a large  tract  of  land,  seemingly  nothing  but 
huge  rocks ; yet  most  of  it  enclosed  and  planted  with  the  most 
industrious  attention.  Every  man  has  an  olive,  a mulberry,  an 
almond,  or  a peach  tree,  and  vines  scattered  among  them ; so  that 
the  whole  ground  is  covered  with  the  oddest  mixture  of  these  plants 
and  bulging  rocks,  that  can  be  conceived.  The  inhabitants  of  this 
village  deserve  encouragement  for  their  industry  ; and  if  I were  a 
French  minister  they  should  have  it.  They  would  soon  turn  all 
the  deserts  around  them  into  gardens.  Such  a knot  of  active 
husbandmen,  who  turn  their  rocks  into  scenes  of  fertility,  because 
I suppose  their  own,  would  do  the  same  by  the  wastes,  if  animated  by 
the  same  omnipotent  principle.”  Again  : f “ Walk  to  Rossendal,” 
(near  Dunkirk)  “ where  M.  le  Brun  has  an  improvement  on  the 
Dunes,  which  he  very  obligingly  showed  me.  Between  the  town  and 
that  place  is  a great  number  of  neat  little  houses,  built  each  with  its 
garden,  and  one  or  two  fields  enclosed,  of  most  wretched  blowing 
dune  sand,  naturally  as  white  as  snow,  but  improved  by  industry. 
The  magic  of  'property  turns  sand  to  gold.”  And  again  : J “ Going  out 
of  Gauge,  I was  surprised  to  find  by  far  the  greatest  exertion  in 

* Arthur  Young’s  Travels  in  France,  vol.  i.  p.  60.  [In  the  edition  of  a 
portion  of  the  work  by  Miss  Betham-Ed wards,  p.  53.] 

f Ibid.  p.  88  [ed.  Betham-Ed  wards,  p.  109]. 

j Ibid.  p.  51  [ed.  Betham-Edwards,  p.  54]. 


PEASANT  PROPRIETORS 


279 


irrigation  which  I had  yet  seen  in  France  ; and  then  passed  by  some 
steep  mountains,  highly  cultivated  in  terraces.  Much  watering  at 
St.  Lawrence.  The  scenery  very  interesting  to  a farmer.  From 
Gange,  to  the  mountain  of  rough  ground  which  I crossed,  the  ride 
has  been  the  most  interesting  which  I have  taken  in  France ; the 
efforts  of  industry  the  most  vigorous ; the  animation  the  most  lively. 
An  activity  has  been  here,  that  has  swept  away  all  dijficulties 
before  it,  and  has  clothed  the  very  rocks  with  verdure.  It 
would  be  a disgrace  to  common  sense  to  ask  the  cause ; the 
enjoyment  of  property  must  have  done  it.  Give  a man  the  secure 
possession  of  a bleak  rock,  and  he  will  turn  it  into  a garden  ; give 
him  a nine  years’  lease  of  a garden,  and  he  will  convert  it  into 
a desert.” 

In  his  description  of  the  country  at  the  foot  of  the  Western 
Pyrenees,  he  speaks  no  longer  from  surmise,  but  from  knowledge. 
“ Take  ♦ the  road  to  Moneng,  and  come  presently  to  a scene  which 
was  so  new  to  me  in  France,  that  I could  hardly  believe  my  own 
eyes.  A succession  of  many  well-built,  tight,  and  comfortable 
farming  cottages  built  of  stone  and  covered  with  tiles  ; each  having 
its  little  garden,  enclosed  by  dipt  thorn-hedges,  with  plenty  of  peach 
and  other  fruit-trees,  some  fine  oaks  scattered  in  the  hedges,  and 
young  trees  nursed  up  with  so  much  care,  that  nothing  but  the  foster- 
ing attention  of  the  owner  could  effect  anything  like  it.  To  every 
house  belongs  a farm,  perfectly  well  enclosed,  with  grass  borders 
mown  and  neatly  kept  around  the  corn-fields,  with  gates  to  pass 
from  one  enclosure  to  another.  There  are  some  parts  of  England 
(where  small  yeomen  still  remain)  that  resemble  this  country  of 
Bearn  ; but  we  have  very  little  that  is  equal  to  what  I have  seen 
in  this  ride  of  twelve  miles  from  Pau  to  Moneng.  It  is  all  in  the  hands 
of  little  proprietors,  without  the  farms  being  so  small  as  to  occasion 
a vicious  and  miserable  population.  An  air  of  neatness,  warmth, 
and  comfort  breathes  over  the  whole.  It  is  visible  in  their  new  built 
houses  and  stables  ; in  their  little  gardens  ; in  their  hedges  ; in  the 
courts  before  their  doors  ; even  in  the  coops  for  their  poultry,  and 
the  sties  for  their  hogs.  A peasant  does  not  think  of  rendering 
his  pig  comfortable,  if  his  own  happiness  hang  by  the  thread  of  a 
nine  years’  lease.  We  are  now  in  Bearn,  within  a few  miles  of  the 
cradle  of  Henry  IV.  Do  they  inherit  these  blessings  from  that 
good  prince  ? The  benignant  genius  of  that  good  monarch  seems 
to  reign  still  over  the  country  ; each  peasant  has  the  fowl  in  the  pot.^' 
* Young,  vol.  i.  p.  56  [ed.  Betham-Edwards,  p.  61]. 


280 


BOOK  II.  CHAPTER  VI.  § 7 


He  frequently  notices  the  excellence  of  the  agriculture  of  French 
Flanders,  where  the  farms  “ are  all  small,  and  much  in  the  hands  of 
little  proprietors.”  * In  the  Pays  de  Caux,  also  a country  of  small 
properties,  the  agriculture  was  miserable  ; of  which  his  explanation 
was  that  it  “is  a manufacturing  country,  and  farming  is  but  a 
secondary  pursuit  to  the  cotton  fabric,  which  spreads  over  the  whole 
of  it.”  t The  same  district  is  still  a seat  of  manufactures,  and  a 
country  of  small  proprietors,  and  is  now,  whether  we  judge  from  the 
appearance  of  the  crops  or  from  the  official  returns,  one  of  the  best 
cultivated  in  France.  In  **  Flanders,  Alsace,  and  part  of  Artois,  as 
well  as  on  the  banks  of  the  Garonne,  France  possesses  a husbandry 
equal  to  our  own.”  { Those  countries,  and  a considerable  part  of 
Quercy,  “ are  cultivated  more  like  gardens  than  farms.  Perhaps 
they  are  too  much  like  gardens,  from  the  smallness  of  properties.”  § 
In  those  districts  the  admirable  rotation  of  crops,  so  long  practised 
in  Italy,  but  at  that  time  generally  neglected  in  France,  was  already 
universal.  “ The  rapid  succession  of  crops,  the  harvest  of  one  being 
but  the  signal  of  sowing  immediately  for  a second,”  (the  same  fact 
which  strikes  all  observers  in  the  valley  of  the  Rhine)  “ can  scarcely 
be  carried  to  greater  perfection  : and  this  is  a point,  perhaps,  of  all 
others  the  most  essential  to  good  husbandry,  when  such  crops  are 
so  justly  distributed  as  we  generally  find  them  in  these  provinces ; 
cleaning  and  ameliorating  ones  being  made  the  preparation  for  such 
as  foul  and  exhaust.” 

It  must  not,  however,  be  supposed  that  Arthur  Young’s  testimony 
on  the  subject  of  peasant  properties  is  uniformly  favourable.  In 
Lorraine,  Champagne,  and  elsewhere,  he  finds  the  agriculture  bad, 
and  the  small  proprietors  very  miserable,  in  consequence,  as  he  says, 
of  the  extreme  subdivision  of  the  land.  His  opinion  is  thus  summed 
up  : II  “ Before  I travelled,  I conceived  that  small  farms,  in  property, 
were  very  susceptible  of  good  cultivation  ; and  that  the  occupier  of 
such,  having  no  rent  to  pay,  might  be  sufficiently  at  his  ease  to  work 
improvements,  and  carry  on  a vigorous  husbandry ; but  what  I 
have  seen  in  France,  has  greatly  lessened  my  good  opinion  of  them. 
In  Flanders,  I saw  excellent  husbandry  on  properties  of  30  to  100 
acres  ; but  we  seldom  find  here  such  small  patches  of  property  as 
are  common  in  other  provinces.  In  Alsace,  and  on  the  Garonne, 
that  is,  on  soils  of  such  exuberant  fertility  as  to  demand  no  exertions, 
some  small  properties  also  are  well  cultivated.  In  Bearn,  I passed 

♦ Young,  vol.  i.  pp.  322  -4.  f Ibid.  p.  325. 

% Ibid.  p.  357.  § Ibid.  p.  364.  0 Ibid.  p.  412. 


PEASANT  PROPRIETORS 


281 


through  a region  of  little  farmers,  whose  appearance,  neatness,  ease, 
and  happiness  charmed  me  ; it  was  what  property  alone  could,  on  a 
small  scale,  effect ; but  these  were  by  no  means  contemptibly  small ; 
they  are,  as  I judged  by  the  distance  from  house  to  house,  from  40 
to  80  acres.  Except  these,  and  a very  few  other  instances,  I saw 
nothing  respectable  on  small  properties,  except  a most  unremitting 
industry.  Indeed,  it  is  necessary  to  impress  on  the  reader’s  mind, 
that  though  the  husbandry  I met  with,  in  a great  variety  of  instances 
on  little  properties,  was  as  bad  as  can  be  well  conceived,  yet  the 
industry  of  the  possessors  was  so  conspicuous,  and  so  meritorious, 
that  no  commendations  would  be  too  great  for  it.  It  was 
sufficient  to  prove  that  property  in  land  is,  of  all  others,  the 
most  active  instigator  to  severe  and  incessant  labour.  And 
this  truth  is  of  such  force  and  extent,  that  I know  no  way  so 
sure  of  carrying  tillage  to  a mountain  top,  as  by  permitting  the 
adjoining  villagers  to  acquire  it  in  property ; in  fact,  we  see  that 
in  the  mountains  of  Languedoc,  &c.,  they  have  conveyed  earth 
in  baskets,  on  their  backs,  to  form  a soil  where  nature  had 
denied  it.” 

The  experience,  therefore,  of  this  celebrated  agriculturist  and 
apostle  of  the  grande  culturey  may  be  said  to  be,  that  the  effect  of 
small  properties,  cultivated  by  peasant  proprietors,  is  admirable 
when  they  are  not  too  small : so  small,  namely,  as  not  fully  to  occupy 
the  time  and  attention  of  the  family  ; for  he  often  complains,  with 
great  apparent  reason,  of  the  quantity  of  idle  time  which  the 
peasantry  had  on  their  hands  when  the  land  was  in  very  small 
portions,  notwithstanding  the  ardour  with  which  they  toiled  to  im- 
prove their  little  patrimony  in  every  way  which  their  knowledge 
or  ingenuity  could  suggest.  He  recommends,  accordingly,  that  a 
limit  of  subdivision  should  be  fixed  by  law  ; and  this  is  by  no  means 
an  indefensible  proposition  in  countries,  if  such  there  are,  where  the 
morcellementy  having  already  gone  farther  than  the  state  of  capital 
and  the  nature  of  the  staple  articles  of  cultivation  render  advisable, 
still  continues  progressive.  That  each  peasant  should  have  a patch 
of  land,  even  in  full  property,  if  it  is  not  sufficient  to  support  him  in 
comfort,  is  a system  with  aU  the  disadvantages,  and  scarcely  any  of 
the  benefits,  of  amall  properties  ; since  he  must  either  live  in  indi- 
gence on  the  produce  of  his  land,  or  depend,  as  habitually  as  if  he  had 
no  landed  possessions,  on  the  wages  of  hired  labour  : which,  besides, 
if  all  the  holdings  surrounding  him  are  of  similar  dimensions,  he  has 
little  prospect  of  finding.  The  benefits  of  peasant  properties  are 


282 


BOOK  II.  CHAPTER  VI.  § 7 


conditional  on  their  not  being  too  much  subdivided ; that  is,  on 
their  not  being  required  to  maintain  too  many  persons,  in  proportion 
to  the  produce  that  can  be  raised  from  them  by  those  persons.  The 
question  resolves  itself,  like  most  questions  respecting  the  condition 
of  the  labouring  classes,  into  one  of  population.  Are  small  proper- 
ties a stimulus  to  undue  multiplication,  or  a check  to  it  ? 


CHAPTER  VII 


CONTINUATION  OF  THE  SAME  SUBJECT 

§ 1.  Before  examining  tlie  influence  of  peasant  properties 
on  the  ultimate  economical  interests  of  the  labouring  class,  as  deter- 
mined by  the  increase  of  population,  let  us  note  the  points  respecting 
the  moral  and  social  influence  of  that  territorial  arrangement,  which 
may  be  looked  upon  as  established,  either  by  the  reason  of  the  case, 
or  by  the  facts  and  authorities  cited  in  the  preceding  chapter. 

The  reader  new  to  the  subject  must  have  been  struck  with  the 
powerful  impression  made  upon  all  the  witnesses  to  whom  I have 
referred,  by  what  a Swiss  statistical  writer  calls  the  “ almost  super- 
human industry”  of  peasant  proprietors.*  On  this  point,  at  least, 
authorities  are  unanimous.  Those  who  have  seen  only  one  country 
of  peasant  properties  always  think  the  inhabitants  of  that  country 
the  most  industrious  in  the  world.  There  is  as  httle  doubt  among 
observers,  with  what  feature  in  the  condition  of  the  peasantry  this 
pre-eminent  industry  is  connected.  It  is  the  “ magic  of  property  ” 
which,  in  the  words  of  Arthur  Young,  “ turns  sand  into  gold.” 
The  idea  of  property  does  not,  however,  necessarily  imply  that  there 
should  be  no  rent,  any  more  than  that  there  should  be  no  taxes. 
It  merely  implies  that  the  rent  should  be  a fixed  charge,  not  liable 
to  be  raised  against  the  possessor  by  his  own  improvements,  or  by 
the  will  of  a landlord.  A tenant  at  a quit-rent  is,  to  all  intents  and 
purposes,  a proprietor  ; a copyholder  is  not  less  so  than  a freeholder. 
What  is  wanted  is  permanent  possession  on  fixed  terms.  “ Give 
a man  the  secure  possession  of  a bleak  rock,  and  he  will  turn  it  into 
a garden ; give  him  a nine  years’  lease  of  a garden,  and  he  will 
convert  it  into  a desert.” 

The  details  which  have  been  cited,  and  those,  still  more  minute, 
to  be  found  in  the  same  authorities,  concerning  the  habitually 
elaborate  system  of  cultivation,  and  the  thousand  devices  of  the 
peasant  proprietor  for  making  every  superfluous  hour  and  odd 
* Der  Canton  Schaffhatisen  (ut  supra),  p.  53. 


284 


BOOR  II.  CHAPTER  VII.  § 1 


moment  instrumental  to  some  increase  in  the  future  produce  and 
value  of  the  land,  will  explain  what  has  been  said  in  a previous 
chapter  * respecting  the  far  larger  gross  produce  which,  with  any- 
thing hke  parity  of  agricultural  knowledge,  is  obtained  from  the  same 
quahty  of  soil  on  small  farms,  at  least  when  they  are  the  pro- 
perty of  the  cultivator.  The  treatise  on  Flemish  Husbandry  is 
especially  instructive  respecting  the  means  by  which  untiring 
industry  does  more  than  outweigh  inferiority  of  resources,  im- 
perfection of  implements,  and  ignorance  of  scientific  theories.  The 
peasant  cultivation  of  Flanders  and  Italy  is  affirmed  to  produce 
heavier  crops,  in  equal  circumstances  of  soil,  than  the  best  cultiva  ted 
districts  of  Scotland  and  England.  It  produces  them,  no  doubt, 
with  an  amount  of  labour  which,  if  paid  for  by  an  employer,  would 
make  the  cost  to  him  more  than  equivalent  to  the  benefit ; but  to  the 
peasant  it  is  not  cost,  it  is  the  devotion  of  time  which  he  can  spare, 
to  a favourite  pursuit,  if  we  should  not  rather  say  a ruhng  passion.*]* 

1 We  have  seen,  too,  that  it  is  not  solely  by  superior  exertion  that 
the  Flemish  cultivators  succeed  in  obtaining  these  brilliant  results. 
The  same  motive  which  gives  such  intensity  to  their  industry, 
placed  them  earher  in  possession  of  an  amount  of  agricultural 
knowledge,  not  attained  until  much  later  in  countries  where  agricul- 
ture was  carried  on  solely  by  hired  labour.  An  equally  high  testimony 

* Supra,  Book  i.  ch.  ix.  § 4. 

t Read  the  graphic  description  by  the  historian  Michelet,  of  the  feelings  of 
a peasant  proprietor  towards  his  land. 

“ If  we  would  know  the  inmost  thought,  the  passion,  of  the  French  peasant, 
it  is  very  easy.  Let  us  walk  out  on  Sunday  into  the  country  and  follow  him. 
Behold  him  yonder,  walking  in  front  of  us.  It  is  two  o’clock ; his  wife  is  at 
vespers  ; he  has  on  his  Sunday  clothes  ; I perceive  that  he  is  going  to  visit 
his  mistress. 

“ What  mistress  ? His  land. 

“ I do  not  say  he  goes  straight  to  it.  No,  he  is  free  to-day,  and  may  either 
go  or  not.  Does  he  not  go  every  day  in  the  week  ? Accordingly,  he  turns 
aside,  he  goes  another  way,  he  has  business  elsewhere.  And  yet — he  goes. 

“ It  is  true,  he  was  passing  close  by ; it  was  an  opportunity.  He  looks,  but 
apparently  he  will  not  go  in  ; what  for  ? And  yet — he  enters. 

“ At  least  it  is  probable  that  he  will  not  work ; he  is  in  his  Sunday  dress  : 
he  has  a clean  shirt  and  blouse.  -Still,  there  is  no  harm  in  plucking  up  this 
weed  and  throwing  out  that  ston&.  There  is  a stump,  too,  which  is  in  the  way  ; 
but  he  has  not  his  tools  with  him,  ne  will  do  it  to-morrow. 

“ Then  he  folds  his  arms  and  gazes,  serious  and  careful.  He  gives  a long, 
a very  long  look,  and  seems  lost  in  thought.  At  last,  if  he  thinks  himself 
observed,  if  he  sees  a passer-by,  he  moves  slowly  away.  Thirty  paces  off  he 
stops,  turns  round,  and  casts  on  his  land  a last  look,  sombre  and  profound,  but 
to  those  who  can  see  it,  the  look  is  full  of  passion,  of  heart,  of  devotion.” — Le 
Peuple,  by  J.  Michelet,  Ire  partie,  ch.  1. 

^ [This  paragraph  was  added  in  the  5th  ed.  (1862).] 


PEASANT  PROPRIETORS 


28fi 


is  borne  by  M.  de  Lavergne  * to  the  agricultuial  skill  of  the  small 
proprietors  in  those  parts  of  France  to  which  the  fetite  culture  is 
really  suitable.  “ In  the  rich  plains  of  Flanders,  on  the  banks  of 
the  Rhine,  the  Garonne,  the  Charente,  the  Rhone,  all  the  practices 
which  fertilize  the  land  and  increase  the  productiveness  of  labour 
are  known  to  the  very  smallest  cultivators,  and  practised  by  them, 
however  considerable  may  be  the  advances  which  they  require. 
In  their  hands,  abundant  manures,  collected  at  great  cost,  repair 
and  incessantly  increase  the  fertility  of  the  soil,  in  spite  of  the 
activity  of  cultivation.  The  races  of  cattle  are  superior,  the  crops 
magnificent.  Tobacco,  flax,  colza,  madder,  beetroot,  in  some 
places  ; in  others,  the  vine,  the  olive,  the  plum,  the  mulberry,  only 
yield  their  abundant  treasures  to  a population  of  industrious 
labourers.  Is  it  not  also  to  the  fetite  culture  that  we  are  indebted  for 
most  of  the  garden  produce  obtained  by  dint  of  great  outlay  in 
the  neighbourhood  of  Paris  ? ” 

§ 2.  Another  aspect  of  peasant  properties,  in  which  it  is  essential 
that  they  should  be  considered,  is  that  of  an  instrument  of  popular 
education.  Books  and  schooling  are  absolutely  necessary  to 
education  ; but  not  all-sufiicient.  The  mental  faculties  will  be 
most  developed  where  they  are  most  exercised ; and  what  gives 
more  exercise  to  them  than  the  having  a multitude  of  interests, 
none  of  which  can  be  neglected,  and  which  can  be  provided  for  only 
by  varied  efforts  of  will  and  intelligence  ? Some  of  the  disparagers 
of  small  properties  lay  great  stress  on  the  cares  and  anxieties  which 
beset  the  peasant  proprietor  of  the  Rhineland  or  Flanders.  It  is 
precisely  those  cares  and  anxieties  which  tend  to  make  him  a 
superior  being  to  an  Enghsh  day-labourer.  It  is,  to  be  sure,  rather 
abusing  the  privileges  of  fair  argument  to  represent  the  condition 
of  a day-labourer  as  not  an  anxious  one.  I can  conceive  no  circum- 
stances in  which  he  is  free  from  anxiety,  where  there  is  a possibility 
of  being  out  of  employment ; unless  he  has  access  to  a profuse 
dispensation  of  parish  pay,  and  no  shame  or  reluctance  in  demanding 
it.i  The  day-labourer  has,  in  the  existing  state  of  society  and 

♦ Essai  sur  V Economie  Rurale  de  VAngleterre,  de  VEcosse,  et  de  VIrlande,  Sine 
^d.  p.  127.  [Cf.  English  translation  in  Rural  Economy  of  Great  Britain  and 
Ireland  (1855),  p.  116.]  ^ 

^ [Here  followed  in  the  original  text  the  following  words,  omitted  in  the  SrcT 
ed,  (1852) : “ then  indeed  he  may  feel  with  the  old  doggrel— 

Hang  sorrow,  cast  away  care. 

The  parish  is  bound  to  find  us. 

But  unless  so  shielded,  the  day  labourer,”  &c.] 


286 


BOOK  II.  CHAPTER  VII.  § 3 


population,  many  of  the  anxieties  which  have  not  an  invigorating 
effect  on  the  mind,  and  none  of  those  which  have.  The  position 
of  the  peasant  proprietor  of  Continental  Europe  is  the  reverse. 
From  the  anxiety  which  chills  and  paralyses — the  uncertainty  of 
having  food  to  eat — few  persons  are  more  exempt : it  requires  as 
rare  a concurrence  of  circumstances  as  the  potato  failure  combined 
with  an  universal  bad  harvest,  to  bring  him  within  reach  of  that 
danger.  His  anxieties  are  the  ordinary  vicissitudes  of  more  and 
less ; his  cares  are  that  he  takes  his  fair  share  of  the  business  of 
life ; that  he  is  a free  human  being,  and  not  perpetually  a child, 
which  seems  to  be  the  approved  condition  of  the  labouring  classes 
according  to  the  prevailing  philanthropy.  He  is  no  longer  a being 
of  a different  order  from  the  middle  classes ; he  has  pursuits  and 
objects  like  those  which  occupy  them,  and  give  to  their  intellects 
the  greatest  part  of  such  cultivation  as  Ihey  receive.  If  there  is  a 
first  principle  in  intellectual  education,  it  is  this — that  the  discipline 
which  does  good  to  the  mind  is  that  in  which  the  mind  is  active,  ^ 
not  that  in  which  it  is  passive.  The  secret  for  developing  the 
faculties  is  to  give  them  much  to  do,  and  much  inducement  to  do  it. 
This  detracts  nothing  from  the  importance,  and  even  necessity,  of 
other  kinds  of  mental  cultivation.  The  possession  of  property 
will  not  prevent  the  peasant  from  being  coarse,  selfish,  and  narrow- 
minded. These  things  depend  on  other  influences  and  other  kinds 
of  instruction.  But  this  great  stimulus  to  one  kind  of  mental 
activity  in  no  way  impedes  any  other  means  of  intellectual  develop- 
ment. On  the  contrary,  by  cultivating  the  habit  of  turning  to 
practical  use  every  fragment  of  knowledge  acquired,  it  helps  to 
render  that  schooling  and  reading  fruitful,  which  without  some  such 
auxiliary  influence  are  in  too  many  cases  like  seed  thrown  on  a rock. 

§ 3.  It  is  not  on  the  intelligence  alone  that  the  situation  of  a 
peasant  proprietor  exercises  an  improving  influence.  It  is  no 
less  propitious  to  the  moral  virtues  of  prudence,  temperance,  and 
self-control.  Day-labourers,  where  the  labouring  class  mainly 
consists  of  them,  are  usually  improvident : they  spend  carelessly 
to  the  full  extent  of  their  means,  and  let  the  future  shift  for  itself. 
This  is  so  notorious,  that  many  persons  strongly  interested  in  the 
welfare  of  the  labouring  classes,  hold  it  as  a fixed  opinion  that  an 
increase  of  wages  would  do  them  little  good,  unless  accompanied 
by  at  least  a corresponding  improvement  in  their  tastes  and  habits. 
The  tendency  of  peasant  proprietors,  and  of  those  who  hope  to 


PEASANT  PROPRIETORS 


287 


become  proprietors,  is  to  the  contrary  extreme  ; to  take  even  too 
much  thought  for  the  morrow.  They  are  oftener  accused  of  penuri- 
ousness than  of  prodigality.  They  deny  themselves  reasonable 
indulgences,  and  live  wretchedly  in  order  to  economize.  In  Switzer- 
land almost  everybody  saves,  who  has  any  means  of  saving ; the 
case  of  the  Flemish  farmers  has  been  already  noticed  : among  the 
French,  though  a pleasure-loving  and  reputed  to  be  a self-indulgent 
people,  the  spirit  of  thrift  is  diffused  through  the  rural  population 
in  a manner  most  gratifying  as  a whole,  and  which  in  individual 
instances  errs  rather  on  the  side  of  excess  than  defect.  Among 
those  who,  from  the  hovels  in  which  they  live,  and  the  herbs  and 
roots  which  constitute  their  diet,  are  mistaken  by  travellers  for 
proofs  and  specimens  of  general  indigence,  there  are  numbers  who 
have  hoards  in  leathern  bags,  consisting  of  sums  in  five-franc  pieces, 
which  they  keep  by  them  perhaps  for  a whole  generation,  unless 
brought  out  to  be  expended  in  their  most  cherished  gratification — 
the  purchase  of  land.  If  there  is  a moral  inconvenience  attached 
to  a state  of  society  in  which  the  peasantry  have  land,  it  is  the 
danger  of  their  being  too  careful  of  their  pecuniary  concerns  ; of  its 
making  them  crafty,  and  “ calculating  ” in  the  objectionable  sense. 
The  French  peasant  is  no  simple  countryman,  no  downright  “ paysan 
du  Danube  ; both  in  fact  and  in  fiction  he  is  now  “ le  ruse  paysan.” 
That  is  the  stage  which  he  has  reached  in  the  progressive  develop- 
ment which  the  constitution  of  things  has  imposed  on  human  intelli- 
gence and  human  emancipation.  But  some  excess  in  this  direction 
is  a small  and  a passing  evil  compared  with  recklessness  and  im- 
providence in  the  labouring  classes,  and  a cheap  price  to  pay  for  the 
inestimable  worth  of  the  virtue  of  self-dependence,  as  the  general 
characteristic  of  a people  : a virtue  which  is  one  of  the  first  conditions 
of  excellence  in  the  human  character — the  stock  on  which  if  the 
other  virtues  are  not  grafted,  they  have  seldom  any  firm  root ; a 
quality  indispensable  in  the  case  of  a labouring  class,  even  to  any 
tolerable  degree  of  physical  comfort ; and  by  which  the  peasantry  of 
France,  and  of  most  European  countries  of  peasant  proprietors,  are 
distinguished  beyond  any  other  labouring  population. 

§ 4.  Is  it  likely  that  a state  of  economical  relations  so  con- 
ducive to  frugality  and  prudence  in  every  other  respect,  should  be 
prejudicial  to  it  in  the  cardinal  point  of  increase  of  population  ? 
That  it  is  so,  is  the  opinion  expressed  by  most  of  those  English 
political  economists  who  have  written  anything  about  the  matter. 


288 


BOOK  IL  CHAPTER  VII.  § 4 


Mr.  McCulloch’s  opinion  is  well  known.  Mr.  Jones  affirms,*  that  a 
“ peasant  population  raising  their  own  wages  from  the  soil,  and 
consuming  them  in  kind,  are  universally  acted  upon  very  feebly  by 
internal  checks,  or  by  motives  disposing  them  to  restraint.  The 
consequence  is,  that  unless  some  external  cause,  quite  independent 
of  their  will,  forces  such  peasant  cultivators  to  slacken  their  rate 
of  increase,  they  will,  in  a hmited  territory,  very  rapidly  approach 
a state  of  want  and  penury,  and  will  be  stopped  at  last  only  by  the 
physical  impossibility  of  procuring  subsistence.”  He  elsewhere  f 
speaks  of  such  a peasantry  as  “ exactly  in  the  condition  in  which 
the  animal  disposition  to  increase  their  numbers  is  checked  by  the 
fewest  of  those  balancing  motives  and  desires  which  regulate  the 
increase  of  superior  ranks  or  more  civihzed  people.”  The  “ causes  of 
this  pecuharity,”  Mr.  Jones  promised  to  point  out  in  a subsequent 
work,  which  never  made  its  appearance.  I am  totally  unable  to  con- 
jecture from  what  theory  of  human  nature,  and  of  the  motives  which 
influence  human  conduct,  he  would  have  derived  them.  Arthur 
Young  assumes  the  same  “ peculiarity,”  as  a fact ; but,  though  not 
much  in  the  habit  of  quahfying  his  opinions,  he  does  not  push  his 
doctrine  to  so  violent  an  extreme  as  Mr.  Jones  ; having,  as  we  have 
seen,  himself  testified  to  various  instances  in  which  peasant  popula- 
tions such  as  Mr.  Jones  speaks  of,  were  not  tending  to  “ a state  of 
want  and  penury,”  and  were  in  no  danger  whatever  of  coming  into 
contact  with  “ physical  impossibihty  of  procuring  subsisteoce.” 

That  there  should  be  discrepancy  of  experience  on  this  matter, 
is  easily  to  be  accounted  for.  Whether  the  labouring  people  live 
by  land  or  by  wages,  they  have  always  hitherto  multiphed  up  to  the 
limit  set  by  their  habitual  standard  of  comfort.  When  that  standard 
was  low,  not  exceeding  a scanty  subsistence,  the  size  of  properties, 
as  well  as  the  rate  of  wages,  has  been  kept  down  to  what  would 
barely  support  hfe.  Extremely  low  ideas  of  what  is  necessary  for 
subsistence,  are  perfectly  compatible  with  peasant  properties  ; and 
if  a people  have  always  been  used  to  poverty,  and  habit  has  recon- 
ciled them  to  it,  there  will  be  over-population,  and  excessive  sub- 
division of  land.  But  this  is  not  to  the  purpose.  The  true  question  is, 
supposing  a peasantry  to  possess  land  not  insufficient  but  sufficient 
for  their  comfortable  support,  are  they  more,  or  less,  hkely  to  fall 
from  this  state  of  comfort  through  improvident  multiphcation, 
than  if  they  were  hving  in  an  equally  comfortable  manner  as  hired 

* Essay  on  the  Distribution  of  Wealth,  p.  146.  [Peasant  Rents,  p.  132.] 

t Ibid.  p.  68.  [Peasant  Rents,  p.  59.] 


PEASANT  PROPRIETORS 


289 


labourers  7 All  d 'priori  considerations  are  in  favour  of  their  being 
less  likely.  The  dependence  of  wages  on  population  is  a matter 
of  speculation  and  discussion.  That  wages  would  fall  if  population 
were  much  increased  is  often  a matter  of  real  doubt,  and  always 
a thing  which  requires  some  exercise  of  the  thinking  faculty  for 
its  intelligent  recognition.  But  every  peasant  can  satisfy  himself 
from  evidence  which  he  can  fully  appreciate,  whether  his  piece  of 
land  can  be  made  to  support  several  families  in  the  same  comfort 
as  it  supports  one.  Few  people  like  to  leave  to  their  children 
a worse  lot  in  life  than  their  own.  The  parent  who  has  land  to 
leave  is  perfectly  able  to  judge  whether  the  children  can  live  upon 
it  or  not : but  people  who  are  supported  by  wages  see  no  reason 
why  their  sons  should  be  unable  to  support  themselves  in  the  same 
way,  and  trust  accordingly  to  chance.  “ In  even  the  most  useful 
and  necessary  arts  and  manufactures,”  says  Mr.  Laing,*  “ the 
demand  for  labourers  is  not  a seen,  known,  steady,  and  appreciable 
demand  : but  it  is  so  in  husbandry  ” under  small  properties.  “ The 
labour  to  be  done,  the  subsistence  that  labour  will  produce  out  of 
his  portion  of  land,  are  seen  and  known  elements  in  a man’s  cal- 
culation upon  his  means  of  subsistence.  Can  his  square  of  land, 
or  can  it  not,  subsist  a family  ? Can  he  marry  or  not  ? are  questions 
which  every  man  can  answer  without  delay,  doubt,  or  speculation. 
It  is  the  depending  on  chance,  where  judgment  has  nothing  clearly 
set  before  it,  that  causes  reckless,  improvident  marriages  in  the 
lower,  as  in  the  higher  classes,  and  produces  among  us  the  evils 
of  over-population  ; and  chance  necessarily  enters  into  every  man’s 
calculations,  when  certainty  is  removed  altogether  ; as  it  is,  where 
certain  subsistence  is,  by  our  distribution  of  property,  the  lot  of 
but  a small  portion  instead  of  about  two-thirds  of  the  people.” 

There  never  has  been  a writer  more  keenly  sensible  of  the  evils 
brought  upon  the  labouring  classes  by  excess  of  population  than 
Sismondi,  and  this  is  one  of  the  grounds  of  his  earnest  advocacy  of 
peasant  properties.  He  had  ample  opportunity,  in  more  countries 
than  one,  for  judging  of  their  effect  on  population.  Let  us  see  his 
testimony.  “ In  the  countries  in  which  cultivation  by  small  pro- 
prietors still  continues,  population  increases  regularly  and  rapidly 
until  it  has  attained  its  natural  hmits  ; that  is  to  say,  inheritances 
continue  to  be  divided  and  subdivided  among  several  sons,  as  long 
as,  by  an  increase  of  labour,  each  family  can  extract  an  equal  in- 
come from  a smaller  portion  of  land.  A father  who  possessed  a 
♦ Notes  of  a Traveller^  p.  46. 


290 


BOOK  n.  CHAPTER  VH.  § 4 


vast  extent  of  natural  pasture,  divides  it  among  his  sons,  and  they 
turn  it  into  fields  and  meadows  ; his  sons  divide  it  among  their  sons, 
who  abolish  fallows  : each  improvement  in  agricultural  knowledge 
admits  of  another  step  in  the  subdivision  of  property.  But  there 
is  no  danger  lest  the  proprietor  should  bring  up  his  children  to  make 
beggars  of  them.  He  knows  exactly  what  inheritance  he  has  to 
leave  them ; he  knows  that  the  law  will  divide  it  equally  among 
them ; he  sees  the  limit  beyond  which  this  division  would  make 
them  descend  from  the  rank  which  he  has  himself  filled,  and  a just 
family  pride,  common  to  the  peasant  and  to  the  nobleman,  makes 
him  abstain  from  summoning  into  life  children  for  whom  he  cannot 
properly  pro\dde.  If  more  are  born,  at  least  they  do  not  marry,  or 
they  agree  among  themselves  which  of  several  brothers  shall  per- 
petuate the  family.  It  is  not  found  that  in  the  Swiss  Cantons  the 
patrimonies  of  the  peasants  are  ever  so  divided  as  to  reduce  them 
below  an  honourable  competence ; though  the  habit  of  foreign 
service,  by  opening  to  the  children  a career  indefinite  and  uncal- 
culable,  sometimes  calls  forth  a super-abundant  population.”  * 
There  is  similar  testimony  respecting  Norway.  Though  there  is 
no  law  or  custom  of  primogeniture,  and  no  manufactures  to  take  off 
a surplus  population,  the  subdivision  of  property  is  not  carried  to  an 
injurious  extent.  “ The  division  of  the  land  among  children,” 
says  Mr.  Laing,t  “ appears  not,  during  the  thousand  years  it  has 
been  in  operation,  to  have  had  the  effect  of  reducing  the  landed 
properties  to  the  minimum  size  that  will  barely  support  human 
existence.  I have  counted  from  five-and-twenty  to  forty  cows 
upon  farms,  and  that  in  a country  in  which  the  farmer  must,  for  at 
least  seven  months  in  the  year,  have  winter  provender  and  houses 
provided  for  all  the  cattle.  It  is  evident  that  some  cause  or  other, 
operating  on  aggregation  of  landed  property,  counteracts  the  divid- 
ing effects  of  partition  among  children.  That  cause  can  be  no 
other  than  what  I have  long  conjectured  would  be  effective  in  such 
a social  arrangement ; viz.  that  in  a comitry  where  land  is  held,  not 
in  tenancy  merely,  as  in  Ireland,  but  in  full  ownership,  its  aggrega- 
tion by  the  deaths  of  co-heirs,  and  by  the  marriages  of  the  female 
heirs  among  the  body  of  landholders,  will  balance  its  subdivision 
by  the  equal  succession  of  children.  The  whole  mass  of  property 
will,  I conceive,  be  found  in  such  a state  of  society  to  consist  of  as 
many  estates  of  the  class  of  lOOOi.,  as  many  of  100^.,  as  many  of  10/., 
a year,  at  one  period  as  another.”  That  this  should  happen,  supposes 
* Nouveattz  Principes,  Book  iii.  ch.  3.  f Residence  in  Norway^  p.  18. 


PEASANT  PROPRIETORS 


291 


diffused  through  society  a very  efficacious  prudential  check  to  popula- 
tion ; and  it  is  reasonable  to  give  part  of  the  credit  of  this  prudential 
restraint  to  the  peculiar  adaptation  of  the  peasant-proprietary 
system  for  fostering  it. 

^ “ In  some  parts  of  Switzerland,”  says  Mr.  Kay,*  “ as  in  the 
canton  of  Argo  vie  for  instance,  a peasant  never  marries  before  he 
attains  the  age  of  twenty-five  years,  and  generally  much  later  in  life  ; 
and  in  that  canton  the  women  very  seldom  marry  before  they  have 
attained  the  age  of  thirty.  . , . Nor  do  the  division  of  land  and  the 
cheapness  of  the  mode  of  conveying  it  from  one  man  to  another 
encourage  the  providence  of  the  labourers  of  the  rural  districts  only. 
They  act  in  the  same  manner,  though  perhaps  in  a less  degree,  upon 
the  labourers  of  the  smaller  towns.  In  the  smaller  provincial  towns 
it  is  customary  for  a labourer  to  own  a small  plot  of  ground  outside 
the  town.  This  plot  he  cultivates  in  the  evening  as  his  kitchen 
garden.  He  raises  in  it  vegetables  and  fruits  for  the  use  of  his 
family  during  the  winter.  After  his  day’s  work  is  over,  he  and  his 
family  repair  to  the  garden  for  a short  time,  which  they  spend  in 
planting,  sowing,  weeding,  or  preparing  for  sowing  or  harvest, 
according  to  the  season.  The  desire  to  become  possessed  of  one  of 
these  gardens  operates  very  strongly  in  strengthening  prudential 
habits  and  in  restraining  improvident  marriages.  Some  of  the 
manufacturers  in  the  canton  of  Argo  vie  told  me  that  a townsman 
was  seldom  contented  until  he  had  bought  a garden,  or  a garden  and 
house,  and  that  the  town  labourers  generally  deferred  their  marriages 
for  some  years,  in  order  to  save  enough  to  purchase  either  one  or 
both  of  these  luxuries.” 

The  same  writer  shows  by  statistical  evidence  f that  in  Prussia 
the  average  age  of  marriage  is  not  only  much  later  than  in  England, 
but  “ is  gradually  becoming  later  than  it  was  formerly,”  while  at 
the  same  time  “ fewer  illegitimate  children  are  born  in  Prussia  than 
in  any  other  of  the  European  countries.”  “ Wherever  I travelled,” 
says  Mr.  Kay,  J “ in  North  Germany  and  Switzerland,  I was  assured 
by  all  that  the  desire  to  obtain  land,  which  was  felt  by  all  the 
peasants,  was  acting  as  the  strongest  possible  check  upon  undue 
increase  of  population.”  § 

In  Flanders,  according  to  Mr.  Fauche,  the  British  Consul  at 

‘ [This  and  the  next  two  paragraphs  were  added  in  the  3rd  ed.  (1852).] 

* Vol.  i.  pp.  67-9.  t Vol.  i.  pp.  75-9.  J Ibid.  p.  90. 

§ The  Prussian  minister  of  statistics,  in  a work  {Der  V olkswohlstand  im 
Preussischen  Staate)  which  I am  obliged  to  quote  at  second  hand  from  Mr.  Ka  v, 
after  proving  by  figures  the  great  and  progressive  increase  of  the  consumption 


292 


BOOK  n.  CHAPTER  VIL  § 4 


Ostend,*  “ farmers’  sons  and  those  who  have  the  means  to  become 
farmers  will  delay  their  marriage  until  they  get  possession  of  a 
farm.”  Once  a farmer,  the  next  object  is  to  become  a proprietor. 
“ The  first  thing  a Dane  does  with  his  savings,”  says  Mr.  Browne, 
the  Consul  at  Copenhagen,f  “is  to  purchase  a clock,  then  a horse 
and  cow,  which  he  hires  out,  and  which  pays  a good  interest.  Then 
his  ambition  is  to  become  a petty  proprietor,  and  this  class  of 
persons  is  better  off  than  any  in  Denmark.  Indeed,  I know  of  no 
people  in  any  country  who  have  more  easily  within  their  reach  all 
that  is  really  necessary  for  life  than  this  class,  which  is  very  large  in 
comparison  with  that  of  labourers.” 

But  the  experience  which  most  decidedly  contradicts  the  asserted 
tendency  of  peasant  proprietorship  to  produce  excess  of  population, 
is  the  case  of  France.  In  that  country  the  experiment  is  not  tried 
in  the  most  favourable  circumstances,  a large  proportion  of  the 
properties  being  too  small.  The  number  of  landed  proprietors  in 
France  is  not  exactly  ascertained,  but  on  no  estimate  does  it  fall 
much  short  of  five  millions  ; which,  on  the  lowest  calculation  of  the 
number  of  persons  of  a family  (and  for  France  it  ought  to  be  a low 
calculation),  shows  much  more  than  half  the  population  as  either 
possessing,  or  entitled  to  inherit,  landed  property.  A majority  of 
the  properties  are  so  small  as  not  to  afford  a subsistence  to  the  pro- 
prietors, of  whom,  according  to  some  computations,  as  many  as 
three  millions  are  obliged  to  eke  out  their  means  of  support  either 
by  working  for  hire,  or  by  taking  additional  land,  generally  on 
metayer  tenure.  When  the  property  possessed  is  not  sufficient  to 
relieve  the  possessor  from  dependence  on  wages,  the  condition  of  a 
proprietor  loses  much  of  its  characteristic  efficacy  as  a check  to 
over-population  ; and  if  the  prediction  so  often  made  in  England 
had  been  realized,  and  France  had  become  a “ pauper  warren,”  the 
experiment  would  have  proved  nothing  against  the  tendencies  of 
the  same  system  of  agricultural  economy  in  other  circumstances. 
But  what  is  the  fact  ? That  the  rate  of  increase  of  the  French 

of  food  and  clothing  per  head  of  the  population,  from  which  he  justly  infers  a 
corresponding  increase  of  the  productiveness  of  agriculture,  continues ; “ The 
division  of  estates  has,  since  1831,  proceeded  more  and  more  throughout  the 
country.  There  are  now  many  more  small  independent  proprietors  than 
formerly.  Yet,  however  many  complaints  of  pauperism  are  heard  among  the 
dependent  labourers,  we  never  hear  it  complained  that  pauperism  is  increasing 
among  the  peasant  proprietors.” — Kay,  i.  262-6. 

* In  a communication  to  the  Commissioners  of  Poor  Law  Enquiry,  p.  640 
of  their  Foreign  Communications,  Appendix  F to  their  First  Report, 
t Ibid.  268. 


PEASANT  PROPRIETORS 


293 


population  h the  slowest  in  Europe.  During  the  generation  which 
the  Revolution  raised  from  the  extreme  of  hopeless  wretchedness  to 
sudden  abundance,  a great  increase  of  population  took  place.  But 
a generation  has  grown  up,  which,  having  been  born  in  improved 
circumstances,  has  not  learnt  to  be  miserable  ; and  upon  them  the 
spirit  of  thrift  operates  most  conspicuously,  in  keeping  the  increase 
of  population  within  the  increase  of  national  wealth.  In  a table 
drawn  up  by  Professor  Rau,*  of  the  rate  of  annual  increase  of  the 


♦ The  following  is  the  table  (see  p.  1G8  of  the  Belgian  translation  of  Mr. 


Rau’s  large  work)  : 

Per  cent. 

United  States  . 1820-30  . .2-92 

Hungary  (according  to  Rohrer)  2-40 
England  . . 1811-21  . .1*78 

„ . . . 1821-31  . .1-60 

Austria  (Rohrer)  . . . .1*30 

Prussia  . . . 1816-27  . .1*54 

„ ...  1820-30  . .1-37 

„ ...  1821-31  . . 1-27 

Netherlands  . 1821-28  . . 1*28 


Per  cent. 


Scotland 

. . 1821-31  . . 

1-30 

Saxony  . 

. . 1815-30  . . 

M5 

Baden  . 

1820-30  (Heunisch) 

113 

Bavaria 

. . 1814-28  . . 

1-08 

Naples  . 

. . 1814-24  . . 

0-83 

France  . 

. 1817-27  (Mathieu) 

0-63 

and  more 

recently  (Moreau  de 

Jonnes) 



0-55 

But  the  number  given  by  Moreau  do  Jonnds,  he  adds,  is  not  entitled  to 
implicit  confidence. 

The  following  table  given  by  M.  Quetelet  {Sur  V Homme  et  le  DSveloppement 
de  ses  Facultes,  vol.  i.  ch.  7)  also  on  the  authority  of  Rau,  contains  additional 
matter,  and  differs  in  some  items  from  the  preceding,  probably  from  the  author’s 
having  taken,  in  those  cases,  an  average  of  different  years  : 


Ireland 
Hungary 
Spain  . 
England 


Per  cent. 

. 2-45 
. 2-40 
. 1-66 
. 1*65 


Per  cent. 

Rhenish  Prussia  . 1*33 
Austria  . . .1*30 

Bavaria  . . .1-08 

Netherlands  . .0*94 


Naples  . 
France . 
Sweden 
Lombardy . 


Per  cent. 

. 0-83 
. 0-63 
. 0-58 
. 0*45 


A very  carefully  prepared  statement,  by  M.  Legoyt,  in  the  Journal  des 
Economistes  for  May  1847,  which  brings  up  the  results  for  France  to  the  census 
of  the  preceding  year  1846,  is  summed  up  in  the  following  table  ; 


According 
to  the 

According  to 
the  excess 
of  births  over 

According 
to  the 

According  to 
the  excess 
of  births  over 

census. 

deaths. 

census. 

deaths. 

per  cent. 

per  cent. 

per  cent. 

per  cent. 

Sweden 

0-83 

M4 

Wurtemburg  . 

0 01 

1-00 

Norway 

1*36 

1-30 

Holland  , 

0-90 

103 

Denmark  . 

0-95 

Belgium  . 

0*76 

Russia  . 

061 

Sardinia  . 

1*08 

Austria 

0*85 

0-90 

Great  Britain 

Prussia 

1-84 

M8 

(exclusive 

[ 1-95 

1*00 

Saxony 

1*45 

0-90 

of  Ireland) 

) 

Hanover  . . 

. . 

0-85 

France  . 

0-68 

0-60 

Bavaria  . • 

- 

0-71 

United  States. 

3-27 

294 


BOOK  II.  CHAPTER  VII.  § 4 


populations  of  various  countries,  that  of  France,  from  1817  to  1827, 
is  stated  at  per  cent,  that  of  England  during  a similar  decennial 
period  being  annually,  and  that  of  the  United  States  nearly  3. 
According  to  the  official  returns  as  analysed  by  M.  Legoyt,*  the 
increase  of  the  population,  which  from  1801  to  1806  was  at  the  rate 
of  1*28  per  cent  annually,  averaged  only  0*47  per  cent  from  1806  to 
1831 ; from  1831  to  1836  it  averaged  0'60  per  cent ; from  1836  to 
1841,  0*41  per  cent,  and  from  1841  to  1846,  0*68  per  cent.f  ^ At 
the  census  of  1851  the  rate  of  annual  increase  shown  was  only  1*08 
per  cent  in  the  five  years,  or  0*21  annually  ; and  at  the  census  of 
1856  only  0*71  per  cent  in  five  years,  or  0*14  annually  : so  that,  in 
the  words  of  M,  de  Lavergne,  “ la  population  ne  s’accroit  presque 
plus  en  France.”  J Even  this  slow  increase  is  wholly  the  effect  of 
a diminution  of  deaths ; the  number  of  births  not  increasing  at 
all,  while  the  proportion  of  the  births  to  the  population  is  constantly 
diminishing.§  This  slow  growth  of  the  numbers  of  the  people,  while 


* Journal  des  Economistea  for  March  and  May  1847. 

f M.  Legoyt  is  of  opinion  that  the  population  was  understated  in  1841,  and 
the  increase  between  that  time  and  1846  consequently  overstated,  and  that  the 
real  increase  during  the  whole  period  was  something  intermediate  between  the 
last  two  averages,  or  not  much  more  than  one  in  two  hundred. 

^ [This  sentence  was  added  to  the  4th  ed.  (1857).] 

J Journal  des  Economistes  for  February  1847. — [1865]  In  the  Journal  for 
January  1865,  M.  Legoyt  gives  some  of  the  numbers  slightly  altered,  and  I 
presume  corrected.  The  series  of  percentages  is  1*28,  0-31,  0‘69,  0-60,  0*41, 
0'68,  0*22,  and  0-20.  The  last  census  in  the  table,  that  of  1861,  shows  a slight 
reaction,  the  percentage,  independently  of  the  newly  acquired  departments, 
being  0*32.  [M.  Emile  Levasseur  {La  Population  Francaise,  1889,  vol.  i.  p.  315) 
cites  a calculation  of  M.  Loua,  according  to  which  the  increase  per  cent  for  the 
territory  which  has  constituted  France  since  1871,  was  for  the  period  1801-1821 
0-56  ; 1821-1841,  0*59  ; 1841-1861,  0*36  ; 1861-1881,  0-27.] 

§ The  following  are  the  numbers  given  by  M.  Legoyt : 


From  1824  to  1828  1 

„ 1829  to  1833  ^ 

„ 1834  to  1838 

„ 1839  to  1843 

„ 1844  and  1845 


annual  number 
of  births 

99 


981,914,  being  1 in  32*30 


965,444,  „ 
972,993,  „ 
970,617,  „ 
983,573,  „ 


1 in  34*00 
1 in  34*39 
1 in  35*27 
1 in  35*58 


of  the  popu- 
lation. 


In  the  last  two  years  the  births,  according  to  M.  Legoyt,  were  swelled  by 
the  effects  of  a considerable  immigration.  This  diminution  of  births,”  he 
observes,  “ while  there  is  a constant,  though  not  a rapid  increase  both  of  popu- 
lation and  of  marriages,  can  only  be  attributed  to  the  progress  of  prudence  and 
forethought  in  families.  It  was  a foreseen  consequence  of  our  civil  and  social 
institutions,  which,  producing  a daily  increasing  subdivision  of  fortunes,  both 
landed  and  moveable,  call  forth  in  our  people  the  instincts  of  conservation  and 
of  comfort.” 

In  four  departments,  among  which  are  two  of  the  most  thriving  in  Nor- 
mandy, the  deaths  even  then  exceeded  the  births. — [1857]  The  census  of  1856 


PEASANT  PROPRIETORS 


296 


capital  increases  much  more  rapidly,  has  caused  a noticeable  im- 
provement in  the  condition  of  the  labouring  class.  The  circumstances 
of  that  portion  of  the  class  who  are  landed  proprietors  are  not 
easily  ascertained  with  precision,  being  of  course  extremely  variable  ; 
but  the  mere  labourers,  who  derived  no  direct  benefit  from  the 
changes  in  landed  property  which  took  place  at  the  Revolution, 
have  unquestionably  much  improved  in  condition  since  that  period.* 

exhibits  the  remarkable  fact  of  a positive  diminution  in  the  population  of  54 
out  of  the  86  departments.  A significant  comment  on  the  pauper- warren 
theory.  See  M.  de  Lavergpe’s  analysis  of  the  returns. 

* “ The  classes  of  our  population  which  have  only  wages,  and  are  therefore 
the  most  exposed  to  indigence,  are  now  (1846)  much  better  provided  with  the 
necessaries  of  food,  lodging,  and  clothing  than  they  were  at  the  beginning  of  the 
century.  This  may  be  proved  by  the  testimony  of  all  persons  who  can  re- 
member the  earlier  of  the  two  periods  compared.  Were  there  any  doubts  on 
the  subject  they  might  easily  be  dissipated  by  consulting  old  cultivators  and 
workmen,  as  I have  myself  done  in  various  localities,  without  meeting  with  a 
single  contrary  testimony  ; we  may  also  appeal  to  the  facts  collected  by  an 
accurate  observer,  M.  Villerme  {Tableau  de  VEtat  Physique  et  Moral  des  Ouvriers, 
liv.  ii.  ch.  i.).”  From  an  intelligent  work  published  in  1846,  Recherches  sur  lea 
Causes  de  VIndigence,  par  A.  Clement,  pp.  84-6.  The  same  writer  speaks 
(p.  118)  of ; “ the  considerable  rise  which  has  taken  place  since  1789  in  the 
wages  of  agricultural  day-labourers ; ” and  adds  the  following  evidence  of  a 
higher  standard  of  habitual  requirements,  even  in  that  portion  of  the  town 
population,  the  state  of  which  is  usually  represented  as  most  deplorable. 
“ In  the  last  fifteen  or  twenty  years  a considerable  change  has  taken  place  in 
the  habits  of  the  operatives  in  our  manufacturing  towns  : they  now  expend 
much  more  than  formerly  on  clothing  and  ornament.  . . . Certain  classes  of 
workpeople,  such  as  the  canuts  of  Lyons,”  (according  to  all  representations,  like 
their  counterpart,  our  handloom  weavers,  the  very  worst  paid  class  of  artizans,) 
“ no  longer  show  themselves,  as  they  did  formerly,  covered  with  filthy  rags.” 
(Page  164.) 

[1862]  The  preceding  statements  were  given  in  former  editions  of  this  work, 
being  the  best  to  which  I had  at  the  time  access ; but  evidence,  both  of  a 
more  recent,  and  of  a more  minute  and  precise  character,  will  now  be  found 
in  the  important  work  of  M.  Leonce  de  Lavergne,  Economie  Rurale  de  la  France 
depuis  1789.  According  to  that  painstaking,  well-informed,  and  most  impartial 
enquirer,  the  average  daily  wages  of  a French  labourer  have  risen,  since  the 
commencement  of  the  Revolution,  in  the  ratio  of  19  to  30,  while,  owing  to  the 
more  constant  employment,  the  total  earnings  have  increased  in  a still  greater 
ratio,  not  short  of  double.  The  following  are  the  words  of  M.  de  Lavergne 
(2nd  ed.  p.  57) : “ Arthur  Young  estimates  at  19  sous  [9^d.]  the  average  of  a 
day’s  wages,  which  must  now  be  about  1 franc  50  centimes  [Is.  3d.],  and  this 
increase  only  represents  a part  of  the  improvement.  Though  the  rural  popu- 
lation has  remained  about  the  same  in  numbers,  the  addition  made  to  the 
population  since  1789  having  centred  in  the  towns,  the  number  of  actual 
working  days  has  increased,  first  because,  the  duration  of  life  having  augmented, 
the  number  of  able-bodied  men  is  greater,  and  next,  because  labour  is  better 
organized,  partly  through  the  suppression  of  several  festival-hohdays,  partly 
by  the  mere  effect  of  a more  active  demand.  When  we  take  into  account  the 
increased  number  of  his  working  days,  the  annual  receipts  of  the  rural  work- 
man must  have  doubled.  This  augmentation  of  wages  answers  to  at  least  an 
equal  augmentation  of  comforts,  since  the  prices  of  the  chief  necessaries  of  life 
have  changed  but  little,  and  those  of  manufactured,  for  example  of  woven. 


296 


BOOK  II.  CHAPTER  VIL  § 5 


Dr.  Rau  testifies  to  a similar  fact  in  the  case  of  another  country 
in  which  the  subdivision  of  the  land  is  probably  excessive,  the 
Palatinate.* 

I am  not  aware  of  a single  authentic  instance  which  supports 
the  assertion  that  rapid  multiplication  is  promoted  by  peasant 
properties.  Instances  may  undoubtedly  be  cited  of  its  not  being 
prevented  by  them,  and  one  of  the  principal  of  these  is  Belgium ; 
the  prospects  of  which,  in  respect  to  population,  are  at  present  a 
matter  of  considerable  uncertainty.  Belgium  has  the  most  rapidly 
increasing  population  on  the  Continent ; and  when  the  circum- 
stances of  the  country  require,  as  they  must  soon  do,  that  this 
rapidity  should  be  checked,  there  will  be  a considerable  strength  of 
existing  habit  to  be  broken  through.  One  of  the  unfavourable 
circumstances  is  the  great  power  possessed  over  the  minds  of  the 
people  by  the  Catholic  priesthood,  whose  influence  is  everywhere 
strongly  exerted  against  restraining  population.  As  yet,  however, 
it  must  be  remembered  that  the  indefatigable  industry  and  great 
agricultural  skill  of  the  people  have  rendered  the  existing  rapidity  of 
increase  practically  innocuous ; the  great  number  of  large  estates 
still  imdivided  affording  by  their  gradual  dismemberment  a resource 
for  the  necessary  augmentation  of  the  gross  produce  ; and  there  are, 
besides,  many  large  manufacturing  towns,  and  mining  and  coal 
districts,  which  attract  and  employ  a considerable  portion  of  the 
annual  increase  of  population. 

§ 5.  But  even  where  peasant  properties  are  accompanied  by 

articles,  have  materially  diminished.  The  lodging  of  the  labourers  has  also 
improved,  if  not  in  all,  at  least  in  most  of  our  provinces.” 

M.  de  Lavergne’s  estimate  of  the  average  amount  of  a day’s  wages  is 
grounded  on  a careful  comparison,  in  this  and  in  all  other  economical  points  of 
view,  of  all  the  different  provinces  of  France. 

♦ In  his  little  book  on  the  agriculture  of  the  Palatinate,  already  cited. 
He  says  that  the  daily  wages  of  labour,  which  during  the  last  years  of  the  war 
were  unusually  high,  and  so  continued  until  1817,  afterwards  sank  to  a lower 
money-rate,  but  that  the  prices  of  many  commodities  having  fallen  in  a still 
greater  proportion,  the  condition  of  the  people  was  unequivocally  improved. 
The  food  given  to  farm  labourers  by  their  employers  has  also  greatly  improved 
in  quantity  and  quality.  “ It  is  to-day  considerably  better  than  it  was  about 
forty  years  ago,  when  the  poorer  class  obtained  less  flesh-meat  and  puddings, 
and  no  cheese,  butter,  and  the  like  ” (p.  20).  “ Such  an  increase  of  wages  ” 

(adds  the  Professor),  “ which  must  be  estimated  not  in  money,  but  in  the 
quantity  of  necessaries  and  conveniences  which  the  labourer  is  enabled  to 
procure,  is,  by  universal  admission,  a proof  that  the  mass  of  capital  must  have 
increased.”  It  proves  not  only  this,  but  also  that  the  labouring  population 
has  not  increased  in  an  equal  degree ; and  that,  in  this  instance  as  w^ell  as  in 
that  of  France,  the  division  of  the  land,  even  when  excessive,  has  been  com- 
patible with  a strengthening  of  the  prudential  checks  to  population. 


PEASANT  PROPRIETORS 


297 


an  excess  of  numbers,  this  evil  is  not  necessarily  attended  with  the 
additional  economical  disadvantage  of  too  great  a subdivision  of  the 
land.  It  does  not  follow  because  landed  property  is  minutely 
divided,  that  farms  will  be  so.  As  large  properties  are  perfectly 
compatible  with  small  farms,  so  are  small  properties  with  farms  of 
an  adequate  size ; and  a subdivision  of  occupancy  is  not  an  in- 
evitable consequence  of  even  undue  multiplication  among  peasant 
proprietors.  As  might  be  expected  from  their  admirable  intelligence 
in  things  relating  to  their  occupation,  the  Flemish  peasantry  have 
long  learnt  this  lesson.  “ The  habit  of  not  dividing  properties,” 
says  Dr.  Kau,*  “ and  the  opinion  that  this  is  advantageous,  have 
been  so  completely  preserved  in  Flanders,  that  even  now,  when  a 
peasant  dies  leaving  several  children,  they  do  not  think  of  dividing 
his  patrimony,  though  it  be  neither  entailed  nor  settled  in  trust ; 
they  prefer  selling  it  entire,  and  sharing  the  proceeds,  considering  it 
as  a jewel  which  loses  its  value  when  it  is  divided.”  That  the  same 
feeling  must  prevail  widely  even  in  France,  is  shown  by  the  great 
frequency  of  sales  of  land,  amounting  in  ten  years  to  a fourth  part 
of  the  whole  soil  of  the  country  : and  M.  Passy,  in  his  tract  On 
the  Changes  in  the  Agricultural  Condition  of  the  Department  of  the 
Eure  since  the  year  1800,  f states  other  facts  tending  to  the 
same  conclusion.  “ The  example,”  says  he,  “ of  this  department 
attests  that  there  does  not  exist,  as  some  writers  have  imagined, 
between  the  distribution  of  property  and  that  of  cultivation,  a con- 
nexion which  tends  invincibly  to  assimilate  them.  In  no  portion 
of  it  have  changes  of  ownership  had  a perceptible  influence  on  the 
size  of  holdings.  While,  in  districts  of  small  farming,  lands  belong- 
ing to  the  same  owner  are  ordinarily  distributed  among  many  tenants, 
so  neither  is  it  uncommon,  in  places  where  the  grande  culture  pre- 
vails, for  the  same  farmer  to  rent  the  lands  of  several  proprietors. 
In  the  plains  of  Vexin,  in  particular,  many  active  and  rich  culti- 
vators do  not  content  themselves  with  a single  farm  ; others  add  to 
the  lands  of  their  principal  holding  all  those  in  the  neighbourhood 
which  they  are  able  to  hire,  and  in  this  manner  make  up  a total 
extent  which  in  some  cases  reaches  or  exceeds  two  hundred  hec- 
tares ” (five  hundred  English  acres).  “ The  more  the  estates  are 

* Page  334  of  the  Brussels  translation.  He  cites  as  an  authority,  Schwerz, 
Landwirthschafiliche  Mittheilungen,  i.  185. 

t One  of  the  many  important  papers  which  have  appeared  in  the  Journal 
des  EcorunnisteSf  the  organ  of  the  principal  political  economists  of  France,  and 
doing  great  and  increasing  honour  to  their  knowledge  and  ability.  M.  Passy’s 
essay  has  been  reprinted  separately  in  a pamphlet. 


298 


BOOK  II.  CHAPTER  VII.  § 6 


dismembered,  the  more  frequent  do  this  sort  of  arrangements 
become  : and  as  they  conduce  to  the  interest  of  all  concerned,  it  is 
probable  that  time  will  confirm  them.” 

1 “ In  some  places,”  says  M.  de  Lavergne,*  “ in  the  neighbour- 
hood of  Paris,  for  example,  where  the  advantages  of  the  grande 
culture  become  evident,  the  size  of  farms  tends  to  increase,  several 
farms  are  thrown  together  into  one,  and  farmers  enlarge  their 
holdings  by  renting  parcelles  from  a number  of  difierent  proprietors. 
Elsewhere  farms,  as  well  as  properties  of  too  great  extent,  tend  to 
division.  Cultivation  spontaneously  finds  out  the  organization 
which  suits  it  best.”  It  is  a striking  fact,  stated  by  the  same  eminent 
writer,!  departments  which  have  the  greatest  number  of 

small  cotes  foncieres,  are  the  Nord,  the  Somme,  the  Pas  de  Calais, 
the  Seine  Inferieure,  the  Aisne,  and  the  Oise ; aU  of  them  among 
the  richest  and  best  cultivated,  and  the  first-mentioned  of  them 
the  very  richest  and  best  cultivated,  in  France. 

Undue  subdivision,  and  excessive  smallness  of  holdings,  are 
undoubtedly  a prevalent  evil  in  some  countries  of  peasant  pro- 
prietors, and  particularly  in  parts  of  Germany  and  France.  The 
governments  of  Bavaria  and  Nassau  have  thought  it  necessary  to 
impose  a legal  limit  to  subdivision,  and  the  Prussian  Government 
unsuccessfully  proposed  the  same  measure  to  the  Estates  of  its 
Khenish  Provinces.  But  I do  not  think  it  will  anywhere  be  found 
that  the  petite  culture  is  the  system *of  the  peasants,  and  the  grande 
culture  that  of  the  great  landlords : on  the  contrary,  wherever  the 
small  properties  are  divided  among  too  many  proprietors,  I beheve 
it  to  be  true  that  the  large  properties  also  are  parcelled  out  among 
too  many  farmers,  and  that  the  cause  is  the  same  in  both  cases,  a 
backward  state  of  capital,  skill,  and  agricultural  enterprise.  There 
is  reason  to  believe  that  the  subdivision  in  France  is  not  more 
excessive  than  is  accounted  for  by  this  cause ; that  it  is  diminish- 
ing, not  increasing  ; and  that  the  terror  expressed  in  some  quarters, 
at  the  progress  of  the  morcellement,  is  one  of  the  most  groundless  of 
real  or  pretended  panics.  J 

^ [This  paragraph  was  added  in  the  5th  ed.  (1862).] 

* Economie  Eurale  de  la  France^  p.  455. 

t P.  117.  See,  for  facts  of  a similar  tendency,  pp.  141,  250,  and  other 
passages  of  the  same  important  treatise : which,  on  the  other  hand,  equally 
abounds  with  evidence  of  the  mischievous  effect  of  subdivision  when  too 
minute,  or  when  the  nature  of  the  soil  and  of  its  products  is  not  suitable 
to  it. 

J [1852]  Mr.  Laing,  in  his  latest  publication,  Observations  on  the  Social 
and  Political  State  of  the  European  People  in  1848  and  1849,  a book  devoted 


PEASANT  PROPRIETORS 


299 


If  peasant  properties  have  any  effect  in  promoting  subdivision 
beyond  the  degree  which  corresponds  to  the  agricultural  practices 
of  the  country,  and  which  is  customary  on  its  large  estates,  the 
cause  must  lie  in  one  of  the  salutary  influences  of  the  system  ; the 
eminent  degree  in  which  it  promotes  providence  on  the  part  of  those 
who,  not  being  yet  peasant  proprietors,  hope  to  become  so.  In 
England,  where  the  agricultural  labourer  has  no  investment  for  his 
savings  but  the  savings  bank,  and  no  position  to  which  he  can  rise  by 
any  exercise  of  economy,  except  perhaps  that  of  a petty  shopkeeper, 
with  its  chances  of  bankruptcy,  there  is  nothing  at  all  resembling 
the  intense  spirit  of  thrift  which  takes  possession  of  one  who,  from 
being  a day  labourer,  can  raise  himself  by  saving  to  the  condition  of 
a landed  proprietor.  According  to  almost  all  authorities,  the  real 
cause  of  the  morcellement  is  the  higher  price  which  can  be  obtained 
for  land  by  selling  it  to  the  peasantry,  as  an  investment  for  their 
small  accumulations,  than  by  disposing  of  it  entire  to  some  rich 
purchaser  who  has  no  object  but  to  live  on  its  income,  without 
improving  it.  The  hope  of  obtaining  such  an  investment  is  the 
most  powerful  of  inducements,  to  those  who  are  without  land,  to 
practise  the  industry,  frugality,  and  self-restraint,  on  which  their 
success  in  this  object  of  ambition  is  dependent. 

As  the  result  of  this  enquiry  into  the  direct  operation  and  indirect 

to  the  glorification  of  England  and  the  disparagement  of  everything  elsewhere 
which  others,  or  even  he  himself  in  former  works,  had  thought  worthy  of  praise, 
argues  that  “ although  the  land  itself  is  not  divided  and  subdivided  ” on  the 
death  of  the  proprietor,  “ the  value  of  the  land  is,  and  with  effects  almost  as 
prejudicial  to  social  progress.  The  value  of  each  share  becomes  a debt  or 
burden  upon  the  land.”  Consequently  the  condition  of  the  agricultural  popu- 
lation is  retrograde ; **  each  generation  is  worse  off  than  the  preceding  one, 
although  the  land  is  neither  less  nor  more  divided,  nor  worse  cultivated.”  And 
this  he  gives  as  the  explanation  of  the  great  indebtedness  of  the  small  landed 
proprietors  in  France  (pp.  97-9).  If  these  statements  were  correct,  they  would 
invalidate  all  which  Mr.  Laing  affirmed  so  positively  in  other  writings,  and 
repeats  in  this,  respecting  the  peculiar  efficacy  of  the  possession  of  land  in 
preventing  over-population.  But  he  is  entirely  mistaken  as  to  the  matter  of  fact. 
In  the  only  country  of  which  he  speaks  from  actual  residence,  Norway,  he 
does  not  pretend  that  the  condition  of  the  peasant  proprietors  is  deteriorating. 
The  facts  already  cited  prove  that  in  respect  to  Belgium,  Germany,  and  Switzer- 
land, he  assertion  is  equally  wide  of  the  mark ; and  what  has  been  shown 
respecting  the  slow  increase  of  population  in  France,  demonstrates  that  if  the 
condition  of  the  French  peasantry  was  deteriorating,  it  could  not  be  from  the 
cause  supposed  by  Mr.  Laing.  The  truth  I believe  to  be  that  in  every  country 
without  exception,  in  which  peasant  properties  prevail,  the  condition  of  the 
people  is  improving,  the  produce  of  the  land  and  even  its  fertility  increasing, 
and  from  the  larger  surplus  which  remains  after  feeding  the  agricultural  classes, 
the  towns  are  augmenting  both  in  population  and  in  the  well-being  of  their 
inhabitants. 


300 


BOOK  IT.  CHAPTER  VII.  § 6 


influences  of  peasant  properties,  T conceive  it  to  be  established, 
that  there  is  no  necessary  connexion  between  this  form  of  landed 
property  and  an  imperfect  state  of  the  arts  of  production  ; that  it 
is  favourable  in  quite  as  many  respects  as  it  is  unfavourable,  to  the 
most  effective  use  of  the  powers  of  the  soil ; that  no  other  existing 
state  of  agricultural  economy  has  so  beneficial  an  effect  on  the 
industry,  the  intelligence,  the  frugality,  and  prudence  of  the  popula- 
tion, nor  tends  on  the  whole  so  much  to  discourage  an  improvident 
increase  of  their  numbers  ; and  that  no  existing  state,  therefore,  is 
on  the  whole  so  favourable  both  to  their  moral  and  their  physical 
welfare.  Compared  with  the  English  system  of  cultivation  by  hired 
labour,  it  must  be  regarded  as  eminently  beneficial  to  the  labouring 
class.*  We  are  not  on  the  present  occasion  called  upon  to 

* Frencli  history  strikingly  confirms  these  conclusions.  Three  times  during 
the  course  of  ages  the  peasantry  have  been  purchasers  of  land ; and  these 
times  immediately  preceded  the  three  principal  eras  of  French  agricultural 
prosperity. 

“In  the  worst  times,”  says  the  historian  Michelet  {Le  Peuple^  Ire  partie, 
ch.  1),  “ the  times  of  universal  poverty,  when  even  the  rich  are  poor  and  obliged 
to  sell,  the  poor  are  enabled  to  buy  ; no  other  purchaser  presenting  himself, 
the  peasant  in  rags  arrives  with  his  piece  of  gold,  and  acquires  a little  bit  of 
land.  These  moments  of  disaster  in  which  the  peasant  was  able  to  buy  land 
at  a low  price,  have  always  been  followed  by  a sudden  gush  of  prosperity  which 
people  could  not  account  for.  Towards  1500,  for  example,  when  France,  ex 
hausted  by  Louis  XI.,  seemed  to  be  completing  its  ruin  in  Italy,  the  noblesse 
who  went  to  the  wars  were  obliged  to  sell : the  land,  passing  into  new 
hands,  suddenly  began  to  flourish ; men  began  to  labour  and  to  build. 
This  happy  moment,  in  the  style  of  courtly  historians,  was  called  the  good 
Louis  XII. 

“ Unhappily  it  did  not  last  long.  Scarcely  had  the  land  recovered  itself 
when  the  tax-collector  fell  upon  it ; the  wars  of  religion  followed,  and  seemed 
to  rase  everything  to  the  ground ; with  horrible  miseries,  dreadful  famines, 
in  which  mothers  devoured  their  children.  Who  would  believe  that  the  country 
recovered  from  this  ? Scarcely  is  the  war  ended,  when  from  the  devastated 
fields,  and  the  cottages  still  black  with  the  flames,  comes  forth  the  hoard  of 
the  peasant.  He  buys  ; in  ten  years,  France  wears  a new  face  ; in  twenty  or 
thirty,  all  possessions  have  doubled  and  trebled  in  value.  This  moment, 
again  baptized  by  a royal  name,  is  called  the  good  Henry  IV.  and  the  great 
Richelieu.'* 

Of  the  third  era  it  is  needless  again  to  speak ; it  was  that  of  the 
Revolution. 

Whoever  would  study  the  reverse  of  the  picture,  may  compare  these  historic 
periods,  characterized  by  the  dismemberment  of  large  and  the  construction  of 
small  properties,  with  the  wide-spread  national  suffering  which  accompanied, 
and  the  permanent  deterioration  of  the  condition  of  the  labouring  classes  which 
followed  the  “ clearing  ” away  of  small  yeomen  to  make  room  for  large  grazing 
farms,  which  was  the  grand  economical  event  of  English  history  during  the 
sixteenth  century.  [This  quotation  from  Michelet  originally  came  at  the  end 
of  chapter  x,  infra,  on  Means  of  Abolishing  Cottier  Tenancy.  It  was  transferred 
to  its  present  position  in  the  6th  ed.  (1862).] 


PEASANT  PROPRIETORS 


301 


compare  it  with  the  joint  ownership  of  the  land  by  associations  of 
labourers.^ 

^ [The  last  two  sentences  replaced  in  the  3rd  ed.  (1852)  the  concluding 
sentence  of  the  original  text ; “ Whether  and  in  what  these  considerations 
admit  of  useful  application  to  any  of  the  social  questions  of  our  time,  will  be 
considered  in  a future  chapter.” 

The  position  of  peasant  proprietors  in  Germany  in  more  recent  decades 
may  be  studied  in  Buchenberger,  Agrarwesen,  one  of  the  volumes  in  ^Wagner’s 
Lehrbuch  der  Politischen  Oekonomie  (1892),  §§  69,  70,  73 ; Blondel,  ttudea  sur 
lea  Populationa  Ruralea  de  VAllemagne  (1897) ; and  David,  Sozialiamua  and 
Landwirthachaft  (1903).  As  to  whether  morcellement  is  progressing  in  France, 
see  Gide,  ticonomic  Sociale  (1905),  pp.  429  seq.] 


CHAPTER  VIII 


OF  METAYERS 

§ 1.  From  the  case  m which  the  produce  of  land  and  labour 
belongs  undividedly  to  the  labourer,  we  proceed  to  the  cases  in 
which  it  is  divided,  but  between  two  classes  only,  the  labourers  and 
the  landowners  : the  character  of  capitalists  merging  in  the  one  or 
the  other,  as  the  case  may  be.  It  is  possible  indeed  to  conceive  that 
there  might  be  only  two  classes  of  persons  to  share  the  produce,  and 
that  the  class  of  capitalists  might  be  one  of  them  ; the  character  of 
labourer  and  that  of  landowner  being  united  to  form  the  other. 
This  might  occur  in  two  ways.  The  labourers,  though  owning  the 
land,  might  let  it  to  a tenant,  and  work  under  him  as  hired  servants. 
But  this  arrangement,  even  in  the  very  rare  cases  which  could  give 
rise  to  it,  would  not  require  any  particular  discussion,  since  it  would 
not  differ  in  any  material  respect  from  the  threefold  system  of 
labourers,  capitalists,  and  landlords.  The  other  case  is  the  not 
uncommon  one,  in  which  a peasant  proprietor  owns  and  cultivates 
the  land,  but  raises  the  little  capital  required  by  a mortgage  upon 
it.  Neither  does  this  case  present  any  important  peculiarity. 
There  is  but  one  person,  the  peasant  himself,  who  has  any  right  or 
power  of  interference  in  the  management.  He  pays  a fixed  annuity 
as  interest  to  a capitalist,  as  he  pays  another  fixed  sum  in  taxes  to 
the  government.  Without  dwelling  further  on  these  cases,  we  pass 
to  those  which  present  marked  features  of  peculiarity. 

When  the  two  parties  sharing  in  the  produce  are  the  labourer  or 
labourers  and  the  landowner,  it  is  not  a very  material  circumstance 
in  the  ca-se  which  of  the  two  furnishes  the  stock,  or  whether,  as 
sometimes  happens,  they  furnish  it  in  a determinate  proportion 
between  them.  The  essential  difference  does  not  lie  in  this,  but  in 
another  circumstance,  namely,  whether  the  division  of  the  produce 
between  the  two  is  regulated  by  custom  or  by  competition.  We 
will  begin  with  the  former  case ; of  which  the  metayer  culture 
the  principal,  and  in  Europe  almost  the  sole,  example. 


METAYERS 


303 


The  principle  of  the  metayer  system  is  that  the  labourer,  or 
peasant,  makes  his  engagement  directly  with  the  landowner,  and 
pays,  not  a fixed  rent,  either  in  money  or  in  kind,  but  a certain 
proportion  of  the  produce,  or  rather  of  what  remains  of  the  produce 
after  deducting  what  is  considered  necessary  to  keep  up  the  stock. 
The  proportion  is  usually,  as  the  name  imports,  one-half ; but  in 
several  districts  in  Italy  it  is  two-thirds.  Kespecting  the  supply  of 
stock,  the  custom  varies  from  place  to  place ; in  some  places  the 
landlord  furnishes  the  whole,  in  others  half,  in  others  some  particular 
part,  as  for  instance  the  cattle  and  seed,  the  labourer  providing  the 
implements.*  “ This  connexion,”  says  Sismondi,  speaking  chiefly 
of  Tuscany ,f  “ is  often  the  subject  of  a contract,  to  define  certain 
services  and  certain  occasional  payments  to  which  the  metayer  binds 
himself ; nevertheless  the  differences  in  the  obligations  of  one  such 
contract  and  another  are  inconsiderable ; usage  governs  alike  all 
these  engagements,  and  supplies  the  stipulations  which  have  not 
been  expressed ; and  the  landlord  who  attempted  to  depart  from 
usage,  who  exacted  more  than  his  neighbour,  who  took  for  the  basis 
of  the  agreement  anything  but  the  equal  division  of  the  crops,  would 
render  himself  so  odious,  he  would  be  so  sure  of  not  obtaining  a 
metayer  who  was  an  honest  man,  that  the  contract  of  all  the  metayers 
may  be  considered  as  identical,  at  least  in  each  province,  and  never 
gives  rise  to  any  competition  among  peasants  in  search  of  employ- 
ment, or  any  offer  to  cultivate  the  soil  on  cheaper  terms  than  one 
another.”  To  the  same  effect  Chateauvieux, } speaking  of  the 
metayers  of  Piedmont.  “ They  consider  it  ” (the  farm)  “ as  a 
patrimony,  and  never  think  of  renewing  the  lease,  but  go  on  from 

♦ In  France  before  the  Revolution,  according  to  Arthur  Young  (i.  403), 
there  was  great  local  diversity  in  this  respect.  In  Champagne  “ the  land- 
lord commonly  finds  half  the  cattle  and  half  the  seed,  and  the  metayer,  labour, 
implements,  and  taxes  ; but  in  some  districts  the  landlord  bears  a share  of  these. 
In  Roussillon,  the  landlord  pays  half  the  taxes  ; and  in  Guienne,  from  Auch  to 
Fleuran,  many  landlords  pay  all.  Near  Augillon,  on  the  Garonne,  the  metayers 
furnish  half  the  cattle.  At  Nangis,  in  the  Isle  of  France,  I met  with  an  agree- 
ment  for  the  landlord  to  furnish  live  stock,  implements,  harness,  and  taxes  ; the 
metayer  found  labour  and  his  own  capitation  tax  : the  landlord  repaired  the 
house  and  gates,  the  metayer  the  windows  : the  landlord  provided  seed  the 
first  year,  the  metayer  the  last ; in  the  intervening  years  they  supply  half  and 
half.  In  the  Bourbonnois  the  landlord  finds  all  sorts  of  live  stock,  yet  the 
metayer  sells,  changes,  and  buys  at  his  will ; the  steward  keeping  an  account 
of  these  mutations,  for  the  landlord  has  half  the  product  of  sales,  and  pays 
half  the  purchases.”  In  Piedmont,  he  says,  “ the  landlord  commonly  pays  the 
taxes  and  repairs  the  buildings,  and  the  tenant  provides  cattle,  implements, 
end  seed.”  (ii.  151.) 

t Etudes  sur  VEconomie  Politique  6me  essai ; De  la  Condition  des  Cal- 
tivateurs  en  Toscane. 

t Letters  from  Italy.  I quote  from  Dr.  Rigby’s  translation  (p.  22). 


304  BOOK  II.  CHAPTER  VIIL  § 2 

generation  to  generation,  on  the  same  terms,  without  writings  or 
registries.”  * 

§ 2.  When  the  partition  of  the  produce  is  a matter  of  fixed 
usage,  not  of  varying  convention,  political  economy  has  no  laws 
of  distribution  to  investigate.  It  has  only  to  consider,  as  in  the 
case  of  peasant  proprietors,  the  effects  of  the  system  first  on  the 
condition  of  the  peasantry,  morally  and  physically,  and  secondly, 
on  the  efficiency  of  the  labour.  In  both  these  particulars  the 
metayer  system  has  the  characteristic  advantages  of  peasant 
properties,  but  has  them  in  a less  degree.  The  metayer  has  less 
motive  to  exertion  than  the  peasant  proprietor,  since  only  half  the 
fruits  of  his  industry,  instead  of  the  whole,  are  his  own.  But  he 
has  a much  stronger  motive  than  a day  labourer,  who  has  no  other 
interest  in  the  result  than  not  to  be  dismissed.  If  the  metayer 
cannot  be  turned  out  except  for  some  violation  of  his  contract,  he 
has  a stronger  motive  to  exertion  than  any  tenant-farmer  who  has 
not  a lease.  The  metayer  is  at  least  his  landlord’s  partner,  and  a 
half-sharer  in  their  joint  gains.  Where,  too,  the  permanence  of 
his  tenure  is  guaranteed  by  custom,  he  acquires  local  attachments, 
and  much  of  the  feelings  of  a proprietor.  I am  supposing  that 
this  half  produce  is  sufficient  to  yield  him  a comfortable  support. 
Whether  it  is  so,  depends  (in  any  given  state  of  agriculture) 
on  the  degree  of  subdivision  of  the  land ; which  depends  on 
the  operation  of  the  population  principle.  A multiplication  of 
people,  beyond  the  number  that  can  be  properly  supported  on  the 
land  or  taken  off  by  manufactures,  is  incident  even  to  a peasant 
proprietary,  and  of  course  not  less  but  rather  more  incident  to  a 
metayer  population.  The  tendency,  however,  which  we  noticed 
in  the  proprietary  system,  to  promote  prudence  on  this  point,  is 
in  no  small  degree  common  to  it  with  the  metayer  system.  There, 
also,  it  is  a matter  of  easy  and  exact  calculation  whether  a family 
can  be  supported  or  not.  If  it  is  easy  to  see  whether  the  owner  of 
the  whole  produce  can  increase  the  production  so  as  to  maintain  a 

♦ This  virtual  fixity  of  tenure  is  not  however  universal  even  in  Italy ; and 
it  is  to  its  absence  that  Sismondi  attributes  the  inferior  condition  of  the 
metayers  in  some  provinces  of  Naples,  in  Lucca,  and  in  the  Riviera  of  Genoa ; 
where  the  landlords  obtain  a larger  (though  still  a fixed)  share  of  the  produce. 
In  those  countries  the  cultivation  is  splendid,  but  the  people  wretchedly  poor. 
**  The  same  misfortune  would  probably  have  befallen  the  people  of  Tuscany  if 
public  opinion  did  not  protect  the  cultivator;  but  a proprietor  would  not  dare 
to  impose  conditions  unusual  in  the  country,  and  even  in  changing  one  metayer 
for  another  he  alters  nothing  in  the  terms  of  the  engagement.” — Nouveau* 
PrincipeSf  liv.  iii.  oh.  6. 


METAYERS 


306 


greater  number  of  persons  equally  well,  it  is  not  a less  simple  problem 
whether  the  owner  of  half  the  produce  can  do  so.*  There  is  one 
check  which  this  system  seems  to  offer,  over  and  above  those  held 
out  even  by  the  proprietary  system ; there  is  a landlord,  who  may 
exert  a controlling  power,  by  refusing  his  consent  to  a subdivision. 
I do  not,  however,  attach  great  importance  to  this  check,  because 
the  farm  may  be  loaded  with  superfluous  hands  without  being  sub- 
divided ; and  because,  so  long  as  the  increase  of  hands  increases  the 
gross  produce,  which  is  almost  always  the  case,  the  landlord,  who 
receives  half  the  produce,  is  an  immediate  gainer,  the  inconvenience 
flailing  only  on  the  labourers.  The  landlord  is  no  doubt  liable  in 
the  end  to  suffer  from  their  poverty,  by  being  forced  to  make 
advances  to  them,  especially  in  bad  seasons ; and  a foresight  of 
this  ultimate  inconvenience  may  operate  beneficially  on  such  land- 
lords as  prefer  future  security  to  present  profit. 

The  characteristic  disadvantage  of  the  metayer  system  is  very 
fairly  stated  by  Adam  Smith.  After  pointing  out  that  metayers 
“ have  a plain  interest  that  the  whole  produce  should  be  as  great 
as  possible,  in  order  that  their  own  proportion  may  be  so,”  he 
continues, *[■  “ it  could  never,  however,  be  the  interest  of  this  species 
of  cultivators  to  lay  out,  in  the  further  improvement  of  the  land,  any 
part  of  the  little  stock  which  they  might  save  from  their  own  share 
of  the  produce,  because  the  lord  who  laid  out  nothing  was  to  get 
one-half  of  whatever  it  produced.  The  tithe,  which  is  but  a tenth 
of  the  produce,  is  found  to  be  a very  great  hindrance  to  improvement. 
A tax,  therefore,  which  amounted  to  one-half,  must  have  been  an 

♦ M.  Bastiat  afl&rms  that  even  in  France,  incontestably  the  least  favour 
able  example  of  the  metayer  system,  its  effect  in  repressing  population  is 
conspicuous. 

“ It  is  a well-ascertained  fact  that  the  tendency  to  excessive  multiplication 
is  chiefly  manifested  in  the  class  who  live  on  wages.  Over  these  the  forethought 
which  retards  marriages  has  little  operation,  because  the  evils  which  flow  from 
excessive  competition  appear  to  them  only  very  confusedly,  and  at  a consider- 
able distance.  It  is,  therefore,  the  most  advantageous  condition  of  a people  to 
be  so  organized  as  to  contain  no  regular  class  of  labourers  for  hire.  In  metayer 
countries,  marriages  are  principally  determined  by  the  demands  of  cultivation  ; 
they  increase  when,  from  whatever  cause,  the  metairies  offer  vacancies  injurious 
to  production  ; they  diminish  when  the  places  are  filled  up.  A fact  easily  ascer- 
tained, the  proportion  between  the  size  of  the  farm  and  the  number  of  hands, 
operates  like  forethought,  and  with  greater  effect.  We  find,  accordingly,  that 
when  nothing  occurs  to  make  an  opening  for  a superfluous  population,  numbers 
remain  stationary  : as  is  seen  in  our  southern  departments.”  Considerations 
sur  le  M4tayage,  Journal  de$  Economistes  for  February  1846.  [The  description 
of  Bastiat  as  “ a high  authority  among  French  political  economists  ” was 
omitted  from  the  3rd  ed.  (1852).] 

t Wealth  of  Nations,  book  iii.  oh.  2. 


306 


BOOK  II.  CHAPTER  Vni.  § 3 


effectual  bar  to  it.  It  might  be  the  interest  of  a metayer  to  make 
the  land  produce  as  much  as  could  be  brought  out  of  it  by  means 
of  the  stock  furnished  by  the  proprietor ; but  it  could  never  be 
his  interest  to  mix  any  part  of  his  own  with  it.  In  France,  where 
five  parts  out  of  six  of.  the  whole  kingdom  are  said  to  be  still  occupied 
by  this  species  of  cultivators,  the  proprietors  complain  that  their 
metayers  take  every  opportunity  of  employing  the  master’s  cattle 
rather  in  carriage  than  in  cultivation  ; because  in  the  one  case  they 
get  the  whole  profits  to  themselves,  in  the  other  they  share  them 
with  their  landlord.”  It  is  indeed  implied  in  the  very  nature  of  the 
tenure  that  all  improvements  which  require  expenditure  of  capital 
must  be  made  with  the  capital  of  the  landlord.  This,  however,  is 
essentially  the  case  even  in  England,  whenever  the  farmers  are 
tenants-at-will : or  (if  Arthur  Young  is  right)  even  on  a “ nine  years’ 
lease.”  If  the  landlord  is  willing  to  provide  capital  for  improve- 
ments, the  metayer  has  the  strongest  interest  in  promoting  them, 
since  half  the  benefit  of  them  will  accrue  to  himself.  As  however 
the  perpetuity  of  tenure  which,  in  the  case  we  are  discussing,  he 
enjoys  by  custom,  renders  his  consent  a necessary  condition ; the 
spirit  of  routine,  and  dislike  of  innovation,  characteristic  of  an 
agricultural  people  when  not  corrected  by  education,  are  no  doubt, 
as  the  advocates  of  the  system  seem  to  admit,  a serious  hindrance  to 
improvement. 

§ 3.  The  metayer  system  has  met  with  no  mercy  from  English 
authorities.  “ There  is  not  one  word  to  be  said  in  favour  of  the 
practice,”  says  Arthur  Young,*  and  a “ thousand  arguments  that 
might  be  used  against  it.  The  hard  plea  of  necessity  can  alone  be 
urged  in  its  favour ; the  poverty  of  the  farmers  being  so  great, 
that  the  landlord  must  stock  the  farm,  or  it  could  not  be  stocked  at 
all : this  is  a most  cruel  burden  to  a proprietor,  who  is  thus  obliged 
to  run  much  of  the  hazard  of  farming  in  the  most  dangerous  of 
all  methods,  that  of  trusting  his  property  absolutely  in  the  hands 
of  people  who  are  generally  ignorant,  many  careless,  and  some 
undoubtedly  wicked.  ...  In  this  most  miserable  of  all  the  modes  of 
letting  land,  the  defrauded  landlord  receives  a contemptible  rent ; 
the  farmer  is  in  the  lowest  state  of  poverty ; the  land  is  miserably 
cultivated ; and  the  nation  suffers  as  severely  as  the  parties 
themselves.  . . . Wherever  f this  system  prevails,  it  may  be  taken 
for  granted  that  a useless  and  miserable  population  is  found.  . . . 

* Travels,  vol.  i.  pp.  404-6.  f Ibid.  vol.  ii.  161-3. 


METAYERS 


307 


Wherever  the  country  (that  I saw)  is  poor  and  un watered,  in  the 
Milanese,  it  is  in  the  hands  of  metayers  ; they  are  almost  always 
in  debt  to  their  landlord  for  seed  or  food,  and  “ their  condition  is 
more  wretched  than  that  of  a day  labourer.  . . . There  * are  but 
few  districts  ” (in  Italy)  “ where  lands  are  let  to  the  occupying 
tenant  at  a money-rent ; but  wherever  it  is  found,  their  crops  are 
greater ; a clear  proof  of  the  imbecility  of  the  metaying  system.” 
“ Wherever  it  ” (the  metayer  system)  “ has  been  adopted,”  says 
Mr.  M‘Culloch,f  “ it  has  put  a stop  to  all  improvement,  and  has 
reduced  the  cultivators  to  the  most  abject  poverty.”  Mr.  Jones  J 
shares  the  common  opinion,  and  quotes  Turgot  and  Destutt-Tracy 
in  support  of  it.  The  impression,  however,  of  all  these  writers 
(notwithstanding  Arthur  Young’s  occasional  references  to  Italy) 
seems  to  be  chiefly  derived  from  France,  and  France  before  the 
Revolution.§  Now  the  situation  of  French  metayers  under  the  old 
regime  by  no  means  represents  the  typical  form  of  the  contract. 
It  is  essential  to  that  form  that  the  proprietor  pays  all  the  taxes. 
But  in  France  the  exemption  of  the  noblesse  from  direct  taxation 
had  led  the  Government  to  throw  the  whole  burthen  of  their  ever- 
increasing  fiscal  exactions  upon  the  occupiers : and  it  is  to  these 
exactions  that  Turgot  ascribed  the  extreme  wretchedness  of  the 
metayers : a wretchedness  in  some  cases  so  excessive,  that  in 
Limousin  and  Angoumois  (the  provinces  which  he  administered) 
they  had  seldom  more,  according  to  him,  after  deducting  all  burthens, 
than  from  twenty-five  to  thirty  livres  (20  to  24  shillings)  per  head 
for  their  whole  annual  consumption : “ je  ne  dis  pas  en  argent, 
mais  en  comptant  tout  ce  qu’ils  consomment  en  nature  sur  ce  qu’ils 
ont  recolte.”  ||  When  we  add  that  they  had  not  the  virtual  fixity 

* Travels f vol.  ii.  217. 

t Principles  of  Political  Economy y 3rd.  ed.  p.  471. 

j Essay  on  the  Distribution  of  Wealth,  pp.  102-4.  [Peasant  Rents,  pp.  90-92  ] 

§ M.  de  Tracy  is  partially  an  exception,  inasmuch  as  his  experience  reaches 
lower  down  than  the  revolutionary  period  ; but  he  admits  (as  Mr.  Jones  has 
himself  stated  in  another  plaee)  that  he  is  acquainted  only  with  a limited  dis- 
trict, of  great  subdivision  and  unfertile  soil. 

M.  Passy  is  of  opinion,  that  a French  peasantry  must  be  in  indigence  and 
the  country  badly  cultivated  on  a metayer  system,  because  the  proportion  of 
the  produce  claimable  by  the  landlord  is  too  high  ; it  being  only  in  more  favour- 
able climates  that  any  land,  not  of  the  most  exuberant  fertility,  can  pay  half 
its  gross  produce  in  rent,  and  leave  enough  to  peasant  farmers  to  enable  them 
to  grow  suoeessfully  the  more  expensive  and  valuable  products  of  agriculture. 
(Systimes  de  Culture,  p.  35.)  This  is  an  objection  only  to  a particular  numerical 
proportion,  which  is  indeed  the  common  one,  but  is  not  essential  to  the  system. 

II  See  the  “ Memoire  sur  la  Surcharge  des  Impositions  qu’eprouvait  la 
Generaht6  de  Limoges,  adress6  au  Conseil  d’Etat  en  1766,”  pp.  260-304  of 
the  fourth  volume  of  Turgot’s  Works.  The  occasional  engagements  of  landlords 


BOOK  II.  CHAPTER  VIIL  § 3 


of  tenure  of  the  metayers  of  Italy  (“  in  Limousin,”  says  Arthur 
Young,*  “ the  metayers  are  considered  as  little  better  than  menial 
servants,  removable  at  pleasure,  and  obliged  to  conform  in  all 
things  to  the  will  of  the  landlords,”)  it  is  evident  that  their  case 
afiords  no  argument  against  the  metayer  system  in  its  better  form. 
A population  who  could  call  nothing  their  own,  who,  like  the  Irish 
cottiers,  could  not  in  any  contingency  be  worse  ofi,  had  nothing  to 
restrain  them  from  multiplying,  and  subdividing  the  land,  until 
stopped  by  actual  starvation. 

We  shall  find  a very  different  picture,  by  the  most  accurate 
authorities,  of  the  metayer  cultivation  of  Italy.  In  the  first  place, 
as  to  subdivision.  In  Lombardy,  according  to  Chateauvieux,f 
there  are  few  farms  which  exceed  fifty  acres,  and  few  which  have  less 
than  ten.  These  farms  are  all  occupied  by  metayers  at  half  profit. 
They  invariably  display  “ an  extent  J and  a richness  in  buildings 
rarely  known  in  any  other  country  in  Europe.”  Their  plan  “ affords 
the  greatest  room  with  the  least  extent  of  building  ; is  best  adapted 
to  arrange  and  secure  the  crop  ; and  is,  at  the  same  time,  the  most 
economical,  and  the  least  exposed  to  accidents  by  fire.”  The 
courtyard  “ exhibits  a whole  so  regular  and  commodious,  and  a 
system  of  such  care  and  good  order,  that  our  dirty  and  ill-arranged 
farms  can  convey  no  adequate  idea  of.”  The  same  description 
applies  to  Piedmont.  The  rotation  of  crops  is  excellent.  “ I 
should  think  § no  country  can  bring  so  large  a portion  of  its  produce 
to  market  as  Piedmont.”  Though  the  soil  is  not  naturally  very 
fertile,  “ the  number  of  cities  is  prodigiously  great.”  The  agricul- 
ture must,  therefore,  be  eminently  favourable  to  the  net  as  well  as 
to  the  gross  produce  of  the  land.  “ Each  plough  works  thirty-two 
acres  in  the  season.  . . . Nothing  can  be  more  perfect  or  neater 
than  the  hoeing  and  moulding  up  the  maize,  when  in  full  growth, 
by  a single  plough,  with  a pair  of  oxen,  without  injury  to  a single 
plant,  while  all  the  weeds  are  effectually  destroyed.”  So  much  for 
agricultural  skill.  “ Nothing  can  be  so  excellent  as  the  crop  which 
precedes  and  that  which  follows  it.”  The  wheat  “ is  thrashed  by  a 
cylinder,  drawn  by  a horse,  and  guided  by  a boy,  while  the  labourers 

(as  mentioned  by  Arthur  Young)  to  pay  a part  of  the  taxes,  were,  according  to 
Turgot,  of  recent  origin,  under  the  compulsion  of  actual  necessity.  “ The  pro- 
prietor only  consents  to  it  when  he  can  6nd  no  metayer  on  other  terms  ; conse- 
quently, even  in  that  case,  the  metayer  is  always  reduced  to  what  is  barely 
sufficient  to  prevent  him  from  dying  of  hunger”  (p.  275). 

* Vol.  L p.  404. 

f Letters  from  Italy,  translated  by  Rigby,  p.  16. 

j Ibid.  pp.  19,  20.  § Ibid.  pp.  24-31. 


METAYERS 


309 


turn  over  the  straw  with  forks.  This  process  lasts  nearly  a fortnight ; 
it  is  quick  and  economical,  and  completely  gets  out  the  grain.  . . . 
In  no  part  of  the  world  are  the  economy  and  the  management  of 
the  land  better  understood  than  in  Piedmont,  and  this  explains 
the  phenomenon  of  its  great  population,  and  immense  export  of 
provisions.”  All  this  under  metayer  cultivation. 

Of  the  valley  of  the  Arno,  in  its  whole  extent,  both  above  and 
below  Florence,  the  same  writer  thus  speaks  “ Forests  of  olive- 
trees  covered  the  lower  parts  of  the  mountains,  and  by  their  foliage 
concealed  an  infinite  number  of  small  farms,  which  peopled  these 
parts  of  the  mountains ; chestnut-trees  raised  their  heads  on  the 
higher  slopes,  their  healthy  verdure  contrasting  with  the  pale  tint 
of  the  ohve-trees,  and  spreading  a brightness  over  this  amphitheatre. 
The  road  was  bordered  on  each  side  with  village-houses,  not  more 
than  a hundred  paces  from  each  other.  . . . They  are  placed  at 
a httle  distance  from  the  road,  and  separated  from  it  by  a wall, 
and  a terrace  of  some  feet  in  extent.  On  the  wall  are  commonly 
placed  many  vases  of  antique  forms,  in  which  flowers,  aloes,  and 
young  orange-trees  are  growing.  The  house  itself  is  completely 
covered  with  vines.  . . . Before  these  houses  we  saw  groups  of 
peasant  females  dressed  in  white  linen,  silk  corsets,  and  straw-hats, 
ornamented  with  flowers.  . . . These  houses  being  so  near  each 
other,  it  is  evident  that  the  land  annexed  to  them  must  be  small, 
and  that  property,  in  these  valleys,  must  be  very  much  divided ; 
the  extent  of  these  domains  being  from  three  to  ten  acres.  The 
land  lies  round  the  houses,  and  is  divided  into  fields  by  small  canals, 
or  rows  of  trees,  some  of  which  are  mulberry-trees,  but  the  greatest 
number  poplars,  the  leaves  of  which  are  eaten  by  the  cattle.  Each 
tree  supports  a vine.  . . . These  divisions,  arrayed  in  oblong 
squares,  are  large  enough  to  be  cultivated  by  a plough  without  wheels 
and  a pair  of  oxen.  There  is  a pair  of  oxen  between  ten  or  twelve 
of  the  farmers ; they  employ  them  successively  in  the  cultivation 
of  all  the  farms.  . . . Almost  every  farm  maintains  a well-looking 
horse,  which  goes  in  a small  two-wheeled  cart,  neatly  made,  and 
painted  red ; they  serve  for  all  the  purposes  of  draught  for  the 
farm,  and  also  to  convey  the  farmer’s  daughters  to  mass  and  to 
balls.  Thus,  on  hohdays,  hundreds  of  these  little  carts  are  seen 
flying  in  all  directions,  carrying  the  young  women,  decorated  with 
flowers  and  ribbons.” 

This  is  not  a picture  of  poverty ; and  so  far  as  agriculture 
♦ Pp.  78-9. 


310 


BOOK  II.  CHAPTER  VIH.  $ 3 


is  concerned,  it  efPectually  redeems  metayer  cultivation,  as  existing 
in  these  countries,  from  the  reproaches  of  English  writers ; but  with 
respect  to  the  condition  of  the  cultivators,  Chateauvieux’s  testi- 
mony is,  in  some  points,  not  so  favourable.  “ It  is  * neither  the 
natural  fertility  of  the  soil,  nor  the  abundance  which  strikes  the  eye 
of  the  tra  veller,  which  constitute  the  well-being  of  its  inhabitants.  It 
is  the  number  of  individuals  among  whom  the  total  produce  is 
divided,  which  fixes  the  portion  that  each  is  enabled  to  enjoy. 
Here  it  is  very  small.  I have  thus  far,  indeed,  exhibited  a delightful 
country,  weU  watered,  fertile,  and  covered  with  a perpetual  vegeta- 
tion ; I have  shown  it  divided  into  countless  enclosures,  which, 
like  so  many  beds  in  a garden,  display  a thousand  varying  pro- 
ductions ; I have  shown,  that  to  all  these  enclosures  are  attached 
well-built  houses,  clothed  with  vines,  and  decorated  with  flowers ; 
but,  on  entering  them,  we  find  a total  want  of  all  the  conveniences 
of  life,  a table  more  than  frugal,  and  a general  appearance  of  priva- 
tion.” Is  not  Chateauvieux  here  unconsciously  contrasting  the 
condition  of  the  metayers  with  that  of  the  farmers  of  other  countries, 
when  the  proper  standard  with  which  to  compare  it  is  that  of  the 
agricultural  day-labourers  ? 

Arthur  Young  says,f  “ I was  assured  that  these  metayers  are 
(especially  near  Florence)  much  at  their  ease;  that  on  holidays 
they  are  dressed  remarkably  well,  and  not  without  objects  of 
luxury,  as  silver,  gold,  and  silk ; and  live  well,  on  plenty  of  bread, 
wine,  and  legumes.  In  some  instances  this  may  possibly  be  the 
case,  but  the  general  fact  is  contrary.  It  is  absurd  to  think  that 
metayers,  upon  such  a farm  as  is  cultivated  by  a pair  of  oxen,  can 
live  at  their  ease ; and  a clear  proof  of  their  poverty  is  this,  that 
the  landlord,  who  provides  half  the  live  stock,  is  often  obhged  to 
lend  the  peasant  money  to  procure  his  half.  . . . The  metayers, 
not  in  the  vicinity  of  the  city,  are  so  poor,  that  landlords  even 
lend  them  com  to  eat : their  food  is  black  bread,  made  of  a mixture 
with  vetches  ; and  their  drink  is  very  little  wine  mixed  with  water, 
and  called  aquarolle ; meat  on  Sundays  only ; their  dress  very 
ordinary.”  Mr.  Jones  admits  the  superior  comfort  of  the  metayers 
near  Florence,  and  attributes  it  partly  to  straw-platting,  by  which 
the  women  of  the  peasantry  can  earn,  according  to  Chateauvieux,J 
from  fifteen  to  twenty  pence  a day.  But  even  this  fact  tells  in 
favour  of  the  metayer  system  : for  in  those  parts  of  England  in 

* Pp.  73-6.  t Travels,  voL  ii.  p.  166. 

J Letters  from  Italy,  p.  76. 


METAYERS 


311 


which  either  straw- platting  or  lace-making  is  carried  on  by  the 
women  and  children  of  the  labouring  class,  as  in  Bedfordshire 
and  Buckinghamshire,  the  condition  of  the  class  is  not  better,  but 
rather  worse  than  elsewhere,  the  wages  of  agricultural  labour 
being  depressed  by  a full  equivalent. 

In  spite  of  Chateauvieux’s  statement  respecting  the  poverty 
of  the  metayers,  his  opinion,  in  respect  to  Italy  at  least,  is  given 
in  favour  of  the  system.  “ It  occupies  * and  constantly  interests 
the  proprietors,  which  is  never  the  case  with  great  proprietors 
who  lease  their  estates  at  fixed  rents.  It  establishes  a community 
of  interests,  and  relations  of  kindness  between  the  proprietors  and 
the  metayers ; a kindness  which  I have  often  witnessed,  and  from 
which  result  great  advantages  in  the  moral  condition  of  society. 
The  proprietor  under  this  system,  always  interested  in  the  success 
of  the  crop,  never  refuses  to  make  an  advance  upon  it,  which  the 
land  promises  to  repay  with  interest.  It  is  by  these  advances 
and  by  the  hope  thus  inspired,  that  the  rich  proprietors  of  land 
have  gradually  perfected  the  whole  rural  economy  of  Italy.  It  is 
to  them  that  it  owes  the  numerous  systems  of  irrigation  which 
water  its  soil,  as  also  the  establishment  of  the  terrace  culture  on 
the  hills  : gradual  but  permanent  improvements,  which  common 
peasants,  for  want  of  means,  could  never  have  effected,  and  which 
could  never  have  been  accomplished  by  the  farmers,  nor  by  the 
great  proprietors  who  let  their  estates  at  fixed  rents,  because  they  are 
not  suflSciently  interested.  Thus  the  interested  system  forms  of 
itself  that  alliance  between  the  rich  proprietor,  whose  means  provide 
for  the  improvement  of  the  culture,  and  the  metayer  whose  care 
and  labour  are  directed,  by  a common  interest,  to  make  the  most 
of  these  advances.” 

But  the  testimony  most  favourable  to  the  system  is  that  orf 
Sismondi,  which  has  the  advantage  of  being  specific,  and  from 
accurate  knowledge ; his  information  being  not  that  of  a traveller, 
but  of  a resident  proprietor,  intimately  acquainted  with  rural  life. 
His  statements  apply  to  Tuscany  generally,  and  more  particularly 
to  the  Val  di  Nievole,  in  which  his  own  property  lay,  and  which  is  not 
within  the  supposed  privileged  circle  immediately  round  Florence. 
It  is  one  of  the  districts  in  which  the  size  of  farms  appears  to  be  the 
smallest.  The  following  is  his  description  of  the  dwellings  and 
mode  of  life  of  the  metayers  of  that  district.f 

* Letters  from  Italy,  pp.  295-6. 

t From  his  Sixth  Essay,  formerly  referrea  ta 


312 


BOOK  IL  CHAPTER  VUL  § 3 


**  The  house,  built  of  good  walls  with  lime  and  mortar,  has  always 
at  least  one  story,  sometimes  two,  above  the  ground  floor.  On  the 
ground  floor  are  generally  the  kitchen,  a cowhouse  for  two  horned 
cattle,  and  the  storehouse,  which  takes  its  name,  tinaia,  from  the 
large  vats  (tini)  in  which  the  wine  is  put  to  ferment,  without  any 
pressing  : it  is  there  also  that  the  metayer  locks  up  his  casks,  his 
oil,  and  his  grain.  Almost  always  there  is  also  a shed  supported 
against  the  house,  where  he  can  work  under  cover  to  mend  his 
tools,  or  chop  forage  for  his  cattle.  On  the  first  and  second  stories 
are  two,  three,  and  often  four  bedrooms.  The  largest  and  most 
airy  of  these  is  generally  destined  by  the  metayer,  in  the  months  of 
May  and  June,  to  the  bringing  up  of  silkworms.  Great  chests  to 
contain  clothes  and  linen,  and  some  wooden  chairs,  are  the  chief 
furniture  of  the  chambers  ; but  a newly-married  wife  always  brings 
with  her  a wardrobe  of  walnut  wood.  The  beds  are  uncurtained  and 
unroofed,  but  on  each  of  them,  besides  a good  paillasse  filled  with 
the  elastic  straw  of  the  maize  plant,  there  are  one  or  two  mattresses  of 
wool,  or,  among  the  poorest,  of  tow,  a good  blanket,  sheets  of  strong 
hempen  cloth,  and  on  the  best  bed  of  the  family  a coverlet  of  silk 
padding,  which  is  spread  on  festival  days.  The  only  fireplace  is  in 
the  kitchen ; and  there  also  is  the  great  wooden  table  where  the 
family  dines,  and  the  benches ; the  great  chest  which  serves  at 
once  for  keeping  the  bread  and  other  provisions,  and  for  kneading  ; 
a tolerably  complete  though  cheap  assortment  of  pans,  dishes,  and 
earthenware  plates  ; one  or  two  metal  lamps,  a steelyard,  and  at 
least  two  copper  pitchers  for  drawing  and  holding  water.  The 
linen  and  the  working  clothes  of  the  family  have  all  been  spun 
by  the  women  of  the  house.  The  clothes,  both  of  men  and  of 
women,  are  of  the  stuS  called  mezza  lana  when  thick,  mola  when 
thin,  and  made  of  a coarse  thread  of  hemp  or  tow,  filled  up  with 
cotton  or  wool ; it  is  dried  by  the  same  women  by  whom  it  is  spun. 
It  would  hardly  be  believed  what  a quantity  of  cloth  and  of  mezza 
lana  the  peasant  women  are  able  to  accumulate  by  assiduous 
industry  ; how  many  sheets  there  are  in  the  store  ; what  a number 
of  shirts,  jackets,  trowsers,  petticoats,  and  gowns  are  possessed 
by  every  member  of  the  family.  By  way  of  example  I add  in 
a note  the  inventory  of  the  peasant  family  best  known  to  me : 
it  is  neither  one  of  the  richest  nor  of  the  poorest,  and  lives  happily 
by  its  industry  on  half  the  produce  of  less  than  ten  argents  of 
land.*  The  young  women  had  a marriage  portion  of  fifty  crowns, 
* Inventory  of  the  trovsstau  of  Jane,  daughter  of  Valente  Papini,  on  her 


METAYERS 


313 


twenty  paid  down,  and  the  rest  by  instalments  of  two  every  year. 
The  Tuscan  crown  is  worth  six  francs  [4s.  lOd.].  The  commonest 
marriage  portion  of  a peasant  girl  in  the  other  parts  of  Tuscany, 
where  the  metairies  are  larger,  is  100  crowns,  600  francs.” 

Is  this  poverty,  or  consistent  with  poverty  ? When  a common, 
M.  de  Sismondi  even  says  the  common,  marriage  portion  of  a 
metayer’s  daughter  is  2U.  Enghsh  money,  equivalent  to  at  least  50Z. 
in  Italy  and  in  that  rank  of  life ; when  one  whose  dowry  is  only 
half  that  amount,  has  the  wardrobe  described,  which  is  represented 
by  Sismondi  as  a fair  average  ; the  class  must  be  fuUy  comparable, 
in  general  condition,  to  a large  proportion  even  of  capitalist  farmers 
in  other  countries ; and  incomparably  above  the  day-labourers 
of  any  country,  except  a new  colony,  or  the  United  States.  Very 
little  can  be  inferred,  against  such  evidence,  from  a traveller’s 
impression  of  the  poor  quality  of  their  food.  Its  unexpensive 
character  may  be  rather  the  effect  of  economy  than  of  necessity. 
Costly  feeding  is  not  the  favourite  luxury  of  a southern  people ; 
their  diet  in  all  classes  is  principally  vegetable,  and  no  peasantry  on 
the  Continent  has  the  superstition  of  the  English  labourer  respecting 
white  bread.  But  the  nourishment  of  the  Tuscan  peasant,  according 
to  Sismondi,  “ is  wholesome  and  various : its  basis  is  an  excellent 
wheaten  bread,  brown,  but  pure  from  bran  and  from  all  mixture. 
In  the  bad  season  they  take  but  two  meals  a day : at  ten  in 
the  morning  they  eat  their  pollenta,  at  the  beginning  of  the  night 
their  soup,  and  after  it  bread  with  a relish  of  some  sort  (companatico). 
In  summer  they  have  three  meals,  at  eight,  at  one,  and  in  the  evening ; 
but  the  fire  is  lighted  only  once  a day,  for  dinner,  which  consists 
of  soup,  and  a dish  of  salt  meat  or  dried  fish,  or  haricots,  or  greens, 
which  are  eaten  with  bread.  Salt  meat  enters  in  a very  small  quantity 
into  this  diet,  for  it  is  reckoned  that  forty  pounds  of  salt  pork 
per  head  suffice  amply  for  a year’s  provision  ; twice  a week  a small 
piece  of  it  is  put  into  the  soup.  On  Sundays  they  have  always  on 

marriage  with  Giovacohino  Landi,  the  29th  of  April  1835,  at  Porta  Vecchia,  neai 
Pescia ; 

“ 28  shifts,  7 best  dresses  (of  particular  fabrics  of  silk),  7 dresses  of  printed 
cotton,  2 winter  working  dresses  {mezza  lana),  3 summer  working  dresses  and 
petticoats  (wo/a),  3 white  petticoats,  5 aprons  of  printed  linen,  1 of  black  silk, 
1 of  black  merino,  9 coloured  working  aprons  {mola),  4 white,  8 coloured,  and 
3 silk,  handkerchiefs,  2 embroidered  veils  and  one  of  tulle,  3 towels,  14  pairs  of 
stockings,  2 hats  (one  of  felt,  the  other  of  fine  straw) ; 2 cameos  set  in  gold,  2 
golden  earrings,  1 chaplet  with  two  Roman  silver  crowns,  1 coral  necklace  with 
its  cross  of  gold.  ...  All  the  richer  married  women  of  the  class  have,  besides, 
the  veste  di  seta,  the  great  holiday  dress,  which  they  only  wear  four  or  five  timoi 
in  their  lives.” 


314 


BOOK  IL  CHAPTER  VIIL  § 3 


the  table  a dish  of  fresh  meat,  but  a piece  which  weighs  only  a pound 
or  a pound  and  a half  suffices  for  the  whole  family,  however  numerous 
it  may  be.  It  must  not  be  forgotten  that  the  Tuscan  peasants 
generally  produce  ohve  oil  for  their  own  consumption ; they  use 
it  not  only  for  lamps,  but  as  seasoning  to  all  the  vegetables  prepared 
for  the  table,  which  it  renders  both  more  savoury  and  more  nutritive. 
At  breakfast  their  food  is  bread,  and  sometimes  cheese  and  fruit ; 
at  supper,  bread  and  salad.  Their  drink  is  composed  of  the  inferior 
wine  of  the  country,  the  vinella  or  piquette  made  by  fermenting  in 
water  the  pressed  skins  of  the  grapes.  They  always,  however,  reserve 
a little  of  their  best  wine  for  the  day  when  they  thresh  their  corn,  and 
for  some  festivals  which  are  kept  in  families.  About  fifty  bottles 
of  vinella  per  annum  and  five  sacks  of  wheat  (about  1000  pounds 
of  bread)  are  considered  as  the  supply  necessary  for  a full  grown 
man.” 

The  remarks  of  Sismondi  on  the  moral  influences  of  this  state 
of  society  are  not  less  worthy  of  attention.  The  rights  and  obliga- 
tions of  the  metayer  being  fixed  by  usage,  and  all  taxes  and  rates 
being  paid  by  the  proprietor,  “ the  metayer  has  the  advantages 
of  landed  property  without  the  burthen  of  defending  it.  It  is  the 
landlord  to  whom,  with  the  land,  belong  all  its  disputes : the  tenant 
lives  in  peace  with  all  his  neighbours ; between  him  and  them 
there  is  no  motive  for  rivalry  or  distrust,  he  preserves  a good  under- 
standing with  them,  as  well  as  with  his  landlord,  with  the  tax- 
collector,  and  with  the  church  : he  sells  little,  and  buys  httle ; he 
touches  little  money,  but  he  seldom  has  any  to  pay.  The  gentle  and 
kindly  character  of  the  Tuscans  is  often  spoken  of,  but  without 
sufficiently  remarking  the  cause  which  has  contributed  most  to 
keep  up  that  gentleness ; the  tenure,  by  which  the  entire  class 
of  farmers,  more  than  three-fourths  of  the  population,  are  kept 
free  from  almost  every  occasion  for  quarrel.”  The  fixity  of  tenure 
which  the  metayer,  so  long  as  he  fulfils  his  own  obligations,  possesses 
by  usage,  though  not  by  law,  gives  him  the  local  attachments, 
and  almost  the  strong  sense  of  personal  interest,  characteristic 
of  a proprietor.  “ The  metayer  fives  on  his  metairie  as  on  his 
inheritance,  loving  it  with  affection,  labouring  incessantly  to  improve 
it,  confiding  in  the  future,  and  making  sure  that  his  land  will  be 
tilled  after  him  by  his  children  and  his  children’s  children.  In  fact 
the  majority  of  metayers  five  from  generation  to  generation  on 
the  same  farm ; they  know  it  in  its  details  with  a minuteness 
which  the  feeling  of  property  can  alone  give.  The  plots  terrassed 


METAYERS 


316 


ap,  one  above  the  other,  are  often  not  above  four  feet  wide ; but 
there  is  not  one  of  them,  the  qualities  of  which  the  metayer  has 
not  studied.  This  one  is  dry,  the  other  is  cold  and  damp  : here 
the  soil  is  deep,  there  it  is  a mere  crust  which  hardly  covers  the 
rock  ; wheat  thrives  best  on  one,  rye  on  another  : here  it  would  be 
labour  wasted  to  sow  Indian  corn,  elsewhere  the  soil  is  unfit  for 
beans  and  lupins,  further  off  flax  will  grow  admirably,  the  edge  of 
this  brook  will  be  suited  for  hemp.  In  this  way  one  learns  with 
surprise  from  the  metayer,  that  in  a space  of  ten  arpents,  the  soil, 
the  aspect,  and  the  inclination  of  the  ground  present  greater  variety 
than  a rich  farmer  is  generally  able  to  distinguish  in  a farm  of  five 
hundred  acres.  For  the  latter  knows  that  he  is  only  a temporary 
occupant ; and  moreover,  that  he  must  conduct  his  operations  by 
general  rules,  and  neglect  details.  But  the  experienced  metayer 
has  had  his  intelligence  so  awakened  by  interest  and  affection, 
as  to  be  the  best  of  observers ; and  with  the  whole  future  before 
him,  he  thinks  not  of  himself  alone,  but  of  his  children  and 
grandchildren.  Therefore,  when  he  plants  an  olive,  a tree  which 
lasts  for  centuries,  and  excavates  at  the  bottom  of  the  hollow 
in  which  he  plants  it  a channel  to  let  out  the  water  by  which  it 
would  be  injured,  he  studies  all  the  strata  of  the  earth  which  he 
has  to  dig  out.**  * 


§ 4.  I do  not  offer  these  quotations  as  evidence  of  the  intrinsic 
excellence  of  the  metayer  system  ; but  they  surely  suffice  to  prove 
that  neither  “ land  miserably  cultivated  *’  nor  a people  in  the  most 
abject  poverty  **  have  any  necessary  connexion  with  it,  and  that  the 
unmeasured  vituperation  lavished  upon  the  system  by  English 
writers  is  grounded  on  an  extremely  narrow  view  of  the  subject. 

♦ Of  the  intelligence  of  this  interesting  people,  M.  de  Sismondi  speaks  in  the 
most  favourable  terms.  Few  of  them  can  read  ; but  there  is  often  one  member 
of  the  family  destined  for  the  priesthood,  who  reads  to  them  on  winter  evenings. 
Theii  language  differs  little  from  the  purest  Italian.  The  taste  for  improvisation 
in  verse  is  general.  “ The  peasants  of  the  Vale  of  Nievole  frequent  the  theatre 
in  summer  on  festival  days,  from  nine  to  eleven  at  night ; their  admission  costs 
them  little  more  than  6ve  French  sous  [2\d.\  Their  favourite  author  is  Alfieri ; 
the  whole  history  of  the  Atridse  is  familiar  to  these  people  who  cannot  read,  and 
who  seek  from  that  austere  poet  a relaxation  from  their  rude  labours.”  Unlike 
most  rustics,  they  6nd  pleasure  in  the  beauty  of  their  country.  “ In  the  hills  of 
the  vale  of  Nievole  there  is  in  front  of  every  bouse  a threshing-ground,  seldom  of 
more  than  25  or  30  square  fathoms  ; it  is  often  the  only  level  space  in  the  whole 
farm  ; it  is  at  the  same  time  a terrace  which  commands  the  plains  and  the  valley, 
and  looks  out  upon  a delightful  country.  Scarcely  ever  have  1 stood  still  to 
admire  it,  without  the  metayer’s  coming  out  to  enjoy  my  admiration,  and  point 
out  with  his  finger  the  beauties  which  he  thought  might  have  escaped  my  notice.” 


316 


BOOK  II.  CHAPTER  VIII.  § 4 


I look  upon  tke  rural  economy  of  Italy  as  simply  so  much  additional 
evidence  in  favour  of  small  occupations  with  permanent  tenure.  It 
is  an  example  of  what  can  be  accomplished  by  those  two  elements, 
even  under  the  disadvantage  of  the  peculiar  nature  of  the  metayer 
contract,  in  which  the  motives  to  exertion  on  the  part  of  the  tenant 
are  only  half  as  strong  as  if  he  farmed  the  land  on  the  same  footing 
of  perpetuity  at  a money-rent,  either  fixed,  or  varying  according 
to  some  rule  which  would  leave  to  the  tenant  the  whole  benefit 
of  his  own  exertions.  The  metayer  tenure  is  not  one  which  we 
should  be  anxious  to  introduce  where  the  exigencies  of  society 
had  not  naturally  given  birth  to  it ; but  neither  ought  we  to  be 
eager  to  abolish  it  on  a mere  a 'priori  view  of  its  disadvantages. 
If  the  system  in  Tuscany  works  as  well  in  practice  as  it  is  represented 
to  do,  with  every  appearance  of  minute  knowledge,  by  so  competent 
an  authority  as  Sismondi ; if  the  mode  of  living  of  the  people,  and 
the  size  of  farms,  have  for  ages  maintained  and  still  maintain  them- 
selves * such  as  they  are  said  to  be  by  him,  it  were  to  be  regretted 
that  a state  of  rural  well-being  so  much  beyond  what  is  reahzed  in 
most  European  countries,  should  be  put  to  hazard  by  an  attempt 
to  introduce,  under  the  guise  of  agricultural  improvement,  a system 
of  money-rents  and  capitalist  farmers.  Even  where  the  metayers 
are  poor,  and  the  subdivision  great,  it  is  not  to  be  assumed,  as  of 
course,  that  the  change  would  be  for  the  better.  The  enlargement 
of  farms,  and  the  introduction  of  what  are  called  agricultural 
improvements,  usually  diminish  the  number  of  labourers  employed 
on  the  land ; and  unless  the  growth  of  capital  in  trade  and  manu- 
factures affords  an  opening  for  the  displaced  population,  or  unless 
there  are  reclaimable  wastes  on  which  they  can  be  located, 
competition  will  so  reduce  wages,  that  they  will  probably  be  worse 
off*  as  day-labourers  than  they  were  as  metayers. 

Mr.  Jones  very  properly  objects  against  the  French  Economists 
of  the  last  century,  that  in  pursuing  their  favourite  object  of  intro- 
ducing money-rents,  they  turned  their  minds  solely  to  putting 
farmers  in  the  place  of  metayers,  instead  of  transforming  the  existing 
metayers  into  farmers ; which,  as  he  justly  remarks,  can  scarcely 

* “ We  never,  says  Sismondi,  **  find  a family  of  metayers  proposing  to  their 
landlord  to  divide  the  metairie,  unless  the  work  is  really  more  than  they  can  do, 
and  they  feel  assured  of  retaining  the  same  enjoyments  on  a smaller  piece  of 

ground.  We  never  find  several  sons  all  marrying,  and  forming  as  many  new 
families  : only  one  marries  and  undertakes  the  charge  of  the  household  : none 
of  the  others  marry  unless  the  first  is  childless,  or  unless  some  one  of  them  has 
the  offer  of  a new  metairie.”  New  PrincvpUa  of  Political  Economy^  book  iii.  oh.  & 


METAYERS 


317 


be  effected,  unless,  to  enable  the  metayers  to  save  and  become 
owners  of  stock,  the  proprietors  submit  for  a considerable  time  to  a 
diminution  of  income,  instead  of  expecting  an  increase  of  it,  which 
has  generally  been  their  immediate  motive  for  making  the  attempt. 
If  this  transformation  were  effected,  and  no  other  change  made  in 
the  metayer’s  condition  ; if,  preserving  all  the  other  rights  which 
usage  insures  to  him,  he  merely  got  rid  of  the  landlord’s  claim  to 
half  the  produce,  paying  in  lieu  of  it  a moderate  fixed  rent ; he  would 
be  so  far  in  a better  position  than  at  present,  as  the  whole,  instead 
of  only  half  the  fruits  of  any  improvement  he  made,  would  now 
belong  to  himself ; but  even  so,  the  benefit  would  not  be  without 
alloy  ; for  a metayer,  though  not  himself  a capitahst,  has  a capitalist 
for  his  partner,  and  has  the  use,  in  Italy  at  least,  of  a considerable 
capital,  as  is  proved  by  the  excellence  of  the  farm  buildings  : and 
it  is  not  probable  that  the  landowners  would  any  longer  consent  to 
peril  their  moveable  property  on  the  hazards  of  agricultural  enter- 
prise, when  assured  of  a fixed  money  income  without  it.  Thus 
would  the  question  stand,  even  if  the  change  left  undisturbed  the 
metayer’s  virtual  fixity  of  tenure,  and  converted  him,  in  fact,  into  a 
peasant  proprietor  at  a quitrent.  But  if  we  suppose  him  converted 
into  a mere  tenant,  displaceable  at  the  landlord’s  will,  and  liable  to 
have  his  rent  raised  by  competition  to  any  amount  which  any  unfor- 
tunate being  in  search  of  subsistence  can  be  found  to  offer  or  promise 
for  it ; he  would  lose  all  the  features  in  his  condition  which  preserve 
it  from  being  deteriorated  ; he  would  be  cast  down  from  his  present 
position  of  a kind  of  half  proprietor  of  the  land,  and  would  sink  into 
a cottier  tenant. 


CHAPTER  IX 


OF  COTTIERS 

§ 1.  By  the  general  appellation  of  cottier  tenure  I shall  designate 
all  cases  without  exception  in  which  the  labourer  makes  his  contract 
for  land  without  the  intervention  of  a capitalist  farmer,  and  in  which 
the  conditions  of  the  contract,  especially  the  amount  of  rent,  are 
determined  not  by  custom  but  by  competition.  The  principal 
European  example  of  this  tenure  is  Ireland,  and  it  is  from  that 
country  that  the  term  cottier  is  derived.*  By  far  the  greater  part 
of  the  agricultural  population  of  Ireland  might  until  very  lately 
have  been  said  to  be  ^ cottier-tenants ; except  so  far  as  the  Ulster 
tenant-right  constituted  an  exception.  There  was,  indeed,  a nume- 
rous class  of  labourers  who  (we  may  presume  through  the  refusal 
either  of  proprietors  or  of  tenants  in  possession  to  permit  any 
further  subdivision)  had  been  unable  to  obtain  even  the  smallest 
patch  of  land  as  permanent  tenants.  But,  from  the  deficiency  of 
capital,  the  custom  of  paying  wages  in  land  was  so  universal,  that 
even  those  who  worked  as  casual  labourers  for  the  cottiers  or  for  such 
large  farmers  as  were  found  in  the  country,  were  usually  paid  not  in 
money,  but  by  permission  to  cultivate  for  the  season  a piece  of  ground 
which  was  generally  delivered  to  them  by  the  farmer  ready  manured, 
and  was  known  by  the  name  of  conacre.  For  this  they  agreed  to  pay 
a money  rent,  often  of  several  pounds  an  acre,  but  no  money  actually 
passed,  the  debt  being  worked  out  in  labour,  at  a money  valuation. 

The  produce,  on  the  cottier  system,  being  divided  into  two 

* In  its  original  acceptation,  the  word  “ cottier  ” designated  a class  of  sub- 
tenants, who  rent  a cottage  and  an  acre  or  two  of  land  from  the  small  farmers. 
But  the  usage  of  writers  has  long  since  stretched  the  term  to  include  those  small 
farmers  themselves,  and  generally  all  peasant  farmers  whose  rents  are  deter- 
mined by  competition. 

' [“  May  be  said  to  be  ” in  1st  ed.  (1848) : altered  as  above  in  5th  ed.  (1862). 
Similarly  the  account  of  the  labourers  in  the  following  sentences  was  changed 
from  the  present*  to  the  past  tense.] 


COTTIERS 


319 


portions,  rent,  and  the  remuneration  of  the  labourer ; the  one  is 
evidently  determined  by  the  other.  The  labourer  has  whatever  the 
landlord  does  not  take  : the  condition  of  the  labourer  depends  on 
the  amount  of  rent.  But  rent,  being  regulated  by  competition, 
depends  upon  the  relation  between  the  demand  for  land,  and  the 
supply  of  it.  The  demand  for  land  depends  on  the  number  of 
competitors,  and  the  competitors  are  the  whole  rural  population. 
The  effect,  therefore,  of  this  tenure,  is  to  bring  the  principle  of  popu- 
lation to  act  directly  on  the  land,  and  not,  as  in  England,  on  capital. 
Rent,  in  this  state  of  things,  depends  on  the  proportion  between 
population  and  land.  As  the  land  is  a fixed  quantity,  while  population 
has  an  unlimited  power  of  increase ; unless  something  checks  that 
increase,  the  competition  for  land  soon  forces  up  rent  to  the  highest 
point  consistent  with  keeping  the  population  alive.  The  effects, 
therefore,  of  cottier  tenure  depend  on  the  extent  to  which  the 
capacity  of  population  to  increase  is  controlled,  either  by  custom, 
by  individual  prudence,  or  by  starvation  and  disease. 

It  would  be  an  exaggeration  to  afi&rm  that  cottier  tenancy  is 
absolutely  incompatible  with  a prosperous  condition  of  the  labouring 
class.  If  we  could  suppose  it  to  exist  among  a people  to  whom  a 
high  standard  of  comfort  was  habitual ; whose  requirements  were 
such,  that  they  would  not  offer  a higher  rent  for  land  than  would  leave 
them  an  ample  subsistence,  and  whose  moderate  increase  of  numbers 
left  no  unemployed  population  to  force  up  rents  by  competition, 
save  when  the  increasing  produce  of  the  land  from  increase  of  skill 
would  enable  a higher  rent  to  be  paid  without  inconvenience ; the 
cultivating  class  might  be  as  well  remunerated,  might  have  as  large 
a share  of  the  necessaries  and  comforts  of  hfe,  on  this  system  of  tenure 
as  on  any  other.  They  would  not,  however,  while  their  rents  were 
arbitrary,  enjoy  any  of  the  peculiar  advantages  which  metayers  on 
the  Tuscan  system  derive  from  their  connexion  with  the  land.  They 
would  neither  have  the  use  of  a capital  belonging  to  their  landlords, 
nor  would  the  want  of  this  be  made  up  by  the  intense  motives  to 
bodily  and  mental  exertion  which  act  upon  the  peasant  who  has  a 
permanent  tenure.  On  the  contrary,  any  increased  value  given  to 
the  land  by  the  exertions  of  the  tenant,  would  have  no  effect  but  to 
raise  the  rent  against  himself,  either  the  next  year,  or  at  farthest  when 
his  lease  expired.  The  landlords  might  have  justice  or  good  sense 
enough  not  to  avail  themselves  of  the  advantage  which  competition 
would  give  them ; and  different  landlords  would  do  so  in  different 
degrees.  But  it  is  never  safe  to  expect  that  a class  or  body  of  men 


320 


BOOK  n.  CHAPTER  IX.  § 1 


will  act  in  opposition  to  their  immediate  pecuniary  interest ; and 
even  a doubt  on  the  subject  would  be  almost  as  fatal  as  a certainty, 
for  when  a person  is  considering  whether  or  not  to  undergo  a present 
exertion  or  sacrifice  for  a comparatively  remote  future,  the  scale 
is  turned  by  a very  small  probability  that  the  fruits  of  the 
exertion  or  of  the  sacrifice  will  be  taken  away  from  him.  The 
only  safeguard  against  these  uncertainties  would  be  the  growth  of 
a custom,  insuring  a permanence  of  tenure  in  the  same  occupant, 
without  liability  to  any  other  increase  of  rent  than  might  happen 
to  be  sanctioned  by  the  general  sentiments  of  the  community.  The 
Ulster  tenant-right  is  such  a custom.  The  very  considerable  sums 
which  outgoing  tenants  obtain  from  their  successors,  for  the  goodwill 
of  their  farms,*  in  the  first  place  actually  limit  the  competition  for 
land  to  persons  who  have  such  sums  to  offer  : while  the  same  fact 
also  proves  that  full  advantage  is  not  taken  by  the  landlord  of 
even  that  more  limited  competition,  since  the  landlord’s  rent  does 
not  amount  to  the  whole  of  what  the  incoming  tenant  not  only  offers 
but  actually  pays.  He  does  so  in  the  full  confidence  that  the  rent 
will  not  be  raised  ; and  for  this  he  has  the  guarantee  of  a custom, 
not  recognised  by  law,  but  deriving  its  binding  force  from  another 
sanction,  perfectly  well  understood  in  Ireland,  f Without  one  or 
other  of  these  supports,  a custom  limiting  the  rent  of  land  is  not 
hkely  to  grow  up  in  any  progressive  community.  If  wealth  and 
population  were  stationary,  rent  also  would  generally  be  stationary, 
and  after  remaining  a long  time  unaltered,  would  probably  come 
to  be  considered  unalterable.  But  all  progress  in  wealth  and 
population  tends  to  a rise  of  rents.  Under  a metayer  system  there 
is  an  established  mode  in  which  the  owner  of  land  is  sure  of 
participating  in  the  increased  produce  drawn  from  it.  But  on  the 

♦ “ It  is  not  uncommon  for  a tenant  without  a lease  to  sell  the  bare  privilege 
of  occupancy  or  possession  of  his  farm,  without  any  visible  sign  of  improvement 
having  been  made  by  him,  at  from  ten  to  sixteen,  up  to  twenty  and  even  forty 
years’  purchase  of  the  rent.” — {Digest  of  Evidence  taken  by  Lord  Devon's  Com- 
mission^  Introductory  Chapter. ) The  compiler  adds,  “ the  comparative  tran- 
quillity of  that  district  ” (Ulster)  “ may  perhaps  be  mainly  attributable  to 
this  fact.” 

t “ It  is  in  the  great  majority  of  oases  not  a reimbursement  for  outlay  in- 
curred,  or  improvements  effected  on  the  land,  but  a mere  life  insurance  or 
purchase  of. immunity  from  outrage.” — {Digest^  ut  supra.)  “The  present 
tenant-right  of  Ulster  ” (the  writer  judiciously  remarks)  “ is  an  embryo  copy- 
hold.'*'  “ Even  there,  if  the  tenant-right  be  disregarded,  and  a tenant  be  ejected 
without  having  received  the  price  of  his  goodwill,  outrages  are  generally  the 
consequence.” — (Ch.  viiL)  “ The  disorganised  state  of  Tipperary,  and  the 
agrarian  combination  throughout  Ireland,  are  but  a methodized  war  to  obtain 
the  Ulster  tenant-right.” 


COTTIERS 


321 


cottier  system  he  can  only  do  so  by  a readjustment  of  the  contract, 
while  that  readjustment,  in  a progressive  community,  would  almost 
always  be  to  his  advantage.  His  interest,  therefore,  is  decidedly 
opposed  to  the  growth  of  any  custom  commuting  rent  into  a 
fixed  demand. 

§ 2.  Where  the  amount  of  rent  is  not  limited,  either  by  law  or 
custom,  a cottier  system  has  the  disadvantages  of  the  worst  metayer 
system,  with  scarcely  any  of  the  advantages  by  which,  in  the  best 
forms  of  that  tenure,  they  are  compensated.  It  is  scarcely  possible 
that  cottier  agriculture  should  be  other  than  miserable.  There  is  not 
the  same  necessity  that  the  condition  of  the  cultivators  should  be  so. 
Since  by  a sufficient  restraint  on  population  competition  for  land  could 
be  kept  down,  and  extreme  poverty  prevented  ; habits  of  prudence 
and  a high  standard  of  comfort,  once  established,  would  have  a fair 
chance  of  maintaining  themselves  : though  even  in  these  favourable 
circumstances  the  motives  to  prudence  would  be  considerably  weaker 
than  in  the  case  of  metayers,  protected  by  custom  (like  those  of 
Tuscany)  from  being  deprived  of  their  farms : since  a metayer  family, 
thus  protected,  could  not  be  impoverished  by  any  other  improvident 
multiplication  than  their  own,  but  a cottier  family,  however  prudent 
and  self-restraining,  may  have  the  rent  raised  against  it  by  the 
consequences  of  the  multiplication  of  other  famihes.  Any  protection 
to  the  cottiers  against  this  evil  could  only  be  derived  from  a salutary 
sentiment  of  duty  or  dignity,  pervading  the  class.  From  this 
source,  however,  they  might  derive  considerable  protection.  If  the 
habitual  standard  of  requirement  among  the  class  were  high,  a young 
man  might  not  choose  to  offer  a rent  which  would  leave  him  in  a 
worse  condition  than  the  preceding  tenant ; or  it  might  be  the 
general  custom,  as  it  actually  is  in  some  countries,  not  to  marry  until 
a farm  is  vacant. 

But  it  is  not  where  a high  standard  of  comfort  has  rooted  itself 
in  the  habits  of  the  labouring  class,  that  we  are  ever  called  upon  to 
consider  the  effects  of  a cottier  system.  That  system  is  found  only 
where  the  habitual  requirements  of  the  rural  labourers  are  the 
lowest  possible  ; where  as  long  as  they  are  not  actually  starving, 
they  will  multiply  : and  population  is  only  checked  by  the  diseases, 
and  the  shortness  of  fife,  consequent  on  insufficiency  of  merely 
physical  necessaries.  This  was  ^ the  state  of  the  largest  portion  of 
the  Irish  peasantry.  When  a people  have  sunk  into  this  state, 
^ [“  Is  unhappily  ” until  the  5th  ed.  (1862).] 

M 


322 


BOOK  II.  CHAPTER  IX.  § 2 


and  still  more  when  they  have  been  in  it  from  time  immemorial, 
the  cottier  system  is  an  almost  insuperable  obstacle  to  their  emerging 
from  it.  When  the  habits  of  the  people  are  such  that  their  increase 
is  never  checked  but  by  the  impossibility  of  obtaining  a bare  support, 
and  when  this  support  can  only  be  obtained  from  land,  all  stipulations 
and  agreements  respecting  amount  of  rent  are  merely  nominal ; 
the  competition  for  land  makes  the  tenants  undertake  to  pay  more 
than  it  is  possible  they  should  pay,  and  when  they  have  paid  all  they 
can,  more  almost  always  remains  due. 

“As  it  may  fairly  be  said  of  the  Irish  peasantry,”  said  Mr. 
Revans,  the  Secretary  to  the  Irish  Poor  Law  Enquiry  Commission,* 
“ that  every  family  which  has  not  sufficient  land  to  yield  its  food  has 
one  or  more  of  its  members  supported  by  begging,  it  will  easily  be 
conceived  that  every  endeavour  is  made  by  the  peasantry  to  obtain 
small  holdings,  and  that  they  are  not  influenced  in  their  biddings 
by  the  fertility  of  the  land,  or  by  their  ability  to  pay  the  rent,  but 
solely  by  the  ofier  which  is  most  likely  to  gain  them  possession. 
The  rents  which  they  promise,  they  are  almost  invariably  incapable 
of  paying  ; and  consequently  they  become  indebted  to  those  under 
whom  they  hold,  almost  as  soon  as  they  take  possession.  They  give 
up,  in  the  shape  of  rent,  the  whole  produce  of  the  land  with  the 
exception  of  a sufficiency  of  potatoes  for  a subsistence  ; but  as  this 
is  rarely  equal  to  the  promised  rent,  they  constantly  have  against 
them  an  increasing  balance.  In  some  cases,  the  largest  quantity  of 
produce  which  their  holdings  ever  yielded,  or  which,  under  their 
system  of  tillage,  they  could  in  the  most  favourable  seasons  be  made 
to  yield,  would  not  be  equal  to  the  rent  bid  ; consequently,  if  the 
peasant  fulfilled  his  engagement  with  his  landlord,  which  he  is  rarely 
able  to  accomplish,  he  would  till  the  ground  for  nothing,  and  give 
his  landlord  a premium  for  being  allowed  to  till  it.  On  the  sea- 
coast,  fishermen,  and  in  the  northern  counties  those  who  have 
looms,  frequently  pay  more  in  rent  than  the  market  value  of  the 
whole  produce  of  the  land  they  hold.  It  might  be  supposed  that 
they  would  be  better  without  land  under  such  circumstances.  But 
fishing  might  fail  during  a week  or  two,  and  so  might  the  demand 
for  the  produce  of  the  loom,  when,  did  they  not  possess  the  land 
upon  which  their  food  is  grown,  they  might  starve.  The  full  amount 
of  the  rent  bid,  however,  is  rarely  paid.  The  peasant  remains 

♦ Evils  of  the  State  of  Ireland^  their  Causes  and  their  Remedy.  Page  10. 
A pamphlet  containing,  among  ocher  things,  an  excellent  digest  and  selection 
of  evidence  from  the  mass  collected  by  the  Commission  presided  over  by  Arch- 
bishop Whately. 


COTTIERS 


323 


constantly  in  debt  to  his  landlord  ; his  miserable  possessions — the 
wretched  clothing  of  himself  and  of  his  family,  the  two  or  three 
stools,  and  the  few  pieces  of  crockery,  which  his  wretched  hovel 
contains,  would  not,  if  sold,  liquidate  the  standing  and  generally 
accumulating  debt.  The  peasantry  are  mostly  a year  in  arrear, 
and  their  excuse  for  not  paying  more  is  destitution.  Should  the 
produce  of  the  holding,  in  any  year,  be  more  than  usually  abundant, 
or  should  the  peasant  by  any  accident  become  possessed  of  any 
property,  his  comforts  cannot  be  increased  ; he  cannot  indulge  in 
better  food,  nor  in  a greater  quantity  of  it.  His  furniture  cannot  be 
increased,  neither  can  his  wife  or  children  be  better  clothed.  The  ac- 
quisition must  go  to  the  person  under  whom  he  holds.  The  accidental 
addition  will  enable  him  to  reduce  his  arrear  of  rent,  and  thus  to 
defer  ejectment.  But  this  must  be  the  bound  of  his  expectation.” 

As  an  extreme  instance  of  the  intensity  of  competition  for  land, 
and  of  the  monstrous  height  to  which  it  occasionally  forced  up  the 
nominal  rent ; we  may  cite  from  the  evidence  taken  by  Lord  Devon’s 
Commission,*  a fact  attested  by  Mr.  Hurly,  Clerk  of  the  Crown  for 
Kerry : “I  have  known  a tenant  bid  for  a farm  that  I was  perfectly 
well  acquainted  with,  worth  601.  a year  : I saw  the  competition  get 
up  to  such  an  extent,  that  he  was  declared  the  tenant  at  450/.” 

§ 3.  In  such  a condition,  what  can  a tenant  gain  by  any  amount 
of  industry  or  prudence,  and  what  lose  by  any  recklessness  ? If  the 
landlord  at  any  time  exerted  his  full  legal  rights,  the  cottier  would  not 
be  able  even  to  live.  If  by  extra  exertion  he  doubled  the  produce 
of  his  bit  of  land,  or  if  he  prudently  abstained  from  producing  mouths 
to  eat  it  up,  his  only  gain  would  be  to  have  more  left  to  pay  to  his 
landlord ; while,  if  he  had  twenty  children,  they  would  still  be  fed 
first,  and  the  landlord  could  only  take  what  was  left.  Almost  alone 
amongst  mankind  the  cottier  is  in  this  condition,  that  he  can  scarcely 
be  either  better  or  worse  ofi  by  any  act  of  his  own.  If  he  were  indus- 
trious or  prudent,  nobody  but  his  landlord  would  gain  ; if  he  is  lazy 
or  intemperate,  it  is  at  his  landlord’s  expense.  A situation  more 
devoid  of  motives  to  either  labour  or  self-command,  imagination 
itself  cannot  conceive.  The  inducements  of  free  human  beings  are 
taken  away,  and  those  of  a slave  not  substituted.  He  has  nothing 
to  hope,  and  nothing  to  fear,  except  being  dispossessed  of  his  holding, 
and  against  this  he  protects  himself  by  the  ultima  ratio  of  a defensive 
civil  war.  Rockism  and  Whiteboyism  were  ^ the  determination  of 
♦ Evidence,  p.  851.  ^ [“  Are  ” until  the  5th  ed.  (1862).] 


324 


BOOK  IL  CHAPTER  IX.  § 4 


a people  who  had  nothing  that  could  be  called  theirs  but  a daily 
meal  of  the  lowest  description  of  food,  not  to  submit  to  being  deprived 
of  that  for  other  people’s  convenience. 

Is  it  not,  then,  a bitter  satire  on  the  mode  in  which  opinions 
are  formed  on  the  most  important  problems  of  human  nature  and 
life,  to  find  public  instructors  of  the  greatest  pretension,  imputing  the 
backwardness  of  Irish  industry,  and  the  want  of  energy  of  the  Irish 
people  in  improving  their  condition,  to  a peculiar  indolence  and 
insouciance  in  the  Celtic  race  ? Of  all  vulgar  modes  of  escaping 
from  the  consideration  of  the  effect  of  social  and  moral  influences 
on  the  human  mind,  the  most  vulgar  is  that  of  attributing  the  diver- 
sities of  conduct  and  character  to  inherent  natural  difierences. 
What  race  would  not  be  indolent  and  insouciant  when  things  are  so 
arranged,  that  they  derive  no  advantage  from  forethought  or  exer- 
tion ? If  such  are  the  arrangements  in  the  midst  of  which  they  live 
and  work,  what  wonder  if  the  listlessness  and  indifference  so 
engendered  are  not  shaken  off  the  first  moment  an  opportunity 
offers  when  exertion  would  really  be  of  use  ? It  is  very  natural  that 
a pleasure-loving  and  sensitively  organized  people  like  the  Irish, 
should  be  less  addicted  to  steady  routine  labour  than  the  English, 
because  life  has  njore  excitements  for  them  independent  of  it ; but 
they  are  not  less  fitted  for  it  than  their  Celtic  brethren  the  French, 
nor  less  so  than  the  Tuscans,  or  the  ancient  Greeks.  An  excitable 
organization  is  precisely  that  in  which,  by  adequate  inducements, 
it  is  easiest  to  kindle  a spirit  of  animated  exertion.  It  speaks  nothing 
Ugainst  the  capacities  of  industry  in  human  beings,  that  they  will  not 
exert  themselves  without  motive.  No  labourers  work  harder,  in 
England  or  America,  than  the  Irish  ; but  not  under  a cottier  system. 

§ 4.  The  multitudes  who  till  the  soil  of  India,  are  in  a condition 
sufi&ciently  analogous  to  the  cottier  system,  and  at  the  same  time 
sufficiently  different  from  it,  to  render  the  comparison  of  the  two 
a source  of  some  instruction.  In  most  parts  of  India  there  are, 
and  perhaps  have  always  been,  only  two  contracting  parties,  the 
landlord  and  the  peasant : the  landlord  being  generally  the  sovereign, 
except  where  he  has,  by  a special  instrument,  conceded  his  rights  to 
an  individual,  who  becomes  his  representative.  The  payments, 
however,  of  the  peasants,  or  ryots  as  they  are  termed,  have  seldom 
if  ever  been  regulated,  as  in  Ireland,  by  competition.  Though  the 
customs  locally  obtaining  were  infinitely  various,  and  though  practi- 
cally no  custom  could  be  maintained  against  the  sovereign’s  will, 


COTTIERS 


325 


there  was  always  a rule  of  some  sort  common  to  a neighbourhood ; 
the  collector  did  not  make  his  separate  bargain  with  the  peasant, 
but  assessed  each  according  to  the  rule  adopted  for  the  rest.  The 
idea  was  thus  kept  up  of  a right  of  property  in  the  tenant,  or,  at  all 
events,  of  a right  to  permanent  possession  ; and  the  anomaly  arose 
of  a fixity  of  tenure  in  the  peasant-farmer,  co-existing  with  an 
arbitrary  power  of  increasing  the  rent. 

When  the  Mogul  government  substituted  itself  throughout  the 
greater  part  of  India  for  the  Hindoo  rulers,  it  proceeded  on  a different 
principle.  A minute  survey  was  made  of  the  land,  and  upon  that 
survey  an  assessment  was  founded,  fixing  the  specific  payment  due 
to  the  government  from  each  field.  If  this  assessment  had  never 
been  exceeded,  the  ryots  would  have  been  in  the  comparatively 
advantageous  position  of  peasant-proprietors,  subject  to  a heavy, 
but  a fixed  quit-rent.  The  absence,  however,  of  any  real  protection 
against  illegal  extortions,  rendered  this  improvement  in  their  con- 
dition rather  nominal  than  real ; and,  except  during  the  occasional 
accident  of  a humane  and  vigorous  local  administrator,  the  exactions 
had  no  practical  limit  but  the  inability  of  the  ryot  to  pay  more. 

It  was  to  this  state  of  things  that  the  English  rulers  of  India 
succeeded ; and  they  were,  at  an  early  period,  struck  with  the 
importance  of  putting  an  end  to  this  arbitrary  character  of  the  land- 
revenue,  and  imposing  a fixed  limit  to  the  government  demand. 
They  did  not  attempt  to  go  back  to  the  Mogul  valuation.  It  has  been 
in  general  the  very  rational  practice  of  the  Enghsh  Government  in 
India  to  pay  little  regard  to  what  was  laid  down  as  the  theory  of  the 
native  institutions,  but  to  inquire  into  the  rights  which  existed  and 
were  respected  in  practice,  and  to  protect  and  enlarge  those.  For  a 
long  time,  however,  it  blundered  grievously  about  matters  of  fact, 
and  grossly  misunderstood  the  usages  and  rights  which  it  found 
existing.  Its  mistakes  arose  from  the  inability  of  ordinary  minds  to 
imagine  a state  of  social  relations  fundamentally  different  from  those 
with  which  they  are  practically  familiar.  England  being  accus- 
tomed to  great  estates  and  great  landlords,  the  English  rulers  took 
it  for  granted  that  India  must  possess  the  like ; and  looking  round  for 
some  set  of  people  who  might  be  taken  for  the  objects  of  their  search, 
they  pitched  upon  a sort  of  tax-gatherers  called  zemindars.  “ The 
zemindar,”  says  the  philosophical  historian  of  India,*  “ had  some 
of  the  attributes  which  belong  to  a landowner ; he  collected  the 
rents  of  a particular  district,  he  governed  the  cultivators  of  that 
* Mill’s  History  of  British  India,  book  vi.  ch.  8. 


326 


BOOK  II.  CHAPTER  IX.  § 4 


district,  lived  in  comparative  splendour,  and  his  son  succeeded  him 
when  he  died.  The  zemindars,  therefore,  it  was  inferred  without 
delay,  were  the  proprietors  of  the  soil,  the  landed  nobility  and 
gentry  of  India.  It  was  not  considered  that  the  zemindars,  though 
they  collected  the  rents,  did  not  keep  them ; but  paid  them  all  away 
with  a small  deduction  to  the  government.  It  was  not  considered 
that  if  they  governed  the  ryots,  and  in  many  respects  exercised 
over  them  despotic  power,  they  did  not  govern  them  as  tenants  of 
theirs,  holding  their  lands  either  at  will  or  by  contract  under 
them.  The  possession  of  the  ryot  was  an  hereditary  possession ; 
from  which  it  was  unlawful  for  the  zemindar  to  displace  him ; 
for  every  farthing  which  the  zemindar  drew  from  the  ryot,  he  was 
bound  to  account ; and  it  was  only  by  fraud,  if,  out  of  aU  that  he 
collected,  he  retained  an  ana  more  than  the  small  proportion 
which,  as  pay  for  collection,  he  was  permitted  to  receive.” 

“ There  was  an  opportunity  in  India,”  continues  the  historian, 
“ to  which  the  history  of  the  world  presents  not  a parallel.  Next 
after  the  sovereign,  the  immediate  cultivators  had,  by  far,  the 
{greatest  portion  of  interest  in  the  soil.  For  the  rights  (such  as 
they  were)  of  the  zemindars,  a complete  compensation  might  have 
tasily  been  made.  The  generous  resolution  was  adopted,  of 
sacrificing  to  the  improvement  of  the  country,  the  proprietary 
rights  of  the  sovereign.  The  motives  to  improvement  which  property 
gives,  and  of  which  the  power  was  so  justly  appreciated,  might 
have  been  bestowed  upon  those  upon  whom  they  would  have 
operated  with  a force  incomparably  greater  than  that  with  which 
they  could  operate  upon  any  other  class  of  men  : they  might  have 
been  bestowed  upon  those  from  whom  alone,  in  every  country,  the 
principal  improvements  in  agriculture  must  be  derived,  the 
immediate  cultivators  of  the  soil.  And  a measure  worthy  to  be 
ranked  among  the  noblest  that  ever  were  taken  for  the  improvement 
of  any  country,  might  have  helped  to  compensate  the  people  of 
India  for  the  miseries  of  that  misgovernment  which  they  had  so 
long  endured.  But  the  legislators  were  Enghsh  aristocrats ; and 
aristocratical  prejudices  prevailed.” 

The  measure  proved  a total  failure,  as  to  the  main  effects  which 
its  well-meaning  promoters  expected  from  it.  Unaccustomed  to 
estimate  the  mode  in  which  the  operation  of  any  given  institution 
is  modified  even  by  such  variety  of  circumstances  as  exists  within  a 
single  kingdom,  they  flattered  themselves  that  they  had  created, 
throughout  the  Bengal  provinces,  Enghsh  landlords,  and  it  proved 


COTTIERS 


327 


that  they  had  only  created  Irish  ones.  The  new  landed  aristocracy 
disappointed  every  expectation  built  upon  them.  They  did  nothing 
for  the  improvement  of  their  estates,  but  everything  for  their  own 
ruin.  The  same  pains  not  being  taken,  as  had  been  taken  in  Ireland, 
to  enable  landlords  to  defy  the  consequences  of  their  improvidence, 
nearly  the  whole  land  of  Bengal  had  to  be  sequestrated  and  sold, 
for  debts  or  arrears  of  revenue,  and  in  one  generation  most  of  the 
ancient  zemindars  had  ceased  to  exist.  Other  families,  mostly  the 
descendants  of  Calcutta  money  dealers,  or  of  native  officials  who 
had  enriched  themselves  under  the  British  government,  now  occupy 
their  place ; and  live  as  useless  drones  on  the  soil  which  has  been 
given  up  to  them.  Whatever  the  government  has  sacrificed  of  its 
pecuniary  claims,  for  the  creation  of  such  a class,  has  at  the  best 
been  wasted. i 

In  the  parts  of  India  into  which  the  British  rule  has  been  more 
recently  introduced,  the  blunder  has  been  avoided  of  endowing  a 
useless  body  of  great  landlords  with  gifts  from  the  public  revenue. 
In  most  parts  of  the  Madras  and  in  part  of  the  Bombay  Presidency, 
the  rent  is  paid  directly  to  the  government  by  the  immediate 
cultivator.  In  the  North-Western  Provinces,  the  government 
makes  its  engagement  with  the  village . community  collectively, 
determining  the  share  to  be  paid  by  each  individual,  but  holding 
them  jointly  responsible  for  each  other’s  default.  But  in  the  greater 
part  of  India,  the  immediate  cultivators  have  not  obtained  a per- 
petuity of  tenure  at  a fixed  rent.  The  government  manages  the 
land  on  the  principle  on  which  a good  Irish  landlord  manages  his 
estate  : not  putting  it  up  to  competition,  not  asking  the  cultivators 

^ [In  the  original  text  there  next  came  the  following  passages : “ But  in 
this  ill  judged  measure  there  was  one  redeeming  point,  to  which  may  probably 
be  ascribed  all  the  progress  which  the  Bengal  provinces  have  since  made  in 
production  and  in  amount  of  revenue.  The  ryots  were  reduced,  indeed,  to 
the  rank  of  tenants  of  the  zemindar ; but  tenants  with  fixity  of  tenure.  The 
rents  were  left  to  the  zemindars  to  fix  at  their  discretion  ; but  once  fixed,  were 
never  more  to  be  altered.  This  is  now  the  law  and  practice  of  landed  tenure, 
in  the  most  flourishing  part  of  the  British  Indian  dominions. 

“ In  the  parts  of  India  into  which  the  British  rule  has  been  more  recently 
introduced,  the  blunder  has  been  avoided  of  endowing  a useless  body  of  great 
landlords  with  gifts  from  the  public  revenue  ; but  along  with  the  evil,  the  good 
also  has  been  left  undone.  The  government  has  done  less  for  the  ryots  than 
it  has  required  to  be  done  for  them  by  the  landlords  of  its  creation.” 

These  were  omitted  (as  incorrect — see  note  of  1871,  infra,  p.  328)  in  the  3rd 
ed.  (1852).  In  that  edition  was  added  the  reference  to  Madras  and  Bombay, 
with  the  statement  that  “ the  rent  on  each  class  of  land  is  fixed  in  perpetuity.” 
This  incorrect  statement  was  struck  out  of  the  4th  ed.  (1857),  and  the  reference 
to  the  North-Western  Provinces  added.] 


328 


BOOK  IL  CHAPTER  IX.  § 4 


what  they  will  promise  to  pay,  but  determining  for  itself  what  they 
can  afford  to  pay,  and  defining  its  demand  accordingly.  In  many 
districts  a portion  of  the  cultivators  are  considered  as  tenants  of  the 
rest,  the  government  making  its  demand  from  those  only  (often  a 
numerous  body)  who  are  looked  upon  as  the  successors  of  the 
original  settlers  or  conquerors  of  the  village.  Sometimes  the  rent 
is  fixed  only  for  one  year,  sometimes  for  three  or  five ; but  the 
uniform  tendency  of  present  pohcy  is  towards  long  leases,  extending, 
in  the  northern  provinces  of  India,  to  a term  of  thirty  years.  This 
arrangement  has  not  existed  for  a sufficient  time  to  have  shown  by 
experience,  how  far  the  motives  to  improvement  which  the  long 
lease  creates  in  the  minds  of  the  cultivators,  fall  short  of  the  influence 
of  a perpetual  settlement.*  But  the  two  plans,  of  annual  settlements 
and  of  short  leases,  are  irrevocably  condemned.  They  can  only  be 
said  to  have  succeeded,  in  comparison  with  the  unlimited  oppression 
which  existed  before.  They  are  approved  by  nobody,  and  were 
never  looked  upon  in  any  other  light  than  as  temporary  arrange- 
ments, to  be  abandoned  when  a more  complete  knowledge  of  the 
capabilities  of  the  country  should  afford  data  for  something  more 
permanent.^ 

* [1871]  Since  this  was  written,  the  resolution  has  been  adopted  by  the 
Indian  government  of  converting  the  long  leases  of  the  northern  provinces  into 
perpetual  tenures  at  fixed  rents. 

^ [See  Appendix  M.  Indian  Te,nuTt&.\ 


CHAPTER  X 


MEANS  07  AlrOLISHING  COTTIER  TENANCY 

§ 1.  When  tlie  first  edition  of  tliis  work  was  written  and 
published, 1 the  question,  what  is  to  be  done  with  a cottier  popula- 
tion, was  to  the  English  Government  the  most  urgent  of  practical 
questions.  The  majority  of  a population  of  eight  millions,  having 
long  grovelled  in  helpless  inertness  and  abject  poverty  under  the 
cottier  system,  reduced  ,by  its  operation  to  mere  food  of  the  cheapest 
description,  and  to  an  incapacity  of  either  doing  or  willing  anything 
for  the  improvement  of  their  lot,  had  at  last,  by  the  failure  of  that 
lowest  quahty  of  food,  been  plunged  into  a state  in  which  the 
alternative  seemed  to  be  either  death,  or  to  be  permanently  sup- 
ported by  other  people,  or  a radical  change  in  the  economical 
arrangements  under  which  it  had  hitherto  been  their  misfortune  to 
live.  Such  an  emergency  had  compelled  attention  to  the  subject 
from  the  legislature  and  from  the  nation,  but  it  could  hardly  be 
said  with  much  result ; for,  the  evil  having  originated  in  a system 
of  land  tenancy  which  withdrew  from  the  people  every  motive  to 
industry  or  thrift  except  the  fear  of  starvation,  the  remedy  provided 
by  Parhament  was  to  take  away  even  that,  by  conferring  on  them  a 
legal  claim  to  eleemosynary  support : while,  towards  correcting 
the  cause  of  the  mischief,  nothing  was  done,  beyond  vain  complaints, 
though  at  the  price  to  the  national  treasury  of  ten  millions  sterling 
for  the  delay. 

“ It  is  needless,”  (I  observed)  “ to  expend  any  argument  in 
proving  that  the  very  foundation  of  the  economical  evils  of  Ireland 
is  the  cottier  system  ; that  while  peasant  rents  fixed  by  competition 
are  the  practice  of  the  country,  to  expect  industry,  useful  activity, 
any  restraint  on  population  but  death,  or  any  the  smallest  diminution 
of  poverty,  is  to  look  for  figs  on  thistles  and  grapes  on  thorns.  If 

^ [These  words  were  added  in  the  Sided.  (1862), and  the  following  sentences 
changed  from  the  present  to  the  past  tense.] 


330 


BOOR  II.  CHAPTER  X.  § 1 


our  practical  statesmen  are  not  ripe  for  the  recognition  of  this  fact ; 
or  if  while  they  acknowledge  it  in  theory,  they  have  not  a sufficient 
feeling  of  its  reality,  to  be  capable  of  founding  upon  it  any  course 
of  conduct ; there  is  still  another,  and  a purely  physical  consideration, 
from  which  they  will  find  it  impossible  to  escape.  If  the  one  crop 
on  which  the  people  have  hitherto  supported  themselves  continues 
to  be  precarious,  either  some  new  and  great  impulse  must  be  given 
to  agricultural  skill  and  industry,  or  the  soil  of  Ireland  can  no 
longer  feed  anything  like  its  present  population.  The  whole 
produce  of  the  western  half  of  the  island,  leaving  nothing  for  rent, 
will  not  now  keep  permanently  in  existence  the  whole  of  its  people  : 
and  they  will  necessarily  remain  an  annual  charge  on  the  taxation 
of  the  empire,  until  they  are  reduced  either  by  emigration  or  by 
starvation  to  a number  corresponding  with  the  low  state  of  their 
industry,  or  unless  the  means  are  found  of  making  that  industry 
much  more  productive.” 

1 Since  these  words  were  written,  events  unforeseen  by  any  one 
have  saved  the  English  rulers  of  Ireland  from  the  embarrassments 
which  would  have  been  the  just  penalty  of  their  indifference  and 
want  of  foresight.  Ireland,  under  cottier  agriculture,  could  no 
longer  supply  food  to  its  population  : Parliament,  by  way  of  remedy, 
applied  a stimulus  to  population,  but  none  at  all  to  production  ; the 
help,  however,  which  had  not  been  provided  for  the  people  of 
Ireland  by  political  wisdom,  came  from  an  unexpected  source. 
Self-supporting  emigration — the  Wakefield  system,  brought  into 
effect  on  the  voluntary  principle  and  on  a gigantic  scale  (the 
expenses  of  those  who  followed  being  paid  from  the  earnings  of 
those  who  Went  before)  has,  for  the  present,  reduced  the  population 
down  to  the  number  for  which  the  existing  agricultural  system  can 
find  employment  and  support.  The  census  of  1851,  compared  with 
that  of  1841,  showed  in  round  numbers  a diminution  of  population 
of  a milhon  and  a half.  The  subsequent  census  (of  1861)  shows  a 
further  diminution  of  about  half  a million.  The  Irish  having  thus 
found  the  way  to  that  flourishing  continent  which  for  generations 
will  be  capable  of  supporting  in  undiminished  comfort  the  increase 
of  the  population  of  the  whole  world ; the  peasantry  of  Ireland 
having  learnt  to  fix  their  eyes  on  a terrestrial  paradise  beyond  the 
ocean,  as  a sure  refuge  both  from  the  oppression  of  the  Saxon  and 
from  the  tyranny  of  nature  ; there  can  be  little  doubt  that  however 

^ [This  and  the  next  two  paragraphs  date  from  the  3rd  ed.  (1852),  and  take 
the  place  of  the  whole  of  the  original  § 2.] 


MEANS  OF  ABOLISHING  COTTIER  TENANCY 


331 


much  the  employment  for  agricultural  labour  may  hereafter  be 
diminished  by  the  general  introduction  throughout  Ireland  of 
English  farming — or  even  if,  like  the  county  of  Sutherland,  all 
Ireland  should  be  turned  into  a grazing  farm — the  superseded 
people  would  migrate  to  America  with  the  same  rapidity,  and  as 
free  of  cost  to  the  nation,  as  the  million  of  Irish  who  went  thither 
during  the  three  years  previous  to  1851.  Those  who  think  that  the 
land  of  a country  exists  for  the  sake  of  a few  thousand  landowners, 
and  that  as  long  as  rents  are  paid,  society  and  government  have 
fulfilled  their  function,  may  see  in  this  consummation  a happy  end 
to  Irish  difficulties. 

But  this  is  not  a time,  nor  is  the  human  mind  now  in  a condition, 
in  which  such  insolent  pretensions  can  be  maintained.  The  land 
of  Ireland,  the  land  of  every  country,  belongs  to  the  people  of  that 
country.  The  individuals  called  landowners  have  no  right,  in 
morality  and  justice,  to  anything  but  the  rent,  or  compensation  for 
its  saleable  value.  With  regard  to  the  land  itself,  the  paramount 
consideration  is,  by  what  mode  of  appropriation  and  of  cultivation 
it  can  be  made  most  useful  to  the  collective  body  of  its  inhabitants. 
To  the  owners  of  the  rent  it  may  be  very  convenient  that  the  bulk 
of  the  inhabitants,  despairing  of  justice  in  the  country  where  they 
and  their  ancestors  have  lived  and  suffered,  should  seek  on  another 
continent  that  property  in  land  which  is  denied  to  them  at  home. 
But  the  legislature  of  the  empire  ought  to  regard  with  other  eyes  the 
forced  expatriation  of  millions  of  people.  When  the  inhabitants  of 
a country  quit  the  country  en  masse  because  its  Government  will 
not  make  it  a place  fit  for  them  to  live  in,  the  Government  is  judged 
and  condemned.  There  is  no  necessity  for  depriving  the  landlords 
of  one  farthing  of  the  pecuniary  value  of  their  legal  rights ; but 
justice  requires  that  the  actual  cultivators  should  be  enabled  to 
become  in  Ireland  what  they  will  become  in  America — proprietors 
of  the  soil  which  they  cultivate. 

Good  policy  requires  it  no  less.  Those  who,  kno^7ing  neither 
Ireland  nor  any  foreign  country,  take  as  their  sole  standard  of 
social  and  economical  excellence  English  practice,  propose  as  the 
single  remedy  for  Irish  wretchedness,  the  transformation  of  the 
cottiers  into  hired  labourers.  But  this  is  rather  a scheme  for  the 
improvement  of  Irish  agriculture,  than  of  the  condition  of  the  Irish 
people.  The  status  of  a day-labourer  has  no  charm  for  infusing 
forethought,  frugality,  or  self-restraint,  into  a people  devoid  of 
them.  If  the  Irish  peasantry  could  be  universally  changed  into 


332 


BOOK  II.  CHAPTER  X.  § 1 


receivers  of  wages,  the  old  habits  and  mental  characteristics  of  the 
people  remaining,  we  should  merely  see  four  or  five  millions  of 
people  living  as  day-labourers  in  the  same  wretched  manner  in  which 
as  cottiers  they  lived  before  ; equally  passive  in  the  absence  of  every 
comfort,  equally  reckless  in  multiplication,  and  even,  perhaps, 
equally  listless  at  their  work ; since  they  could  not  be  dismissed 
in  a body,  and  if  they  could,  dismissal  would  now  be  simply  remand- 
ing them  to  the  poor-rate.  Far  other  would  be  the  effect  of  making 
them  peasant  proprietors.  A people  who  in  industry  and  providence 
have  everything  to  learn — who  are  confessedly  among  the  most 
backward  of  European  populations  in  the  industrial  virtues — require 
for  their  regeneration  the  most  powerful  incitements  by  which 
those  virtues  can  be  stimulated  : and  there  is  no  stimulus  as  yet 
comparable  to  property  in  land.  A permanent  interest  in  the  soil 
to  those  who  till  it,  is  almost  a guarantee  for  the  most  unwearied 
laboriousness  : against  over-population,  though  not  infallible,  it  is 
the  best  preservative  yet  known,  and  where  it  failed,  any  other 
plan  would  probably  fail  much  more  egregiously  ; the  evil  would  be 
beyond  the  reach  of  merely  economic  remedies. 

The  case  of  Ireland  is  similar  in  its  requirements  to  that  of  India. 
In  India,  though  great  errors  have  from  time  to  time  been  committed, 
no  one  ever  proposed,  under  the  name  of  agricultural  improvement, 
to  eject  the  ryots  or  peasant  farmers  from  their  possession ; the 
improvement  that  has  been  looked  for,  has  been  through  making 
their  tenure  more  secure  to  them,  and  the  sole  difference  of  opinion 
is  between  those  who  contend  for  perpetuity,  and  those  who  think 
that  long  leases  will  suffice.  The  same  question  exists  as  to  Ireland : 
and  it  would  be  idle  to  deny  that  long  leases,  under  such  landlords 
as  are  sometimes  to  be  found,  do  effect  wonders,  even  in  Ireland. 
But  then  they  must  be  leases  at  a low  rent.  Long  leases  are  in  no 
way  to  be  relied  on  for  getting  rid  of  cottierism.  During  the 
existence  of  cottier  tenancy,  leases  have  always  been  long  ; twenty- 
one  years  and  three  lives  concurrent,  was  a usual  term.  But  the 
rent  being  fixed  by  competition,  at  a higher  amount  than  could  be 
paid,  so  that  the  tenant  neither  had,  nor  could  by  any  exertion 
acquire,  a beneficial  interest  in  the  land,  the  advantage  of  a lease  was 
nearly  nominal.  In  India,  the  government,  where  it  has  not 
imprudently  made  over  its  proprietary  rights  to  the  zemindars,^ 
is  able  to  prevent  this  evil,  because,  being  itself  the  landlord,  it  can 
fix  the  rent  according  to  its  own  judgment ; but  under  individual 
* [This  clause  was  inserted  in  the  3rd  ed.  (1852).] 


MEANS  OF  ABOLISHING  COTTIER  TENANCY 


333 


landlords,  while  rents  are  fixed  by  competition,  and  the  competitors 
are  a peasantry  struggling  for  subsistence,  nominal  rents  are  in- 
evitable, unless  the  population  is  so  thin,  that  the  competition 
itself  is  only  nominal.  The  majority  of  landlords  will  grasp  at 
immediate  money  and  immediate  power ; and  so  long  as  they 
find  cottiers  eager  to  offer  them  everything,  it  is  useless  to  rely 
on  them  for  tempering  the  vicious  practice  by  a considerate 
self-denial. 

A perpetuity  is  a stronger  stimulus  to  improvement  than  a 
long  lease  : not  only  because  the  longest  lease,  before  coming  to 
an  end,  passes  through  all  the  varieties  of  short  leases  down  to  no 
lease  at  all ; but  for  more  fundamental  reasons.  It  is  very  shallow, 
even  in  pure  economics,  to  take  no  account  of  the  influence  of 
imagination  : there  is  a virtue  in  “ for  ever  ” beyond  the  longest 
term  of  years  ; even  if  the  term  is  long  enough  to  include  children, 
and  all  whom  a person  individually  cares  for,  yet  until  he  has 
reached  that  high  degree  of  mental  cultivation  at  which  the  public 
good  (which  also  includes  perpetuity)  acquires  a paramount  ascen- 
dancy over  his  feelings  and  desires,  he  will  not  exert  himself  with 
the  same  ardour  to  increase  the  value  of  an  estate,  his  interest  in 
which  diminishes  in  value  every  year.  Besides,  while  perpetual 
tenure  is  the  general  rule  of  landed  property,  as  it  is  in  all  the  countries 
of  Europe,  a tenure  for  a limited  period,  however  long,  is  sure  to  be 
regarded  as  a something  of  inferior  consideration  and  dignity,  and 
inspires  less  of  ardour  to  obtain  it,  and  of  attachment  to  it  when 
obtained.  But  where  a country  is  under  cottier  tenure,  the  question 
of  perpetuity  is  quite  secondary  to  the  more  important  point,  a 
limitation  of  the  rent.  Kent  paid  by  a capitalist  who  farms  for 
profit,  and  not  for  bread,  may  safely  be  abandoned  to  competition  ; 
rent  paid  by  labourers  cannot,  unless  the  labourers  were  in  a state  of 
civilization  and  improvement  which  labourers  have  nowhere  yet 
reached,  and  cannot  easily  reach  under  such  a tenure.  Peasant 
rents  ought  never  to  be  arbitrary,  never  at  the  discretion  of  the 
landlord  : either  by  custom  or  law,  it  is  imperatively  necessary  that 
they  should  be  fixed  ; and  where  no  mutually  advantageous  custom, 
such  as  the  metayer  system  of  Tuscany,  has  established  itself, 
reason  and  experience  recommend  that  they  should  be  fixed  by 
authority  : thus  changing  the  rent  into  a quit-rent,  and  the  farmer 
into  a peasant  proprietor. 

For  carrying  this  change  into  effect  on  a sufficiently  large  scale 
to  accomplish  the  complete  abolition  of  cottier  tenancy,  the  mode 


334 


BOOK  II.  CHAPTER  X.  § 1 


which  most  obviously  suggests  itself  is  the  direct  one  of  doing 
the  thing  outright  by  Act  of  Parliament ; making  the  whole  land 
of  Ireland  the  property  of  the  tenants,  subject  to  the  rents  now  really 
paid  (not  the  nominal  rent),  as  a fixed  rent  charge.  This,  under  the 
name  of  “ fixity  of  tenure,”  was  one  of  the  demands  of  the  Kepeal 
Association  during  the  most  successful  period  of  their  agitation ; 
and  was  better  expressed  by  Mr.  Conner,  its  earliest,  most  enthusi- 
astic, and  most  indefatigable  apostle,*  by  the  words,  “ a valuation 
and  a perpetuity.”  In  such  a measure  there  would  not  have  been 
any  injustice,  provided  the  landlords  were  compensated  for  the 
present  value  of  the  chances  of  increase  which  they  were  prospectively 
required  to  forego.  The  rupture  of  existing  social  relations  would 
hardly  have  been  more  violent  than  that  effected  by  the  ministers 
Stein  and  Hardenberg  when,  by  a series  of  edicts,  in  the  early  part 
of  the  present  century,  they  revolutionized  the  state  of  landed 
property  in  the  Prussian  monarchy,  and  left  their  names  to  posterity 
among  the  greatest  benefactors  of  their  country.  To  enlightened 
foreigners  writing  on  Ireland,  Von  Raumer  and  Gustave  de 
Beaumont,  a remedy  of  this  sort  seemed  so  exactly  and  obviously 
what  the  disease  required,  that  they  had  some  difficulty  in 
comprehending  how  it  was  that  the  thing  was  not  yet  done. 

This,  however,  would  have  been,  in  the  first  place,  a complete 
expropriation  of  the  higher  classes  of  Ireland  : which,  if  there  is  any 
truth  in  the  principles  we  have  laid  down,  would  be  perfectly 
warrantable,  but  only  if  it  were  the  sole  means  of  effecting  a great 
public  good.  In  the  second  place,  that  there  should  be  none  but 
peasant  proprietors,  is  in  itself  far  from  desirable.  Large  farms, 
cultivated  by  large  capital,  and  owned  by  persons  of  the  best  educa- 
tion which  the  country  can  give,  persons  qualified  by  instruction 
to  appreciate  scientific  discoveries,  and  able  to  bear  the  delay  and 
risk  of  costly  experiments,  are  an  important  part  of  a good 
agricultural  system.  Many  such  landlords  there  are  even  in  Ireland  ; 
and  it  would  be  a public  misfortune  to  drive  them  from  their  posts. 
A large  proportion  also  of  the  present  holdings  are  probably  still 
too  small  to  try  the  proprietary  system  under  the  greatest  advantages; 
nor  are  the  tenants  always  the  persons  one  would  desire  to  select 
as  the  first  occupants  of  peasant-properties.  There  are  numbers 
of  them  on  whom  it  would  have  a more  beneficial  effect  to  give 

♦ Author  of  numerous  pamphlets,  entitled  True  Political  Economy  of 
Ireland,  Letter  to  the  Earl  of  Devon,  Two  Letters  on  the  Rackrent  Oppression 
of  Ireland,  and  others.  Mr.  Conner  has  been  an  agitator  on  the  subject 
■ince  1832. 


MEANS  OF  ABOLISHING  COTTIER  TENANCY 


335 


them  the  hope  of  acquiring  a landed  property  by  industry  and 
frugality,  than  the  property  itself  in  immediate  possession.^ 

There  are,  however,  much  milder  measures,  not  open  to  similar 
objections,  and  which,  if  pushed  to  the  utmost  extent  of  which 
they  are  susceptible,  would  realize  in  no  inconsiderable  degree 
the  object  sought.  One  of  them  would  be,  to  enact  that  whoever 
reclaims  waste  land  becomes  the  owner  of  it,  at  a fixed  quit-rent 
equal  to  a moderate  interest  on  its  mere  value  as  waste.  It  would 
of  course  be  a necessary  part  of  this  measure,  to  make  compulsory 
on  landlords  the  surrender  of  waste  lands  (not  of  an  ornamental 
character)  whenever  required  for  reclamation.  Another  expedient, 
and  one  in  which  individuals  could  co-operate,  would  be  to  buy 
as  much  as  possible  of  the  land  offered  for  sale,  and  sell  it  again 
in  small  portions  as  peasant-properties.  A Society  for  this  purpose 

[Here  was  dropt  out,  from  the  3rd  ed.  (1852)  the  following  section  of 
the  original  text : 

“ § 6.  Some  persons  who  desire  to  avoid  the  term  fixity  of  tenure,  but  who 
cannot  be  satisfied  without  some  measure  co-extensive  with  the  whole  country, 
have  proposed  the  universal  adoption  of  ‘ tenant-right.’  Under  this  equivocal 
phrase,  two  things  are  confounded.  What  it  commonly  stands  for  in  Irish 
discussion,  is  the  Ulster  practice,  which  is  in  fact,  fixity  of  tenure.  It  supposes 
a customary,  though  not  a legal,  hmitation  of  the  rent ; without  which  the 
tenant  evidently  could  not  acquire  a beneficial  and  saleable  interest.  Its 
existence  is  highly  salutary,  and  is  one  principal  cause  of  the  superiority  of 
Ulster  in  efficiency  of  cultivation,  and  in  the  comfort  of  the  people,  notwith- 
standing a minuter  sub-division  of  holdings  than  in  the  other  provinces.  But 
to  convert  this  customary  limitation  of  rent  into  a legal  one,  and  to  make  it 
universal,  would  be  to  establish  a fixity  of  tenure  by  law,  the  objections  to  which 
have  already  been  stated. 

“ The  same  appellation  (tenant  right)  has  of  late  years  been  applied,  more 
particularly  in  England,  to  something  altogether  different,  and  falling  as  much 
short  of  the  exigency,  as  the  enforcement  of  the  Ulster  custom  would  exceed 
it.  This  English  tenant  right,  with  which  a high  agricultural  authority  has 
connected  his  name  by  endeavouring  to  obtain  for  it  legislative  sanction, 
amounts  to  no  more  than  this,  that  on  the  expiration  of  a lease,  the  landlord 
should  make  compensation  to  the  tenant  for  ‘ unexhausted  improvements.’ 
This  is  certainly  very  desirable,  but  provides  only  for  the  case  of  capitalist 
farmers,  and  of  improvements  made  by  outlay  of  money  ; of  the  worth  and 
cost  of  which,  an  experienced  land  agent  or  a jury  of  farmers  could  accurately 
judge.  The  improvements  to  be  looked  for  from  peasant  cultivators  are  the 
result  not  of  money  but  of  their  labour,  applied  at  such  various  times  and  in 
such  minute  portions  as  to  be  incapable  of  judicial  appreciation.  For  such 
labour,  compensation  could  not  be  given  on  any  principle  but  that  of  paying 
to  the  tenant  the  whole  difference  between  the  value  of  the  property  when  he 
received  it,  and  when  he  gave  it  up : which  would  as  effectually  annihilate 
the  right  of  property  of  the  landlord  as  if  the  rent  had  been  fixed  in  perpetuity, 
while  it  would  not  offer  the  same  inducements  to  the  cultivator,  who  improve! 
from  affection  and  passion  as  much  as  from  calculation,  and  to  whom  his  own 
land  is  a widely  different  thing  from  the  most  liberal  possible  pecuniary  com- 
pensation for  it.”] 


336 


BOOK  II.  CHAPTER  X.  § 1 


was  at  one  time  projected  (though  the  attempt  to  establish  it 
proved  unsuccessful)  on  the  principles,  so  far  as  applicable,  ot 
the  Freehold  Land  Societies,  which  have  been  so  successfully 
established  in  England,  not  primarily  for  agricultural,  but  for 
electoral  purposes.^ 

This  is  a mode  in  which  private  capital  may  be  employed  in 
renovating  the  social  and  agricultural  economy  cf  Ireland,  not 
only  without  sacrifice  but  with  considerable  profit  to  its  owners. 
The  remarkable  success  of  the  Waste  Land  Improvement  Society, 
which  proceeded  on  a plan  far  less  advantageous  to  the  tenant, 
is  an  instance  of  what  an  Irish  peasantry  can  be  stimulated  to  do, 

^ [Little  more  than  this  remained  in  the  3rd  ed.  (1852) — modified  to  its 
present  shape  in  the  5th  (1862) — of  the  argument  in  favour  of  measures  of 
reclamation  of  waste  land  which  occupied  five  pages  in  the  original  edition. 
It  opened  thus : “ There  is  no  need  to  extend  them  to  all  the  population,  or  all 
the  land.  It  is  enough  if  there  be  land  available,  on  which  to  locate  so  great 
a portion  of  the  population,  that  the  remaining  area  of  the  country  shall  not 
be  required  to  maintain  greater  numbers  than  are  compatible  with  large 
farming  and  hired  labour.  For  this  purpose  there  is  an  obvious  resource  in 
the  waste  lands  ; which  are  happily  so  extensive,  and  a large  proportion  of 
them  so  improvable,  as  to  afford  a means  by  which,  without  making  the  present 
tenants  proprietors,  nearly  the  whole  surplus  population  might  b^e  converted 
into  peasant  proprietors  elsewhere.” 

After  this  argument  came  the  following  account  of  the  English  experiments 
associated  with  the  name  of  Feargus  O’Connor  ; “ There  are  yet  other  means, 
by  which  not  a little  could  be  done  in  the  dissemination  of  peasant  proprietors 
over  even  the  existing  area  of  cultivation.  There  is  at  the  present  time  an 
experiment  in  progress,  in  more  than  one  part  of  England,  for  the  creation  of 
peasant  proprietors.  The  project  is  of  Chartist  origin,  and  its  first  colony  is 
now  in  full  operation  near  Rickmansworth,  in  Hertfordshire.  The  plan  is  as 
follows  : — Funds  were  raised  by  subscription,  and  vested  in  a joint-stock 
company.  With  part  of  these  funds  an  estate  of  several  hundred  acres  was 
bought.  This  estate  was  divided  into  portions  of  two,  three,  and  four  acres,  on 
each  of  which  a house  was  erected  by  the  Association.  These  holdings  were 
let  to  select  labourers,  to  whom  also  such  sums  were  advanced  as  were  thought 
to  amount  to  a sufficient  capital  for  cultivation  by  spade  labour.  An  annual 
payment,  affording  to  the  Company  an  interest  of  five  per  jent.  on  their  outlay, 
was  laid  on  the  several  holdings  as  a fixed  quit-rent,  never  in  any  circum- 
stances to  be  raised.  The  tenants  are  thus  proprietors  from  the  first,  and  their 
redemption  of  the  quit-rent,  by  saving  from  the  produce  of  their  labour,  is 
desired  and  calculated  upon. 

“ The  originator  of  this  experiment  appears  to  have  successfully  repelled 
(before  a tribunal  by  no  means  prepossessed  in  his  favour,  a Committee  of  the 
House  of  Commons)  the  imputations  which  were  lavished  upon  his  project, 
and  upon  his  mode  of  executing  it.  Should  its  issue  ultimately  be  unfavourable, 
the  cause  of  failure  will  be  in  the  details  of  management,  not  in  the  principle. 
These  well-conceived  arrangements  afford  a mode  in  which  private  capital  may 
co-operate  in  renovating  &c.”  In  the  first  edition  it  was  said  that  “ at  present 
there  seems  no  reason  to  believe  ” the  issue  would  be  unfavorable ; and  in 
the  second  the  reference  was  inserted  to  the  parliamentary  enquiry.  For  the 
subsequent  history  of  the  National  Land  Company,  see  L.  Jebb,  Small  Holdings, 
(1907),  p.  121.] 


MEANS  OF  ABOLISHING  COTTIER  TENANCY 


337 


by  a sufficient  assurance  that  what  they  do  will  be  for  their  own 
advantage.  It  is  not  even  indispensable  to  adopt  perpetuity  as  the 
rule ; long  leases  at  moderate  rents,  hke  those  of  the  Waste  Land 
Society,  would  suffice,  if  a prospect  were  held  out  to  the  farmers  of 
being  allowed  to  purchase  their  farms  with  the  capital  which  they 
might  acquire,  as  the  Society’s  tenants  were  so  rapidly  acquiring 
under  the  influence  of  its  beneficent  system.*  When  the  lands 
were  sold,  the  funds  of  the  association  would  be  liberated,  and  it 
might  recommence  operations  in  some  other  quarter. 

§ 2.1  Thus  far  I had  written  in  1856.  Since  that  time  the 
great  crisis  of  Irish  industry  has  made  further  progress,  and  it  is 
necessary  to  consider  how  its  present  state  affects  the  opinions, 
on  prospects  or  on  practical  measures,  expressed  in  the  previous 
part  of  this  chapter. 

* [1857]  Though  this  society,  during  the  years  succeeding  the  famine,  was 
forced  to  wind  up  its  affairs,  the  memory  of  what  it  accomplished  ought  to  be 
preserved.  The  following  is  an  extract  in  the  Proceedings  of  Lord  Devon’s 
Commission  (page  84)  from  the  report  made  to  the  society  in  1845,  by  their 
intelligent  manager.  Colonel  Robinson  : — 

“ Two  hundred  and  forty-five  tenants,  many  of  whom  were  a few  years  since 
in  a state  bordering  on  pauperism,  the  occupiers  of  small  holdings  of  from  ten 
to  twenty  plantation  acres  each,  have,  by  their  own  free  labour,  with  the 
society’s  aid,  improved  their  farms  to  the  value  of  4396?.  ; 605?,  having  been 
added  during  the  last  year,  being  at  the  rate  of  17?.  18s.  per  tenant  for  the  whole 
term,  and  2?.  9s.  for  the  past  year ; the  benefit  of  winch  improvements  each 
tenant  will  enjoy  during  the  unexpired  term  of  a thirty-one  years’  lease. 

“ These  245  tenants  and  their  families  have,  by  spade  industry,  reclaimed 
and  brought  into  cultivation  1032  plantation  acres  of  land,  previously  unpro- 
ductive mountain  waste,  upon  which  they  grew,  last  year,  crops  valued  by 
competent  practical  persons  at  3896?.,  being  in  the  proportion  of  15?.  18s.  each 
tenant ; and  their  live  stock,  consisting  of  cattle,  horses,  sheep,  and  pigs,  now 
actually  upon  the  estates,  is  valued,  according  to  the  present  prices  of  the 
neighbouring  markets,  at  4162?.,  of  which  1304?.  has  been  added  since  February 
1844,  being  at  the  rate  of  16?.  19s.  for  the  whole  period,  and  51.  6s.  for  the  last 
year  ; during  which  time  their  stock  has  thus  increased  in  value  a sum  equal  to 
their  present  annual  rent ; and  by  the  statistical  tables  and  returns  referred  to 
in  previous  reports,  it  is  proved  that  the  tenants,  in  general,  improve  their 
little  farms,  and  increase  their  cultivation  and  crops,  in  nearly  direct  proportion 
to  the  number  of  available  working  persons  of  both  sexes  of  which  their 
families  consist.” 

There  cannot  be  a stronger  testimony  to  the  superior  amount  of  gross,  and 
even  of  net  produce,  raised  by  small  farming  under  any  tolerable  system  of 
landed  tenure ; and  it  is  worthy  of  attention  that  the  industry  and  zeal  were 
greatest  among  the  smaller  holders  ; Colonel  Robinson  noticing,  as  exceptions 
to  the  remarkable  and  rapid  progress  of  improvement,  some  tenants  who  were 
“ occupants  of  larger  farms  than  twenty  acres,  a class  too  often  deficient  in  the 
enduring  industry  indispensable  for  the  successful  prosecution  of  mountain 
improvements.” 

^ [A  brief  section,  beginning  thus,  was  added  in  the  5th  ed.  (1862).  This 
was  omitted,  and  the  present  § 2 added  in  the  6th  ed.  (1865).] 


338 


BOOK  II.  CHAPTER  X.  § 2 


The  principal  change  in  the  situation  consists  in  the  great  diminu- 
tion, holding  out  a hope  of  the  entire  extinction,  of  cottier  tenure. 
The  enormous  decrease  in  the  number  of  small  holdings,  and  increase 
in  those  of  a medium  size,  attested  by  the  statistical  returns,  suf- 
ficiently proves  the  general  fact,  and  all  testimonies  show  that  the 
tendency  still  continues.*  It  is  probable  that  the  repeal  of  the 
corn  laws,  necessitating  a change  in  the  exports  of  Ireland  from  the 
products  of  tillage  to  those  of  pasturage,  would  of  itself  have  sufficed 
to  bring  about  this  revolution  in  tenure.  A grazing  farm  can  only  be 

* There  is,  however,  a partial  counter-current,  of  which  I have  not  seen  any 
public  notice.  **  A class  of  men,  not  very  numerous,  but  sufficiently  so  to  do 
much  mischief,  have,  through  the  Landed  Estates  Court,  got  into  possession  of 
land  in  Ireland,  who,  of  all  classes,  are  least  likely  to  recognise  the  duties  of  a 
landlord’s  position.  These  are  small  traders  in  towns,  who  by  dint  of  sheer 
parsimony,  frequently  combined  with  money-lending  at  usurious  rates,  have 
succeeded,  in  the  course  of  a long  life,  in  scraping  together  as  much  money  as 
will  enable  them  to  buy  fifty  or  a hundred  acres  of  land.  These  people  never 
think  of  turning  farmers,  but,  proud  of  their  position  as  landlords,  proceed  to 
turn  it  to  the  utmost  account.  An  instance  of  this  kind  came  under  my  notice 
lately.  The  tenants  on  the  property  were,  at  the  time  of  the  purchase,  some 
twelve  years  ago,  in  a tolerably  comfortable  state.  Within  that  period  their 
rent  has  been  raised  three  several  times  ; and  it  is  now,  as  I am  informed  by 
the  priest  of  the  district,  nearly  double  its  amount  at  the  commencement  of  the 
present  proprietor’s  reign.  The  result  is  that  the  people,  who  were  formerly  in 
tolerable  comfort,  are  now  reduced  to  poverty  ; two  of  them  have  left  the 
property  and  squatted  near  an  adjacent  turf  bog,  where  they  exist  trusting  for 
support  to  occasional  jobs.  If  this  man  is  not  shot,  he  will  injure  himself 
through  the  deterioration  of  his  property,  but  meantime  he  has  been  getting 
eight  or  ten  per  cent  on  his  purchase-money.  This  is  by  no  means  a rare  case. 
The  scandal  which  such  occurrences  cause,  casts  its  reflection  on  transactions 
of  a wholly  different  and  perfectly  legitimate  kind,  where  the  removal  of  the 
tenants  is  simply  an  act  of  mercy  for  all  parties. 

“ The  anxiety  of  landlords  to  get  rid  of  cottiers  is  also  to  some  extent  neu- 
tralized by  the  anxiety  of  middlemen  to  get  them.  About  one-fourth  of  the 
whole  land  of  Ireland  is  held  under  long  leases ; the  rent  received,  when  the 
lease  is  of  long  standing,  being  generally  greatly  under  the  real  value  of  the 
land.  It  rarely  happens  that  the  land  thus  held  is  cultivated  by  the  owner  of 
the  lease ; instead  of  this,  he  sublets  it  at  a rackrent  to  small  men,  and  lives 
on  the  excess  of  the  rent  which  he  receives  over  that  which  he  pays.  Some  of 
these  leases  are  always  running  out ; and  as  they  draw  towards  their  close,  the 
middleman  has  no  other  interest  in  the  land  than,  at  any  cost  of  permanent 
deterioration,  to  get  the  utmost  out  of  it  during  the  unexpired  period  of  the 
term.  For  this  purpose  the  small  cottier  tenants  precisely  answer  his  turn. 
Middlemen  in  this  position  are  as  anxious  to  obtain  cottiers  as  tenants,  as  the 
landlords  are  to  be  rid  of  them  ; and  the  result  is  a transfer  of  this  sort  of  tenant 
from  one  class  of  estates  to  the  other.  The  movement  is  of  limited  dimensions, 
but  it  does  exist,  and  so  far  as  it  exists,  neutralizes  the  general  tendency. 
Perhaps  it  may  be  thought  that  this  system  will  reproduce  itself  ; that  the 
same  motives  which  led  to  the  existence  of  middlemen  will  perpetuate  the 
class  ; but  there  is  no  danger  of  this.  Landowners  are  now  perfectly  alive  to 
the  ruinous  consequences  of  this  system,  however  convenient  for  a time  ; and  a 
clause  against  sub-letting  is  now  becoming  a matter  of  course  in  every  lease.” — 
{Private  Communication  from  Professor  Cairnes.^ 


MEANS  OF  ABOLISHING  COTTIER  TENANCY 


339 


managed  by  a capitalist  farmer,  or  by  the  landlord.  But  a change 
involving  so  great  a displacement  of  the  population  has  been 
immensely  facilitated  and  made  more  rapid  by  the  vast  emigration, 
as  well  as  by  that  greatest  boon  ever  conferred  on  Ireland  by  any 
Government,  the  Encumbered  Estates  Act ; the  best  provisions 
of  which  have  since,  through  the  Landed  Estates  Court,  been 
permanently  incorporated  into  the  social  system  of  the  country. 
The  greatest  part  of  the  soil  of  Ireland,  there  is  reason  to  believe, 
is  now  farmed  either  by  the  landlords,  or  by  small  capitalist  farmers. 
That  these  farmers  are  improving  in  circumstances,  and  accumu- 
lating capital,  there  is  considerable  evidence,  in  particular  the  great 
increase  of  deposits  in  the  banks  of  which  they  are  the  principal 
customers.  So  far  as  that  class  is  concerned,  the  chief  thing  still 
wanted  is  security  of  tenure,  or  assurance  of  compensation  for 
improvements.  The  means  of  supplying  these  wants  are  now 
engaging  the  attention  of  the  most  competent  minds ; Judge 
Longfield’s  address,  in  the  autumn  of  1864,  and  the  sensation 
created  by  it,  are  an  era  in  the  subject,  and  a point  has  now  been 
reached  when  we  may  confidently  expect  that  within  a very  few 
years  something  effectual  will  be  done. 

But  what,  meanwhile,  is  the  condition  of  the  displaced  cottiers, 
so  far  as  they  have  not  emigrated ; and  of  the  whole  class  who 
subsist  by  agricultural  labour,  without  the  occupation  of  any  land  ? 
As  yet,  their  state  is  one  of  great  poverty,  with  but  slight  prospect  of 
improvement.  Money  wages,  indeed,  have  risen  much  above  the 
wretched  level  of  a generation  ago  : but  the  cost  of  subsistence 
has  also  risen  so  much  above  the  old  potato  standard,  that  the 
real  improvement  is  not  equal  to  the  nominal ; and  according  to  the 
best  information  to  which  I have  access,  there  is  little  appearance 
of  an  improved  standard  of  living  among  the  class.  The  population, 
in  fact,  reduced  though  it  be,  is  still  far  beyond  what  the  country 
can  support  as  a mere  grazing  district  of  England.  It  may  not, 
perhaps,  be  strictly  true  that,  if  the  present  number  of  inhabitants  are 
to  be  maintained  at  home,  it  can  only  be  either  on  the  old  vicious 
system  of  cottierism,  or  as  small  proprietors  growing  their  own 
food.  The  lands  which  will  remain  under  tillage  would,  no  doubt, 
if  sufficient  security  for  outlay  were  given,  admit  of  a more  extensive 
employment  of  labourers  by  the  small  capitalist  farmers  ; and  this, 
in  the  opinion  of  some  competent  judges,  might  enable  the  country 
to  support  the  present  number  of  its  population  in  actual  existence. 
But  no  one  will  pretend  that  this  resource  is  sufficient  to  maintain 


340 


BOOK  II.  CHAPTER  X.  § 2 


them  in  any  condition  in  which  it  is  fit  that  the  great  body  of  the 
peasantry  of  a country  should  exist.  Accordingly  the  emigration, 
which  for  a time  had  fallen  off,  has,  under  the  additional  stimulus 
of  bad  seasons,  revived  in  all  its  strength.  It  is  calculated  that 
within  the  year  1864  not  less  than  100,000  emigrants  left  the  Irish 
shores.  As  far  as  regards  the  emigrants  themselves  and  their 
posterity,  or  the  general  interests  of  the  human  race,  it  would  be 
folly  to  regret  this  result.  The  children  of  the  immigrant  Irish 
receive  the  education  of  Americans,  and  enter,  more  rapidly  and 
completely  than  would  have  been  possible  in  the  country  of  their 
descent,  into  the  benefits  of  a higher  state  of  civilization.  In  twenty 
or  thirty  years  they  are  not  mentally  distinguishable  from  other 
Americans.  The  loss,  and  the  disgrace,  are  England’s  : and  it  is 
the  English  people  and  government  whom  it  chiefly  concerns  to 
ask  themselves,  how  far  it  will  be  to  their  honour  and  advantage 
to  retain  the  mere  soil  of  Ireland,  but  to  lose  its  inhabitants.  With 
the  present  feelings  of  the  Irish  people,  and  the  direction  which  their 
hope  of  improving  their  condition  seems  to  be  permanently  taking, 
England,  it  is  probable,  has  only  the  choice  between  the  depopula- 
tion of  Ireland,  and  the  conversion  of  a part  of  the  labouring 
population  into  peasant  proprietors.  The  truly  insular  ignorance 
of  her  public  men  respecting  a form  of  agricultural  economy  which 
predominates  in  nearly  every  other  civilized  country,  makes  it  only 
too  probable  that  she  will  choose  the  worse  side  of  the  alternative. 
Yet  there  are  germs  of  a tendency  to  the  formation  of  peasant 
proprietors  on  Irish  soil,  which  require  only  the  aid  of  a friendly 
legislator  to  foster  them ; as  is  shown  in  the  following  extract 
from  a private  communication  by  my  eminent  and  valued  friend, 
Professor  Cairnes  : — 

“ On  the  sale,  some  eight  or  ten  years  ago,  of  the  Thomond, 
Portarlington,  and  Kingston  estates,  in  the  Encumbered  Estates 
Court,  it  was  observed  that  a considerable  number  of  occupying 
tenants  purchased  the  fee  of  their  farms.  I have  not  been  able 
to  obtain  any  information  as  to  what  followed  that  proceeding — 
whether  the  purchasers  continued  to  farm  their  small  properties, 
or  under  the  mania  of  landlordism  tried  to  escape  from  their  former 
mode  of  life.  But  there  are  other  facts  which  have  a bearing  on  this 
question.  In  those  parts  of  the  country  where  tenant-right  prevails, 
the  prices  given  for  the  goodwill  of  a farm  are  enormous.  The 
following  figures,  taken  from  the  schedule  of  an  estate  in  the  neigh- 
bourhood of  Newry,  now  passing  through  the  Landed  Estates  Court, 


MEANS  OF  ABOLISHING  COTTIER  TENANCY 


341 


will  give  an  idea,  but  a very  inadequate  one,  of  the  prices  which  this 
mere  customary  right  generally  fetches. 

“ Statement  showing  the  prices  at  which  the  tenant-right  of 
certain  farms  near  Newry  was  sold  : — 


Acres. 

Kent!. 

Purchase-money 
of  tenant-right. 

Lot  1 

23  .. 

. . £74  . . 

2 

24  .. 

77  . . 

. . . . 240 

3 

13  .. 

. . 39  . . 

..  ..  110 

4 

14  . . 

. . 34 

....  85 

6 

10  .. 

. . 33  . . 

. . . . 172 

6 

6 .. 

..  13 

. . . . 75 

7 

8 

. . 26  . . 

. . . . 130 

8 

11 

. . 33  . . 

. . . . 130 

9 

2 .. 

5 . . 

....  5 

110 

£334 

£980 

The  prices  here  represent  on  the  whole  about  three  years* 
purchase  of  the  rental : but  this,  as  I have  said,  gives  but  an  in- 
adequate idea  of  that  which  is  frequently,  indeed  of  that  which 
is  ordinarily,  paid.  The  right,  being  purely  customary,  will  vary 
in  value  with  the  confidence  generally  reposed  in  the  good  faith 
of  the  landlord.  In  the  present  instance,  circumstances  have 
come  to  light  in  the  course  of  the  proceedings  connected  with 
the  sale  of  the  estate,  which  give  reason  to  believe  that  the  confidence 
in  ttis  case  was  not  high ; consequently,  the  rates  above  given 
may  be  taken  as  considerably  under  those  which  ordinarily  prevail. 
Cases,  as  I am  informed  on  the  highest  authority,  have  in  other 
parts  of  the  country  come  to  light,  also  in  the  Landed  Estates 
Court,  in  which  the  price  given  for  the  tenant-right  was  equal  to 
that  of  the  whole  fee  of  the  land.  It  is  a remarkable  fact  that 
people  should  be  found  to  give,  say  twenty  or  twenty-five  years’ 
purchase,  for  land  which  is  still  subject  to  a good  round  rent.  Why, 
it  will  be  asked,  do  they  not  purchase  land  out  and  out  for  the 
same,  or  a slightly  larger,  sum  ? The  answer  to  this  question  1 
believe  is  to  be  found  in  the  state  of  our  land  laws.  The  cost 
of  transferring  land  in  small  portions  is,  relatively  to  the  purchase 
money,  very  considerable,  even  in  the  Landed  Estates  Court ; 
while  the  goodwill  of  a farm  may  be  transferred  without  any  cost 
at  all.  The  cheapest  conveyance  that  could  be  drawn  in  that 
Court,  where  the  utmost  economy,  consistent  with  the  present 
mode  of  remunerating  legal  services,  is  strictly  enforced,  would, 
irrespective  of  stamp  duties,  cost  lOL — a very  sensible  addition  to 
the  purchase  of  a small  peasant  estate  : a conveyance  to  transfer 


342 


BOOK  II.  CHAPTER  X.  § 2 


a thousand  acres  might  not  cost  more,  and  would  probably  not 
cost  much  more.  But,  in  truth,  the  mere  cost  of  conveyance 
represents  but  the  least  part  of  the  obstacles  which  exist  to 
obtaining  land  in  small  portions.  A far  more  serious  impediment 
is  the  complicated  state  of  the  ownership  of  land,  which  renders 
it  frequently  impracticable  to  subdivide  a property  into  such 
portions  as  would  bring  the  land  within  the  reach  of  small  bidders. 
The  remedy  for  this  state  of  things,  however,  lies  in  measures  of  a 
more  radical  sort  than  I fear  it  is  at  all  probable  that  any  House  of 
Commons  we  are  soon  likely  to  see  would  even  with  patience  con- 
sider. A registry  of  titles  may  succeed  in  reducing  this  complex 
condition  of  ownership  to  its  simplest  expression ; but  where  real 
complication  exists,  the  difficulty  is  not  to  be  got  rid  of  by  mere 
simplicity  of  form  ; and  a registry  of  titles — while  the  powers  of  dis- 
position at  present  enjoyed  by  landowners  remain  undiminished, 
while  every  settler  and  testator  has  an  almost  unbounded  licence 
to  multiply  interests  in  land,  as  pride,  the  passion  for  dictation, 
or  mere  whim  may  suggest — will,  in  my  opinion,  fail  to  reach  the 
root  of  the  evil.  The  effect  of  these  circumstances  is  to  place  an 
immense  premium  upon  large  dealings  in  land — indeed  in  most 
cases  practically  to  preclude  all  other  than  large  dealings ; and 
while  this  is  the  state  of  the  law,  the  experiment  of  peasant  pro- 
prietorship, it  is  plain,  cannot  be  fairly  tried.  The  facts,  however, 
which  I have  stated,  show,  I think,  conclusively,  that  there  is 
no  obstacle  in  the  disposition  of  the  people  to  the  introduction  of 
this  system.” 

I have  concluded  a discussion,  which  has  occupied  a space 
almost  disproportioned  to  the  dimensions  of  this  work;  and  I 
here  close  the  examination  of  those  simpler  forms  of  social  economy 
in  which  the  produce  of  the  land  either  belongs  undividedly  to  one 
class,  or  is  shared  only  between  two  classes.  We  now  proceed 
to  the  hypothesis  of  a threefold  division  of  the  produce,  among 
labourers,  landlords,  and  capitahsts ; and  in  order  to  connect 
the  coming  discussions  as  closely  as  possible  with  those  which  have 
now  for  some  time  occupied  us,  I shall  commence  with  the  subject 
of  W ages.i 

^ [See  Appendix  N.  Irish  Agrarian  Development} 


“I  (Ll  Ia/^.jc/Ci.  La^Ot Lc4  tr'^ 

S itjuJJU  CL  tytAJU<H^  . -/^  

c(L<-  y\  ^ y'  ^hIl  2>cACAtjuy^<^  ^</^  . r/j^  ^ ^ -cy^ 
Ccxw  C.  ftr.7tj: 

^'  ^--  -/"y  ^ 

/^r/-rr  ^ CHAPTER  XI  ' '" 


/. 


h-i^cr 


rZfX, 


fX^Ac  , 


' - 4: 


OP  WAGES 


/ 


C 


§ 1.  Under  the  head  of  Wages  are  to  be  considered,  first, 
the  causes  which  determine  or  influence  the  wages  of  labour  gene- 
rally, and  secondly,  the  differences  that  exist  between  the  wages 
of  different  employments.  It  is  convenient  to  keep  these  two 
classes  of  considerations  separate ; and  in  discussing  the  law  of 
wages,  to  proceed  in  the  first  instance  as  if  there  were  no  other 
kind  of  labour  than  common  unskilled  labour  of  the  average  degree 
of  hardness  and  disagreeableness. 

Wages,  hke  other  things,  may  be  regulated  either  by  competition 
or  by  custom.  In  this  country  there  are  few  kinds  of  labour  of 
which  the  remuneration  would  not  be  lower  than  it  is,  if  the  employer 
took  the  full  advantage  of  competition.  Competition,  however, 
must  be  regarded,  in  the  present  state  of  society,  as  the  principal 
regulator  of  wages,  and  custom  or  individual  character  only  as 
a modifying  circumstance,  and  that  in  a comparatively  slight 
degree.^ 

Wages,  then,  depend  mainly  upon  the  demand  and  supply  of 
labour ; or,  as  it  is  often  expressed,  on  the  proportion  between 
population  and  capital.  By  population  is  here  meant  the  number 
only  of  the  labouring  class,  or  rather  of  those  'svho  work  for  hire ; 
and  by  capital  only  circulating  capital,  and  not  even  the  whole  of 
that,  but  the  part  which  is  expended  in  the  direct  purchase  of 
labour.  To  this,  however,  must  be  added  all  funds  which,  without 


' [The  present  text  of  this  paragraph  dates  from  the  .3rd  ed.  (1852).  The 
original  text  ran,  after  the  word  “ custom  ” ; “ but  the  last  is  not  a common 
case.  A custom  on  the  subject,  even  if  established,  could  not  easily  maintain 
itself  unaltered  in  any  other  than  a stationary  state  of  society.  An  increase  or  a 
falling  off  in  the  demand  for  labour,  an  increase  or  diminution  of  the  labouring 
population,  could  hardly  fail  to  engender  a competition  which  would  break  down 
any  custom  respecting  wages,  by  giving  either  to  one  side  or  to  the  other  a strong 
direct  interest  in  infringing  it.  We  may  at  all  events  speak  of  the  wages  of 
labour  as  determined,  in  ordinary  circumstances,  by  competition.”] 


S44 


BOOK  il.  CHAPTEB  XI.  § 2 

forming  a part  of  capital,  are  paid  in  exchange  for  labour,  such  as  the 
wages  of  soldiers,  domestic  servants,  and  all  other  unproductive 
labourers.  There  is  unfortunately  no  mode  of  expressing  by  one 
familiar  term,  the  aggregate  of  what  has  been  called  the  wages-fund 
of  a country : and  as  the  wages  of  productive  labour  form  nearly 
the  whole  of  that  fund,  it  is  usual  to  overlook  the  smaller  and  less 
important  part,  and  to  say  that  wages  depend  on  population 
and  capital.  It  will  be  convenient  to  employ  this  expression, 
remembering,  however,  to  consider  it  as  elliptical,  and  not  as  a 
literal  statement  of  the  entire  truth. 

With  these  limitations  of  the  terms,  wages  not  only  depend 
upon  the  relative  amount  of  capital  and  population,  but_cannot, 
under  the  rule  of  competition,^  be  affected  by  anything  else.  Wages 
(meaning,  of  course,  the  general  rate)  cannot  rise,  but  by  ^increase 
of  the  aggregate  funds  employed  in  hiring  labourers,  or  a diminution 
in  the  number  of  the  competitors  for  hire ; nor  fall,  except  either 
by  a diminution  of  the  funds  devoted  to  paying  labour,  or  by  an 
increase  in  the  number  of  labourers  to  be  paid.^ 

§ 2.  There  are,  however,  some  facts  in  apparent  contradiction 
to  this  doctrine,  which  it  is  incumbent  on  us  to  consider  and  explain. 

/ For  instance,  it  is  a common  saying  that^  wages  are  high  whoTi 
CTade  is  good.  The  demand  for  labour  in  any  particular  employ- 
ment is  more  pressing,  and  higher  wages  are  paid,  when  there  is 
a brisk  demand  for  the  commodity  produced ; and  the  contrary 
when  there  is  what  is  called  a stagnation  : then  workpeople  are 
dismissed,  and  those  who  are  retained  must  submit  to  a reduction  of 
wages  : though  in  these  cases  there  is  neither  more  nor  less  capital 
than  before.  This  is  true  ; and  is  one  of  those  complications  in  the 
concrete  phenomena,  which  obscure  and  disguise  the  operation  of 
general  causes  : but  it  is  not  really  inconsistent  with  the  principles 
laid  down.  Capital  which  the  owner  does  not  employ  in  purchasing 
labour,  but  keeps  idle  in  his  hands,  is  the  same  thing  to  the  labourers, 
for  the  time  being,  as  if  it  did  not  exist.  All  capital  is,  from  the 
variations  of  trade,  occasionally  in  this  state.  A manufacturer, 
finding  a slack  demand  for  his  commodity,  forbears  to  employ 
labourers  in  increasing  a stock  which  he  finds  it  difficult  to  dispose 
of ; or  if  he  goes  on  until  all  his  capital  is  locked  up  in  unsold  goods, 
then  at  least  he  must  of  necessity  pause  until  he  can  get  paid  for 

* [The  qualification  inserted  in  3rd  ed.  (1852).] 

* [See  Appendix  0.  The  Wages  Fund  Voctrine,'\ 


WAGES 


345 


some  of  them.  But  no  one  expects  either  of  these  states  to  be 
permanent ; if  he  did,  he  would  at  the  first  opportunity  remove  his 
capital  to  some  other  occupation,  in  which  it  would  still  continue 
to  employ  labour.  The  capital  remains  unemployed  for  a time, 
during  which  the  labour  market  is  overstocked,  and  wages  fall. 
Afterwards  the  demand  revives,  and  perhaps  becomes  unusually 
brisk,  enabling  the  manufacturer  to  sell  his  commodity  even  faster 
than  he  can  produce  it : his  whole  capital  is  then  brought  into 
complete  efficiency,  and  if  he  is  able,  he  borrows  capital  in  addition, 
which  would  otherwise  have  gone  into  some  other  employment. 
At  such  times  wages,  in  his  particular  occupation,  rise.  If  we 
suppose,  what  in  strictness  is  not  absolutely  impossible,  that  one 
of  these  fits  of  briskness  or  of  stagnation  should  affect  all  occupations 
at  the  same  time,  wages  altogether  might  undergo  a rise  or  a fall. 
These,  however,  are  but  temporary  fluctuations  : the  capital  now 
lying  idle  will  next  year  be  in  active  employment,  that  which  is  this 
year  unable  to  keep  up  with  the  demand  will  in  its  turn  be  locked 
up  in  crowded  warehouses  ; and  wages  in  these  several  departments 
will  ebb  and  flow  accordingly:  but  nothing  can  permanently  alter 
general  wages,  except  an  increase  or  a diminution  of  capital  itself 
(always  meaning  by  the  term,  the  funds  of  all  sorts  devoted  to  the 
payment  of  labour)  compared  with  the  quantity  of  labour  offering 
itself  to  be  hired. 

Again,  it  is  another  common  notion  that  high  prices  make  high^  . 
wages ; because  the  producers  and  dealers,  being  better  off7~can 
a5drd~t?  pay  more  to  their  labourers.  I have  already  said  that  a 
brisk  demand,  which  causes  temporary  high  prices,  causes  also 
temporary  high  wages.  But  high  prices,  in  themselves,  can  only 
raise  wages  if  the  dealers,  receiving  more,  are  induced  to  save  more, 
and  make  an  addition  to  their  capital,  or  at  least  to  their  purchases 
of  labour.  This  is  indeed  likely  enough  to  be  the  case  ; and  if  the 
high  prices  came  direct  from  heaven,  or  even  from  abroad,  the 
labouring  class  might  be  benefited,  not  by  the  high  prices  them- 
selves, but  by  the  increase  of  capital  occasioned  by  them.  The 
same  effect,  however,  is  often  attributed  to  a high  price  which  is 
the  result  of  restrictive  laws,  or  which  is  in  some  way  or  other  to  be 
paid  by  the  remaining  members  of  the  community  ; they  having 
no  greater  means  than  before  to  pay  it  with.  High  prices  of  this 
sort,  if  they  benefit  one  class  of  labourers,  can  only  do  so  at  the 
expense  of  others ; since  if  the  dealers  by  receiving  high  prices 
are  enabled  to  make  greater  savings,  or  otherwise  increase  their 


346 


BOOK  II.  CHAPTER  XL  § 2 


purchases  of  labour,  all  other  people  by  paying  those  high  prices  have 
their  means  of  saving,  or  of  purchasing  labour,  reduced  in  an  equal 
degree ; and  it  is  a matter  of  accident  whether  the  one  alteration 
or  the  other  will  have  the  greatest  effect  on  the  labour  market. 
Wages  will  probably  be  temporarily  higher  in  the  employment  in 
which  prices  have  risen,  and  somewhat  lower  in  other  employments  : 
in  which  case,  while  the  first  half  of  the  phenomenon  excites  notice, 
the  other  is  generally  overlooked,  or  if  observed,  is  not  ascribed  to 
the  cause  which  really  produced  it.  Nor  will  the  partial  rise  of 
wages  last  long : for  though  the  dealers  in  that  one  employment 
gain  more,  it  does  not  follow  that  there  is  room  to  employ  a greater 
amount  of  savings  in  their  own  business  : their  increasing  capital 
will  probably  flow  over  into  other  employments,  and  there  counter- 
balance the  diminution  previously  made  in  the  demand  for  labour 
by  the  diminished  savings  of  other  classes. 

Another  opinion  often  maintained  is,  ^aLjya-ges  (meaning  of 
7 pourse  money  wages)  vary  with  the  price  of  food ; rising  when  it 
rises,  and  falhng  when  it  falls.  This  opinion  is,  I conceive,  only 
partially  true  ; and  in  so  far  as  true,  in  no  way  affects  the  dependence 
of  wages  on  the  proportion  between  capital  and  labour : since  the 
price  of  food,  when  it  affects  wages  at  all,  affects  them  through  that 
law.  Dear  or  cheap  food,  caused  by  variety  of  seasons,  does  not 
affect  wages  (unless  they  are  artificially  adjusted  to  it  by  law  or 
charity)  : or  rather,  it  has  some  tendency  to  affect  them  in  the 
contrary  way  to  that  supposed ; since  in  times  of  scarcity  people 
generally  compete  more  violently  for  employment,  and  lower  the 
labour  market  against  themselves.  But  dearness  or  cheapness  of 
food,  when  of  a permanent  character,  and  capable  of  being  calculated 
on  beforehand,  may  affect  wages.  In  the  first  place,  if  the  labourers 
have,  as  is  often  the  case,  no  more  than  enough  to  keep  them  in 
working  condition,  and  enable  them  barely  to  support  the  ordinary 
number  of  children,  it  follows  that  if  food  grows  permanently  dearer 
without  a rise  of  wages,  a greater  number  of  the  children  will  pre- 
maturely die ; and  thus  wages  will  be  ultimately  higher,  but  only 
because  the  number  of  people  will  be  smaller,  than  if  food  had 
remained  cheap.  But,  secondly,  even  though  wages  were  high 
enough  to  admit  of  food’s  becoming  more  costly  without  depriving 
the  labourers  and  their  families  of  necessaries ; though  they  could 
bear,  physically  speaking,  to  be  worse  off,  perhaps  they  would  not 
consent  to  be  so.  They  might  have  habits  of  comfort  which  were  to 
them  as  necessaries,  and  sooner  than  forego  which,  they  would  put 


WAGES 


347 


an  additional  restraint  on  their  power  of  multiplication ; so  that 
wages  would  rise,  not  by  increase  of  deaths  but  by  diminution  of 
births.  In  these  cases,  then,  wages  do  adapt  themselves  to  the 
price  of  food,  though  after  an  interval  of  almost  a generation.  Mr. 
Ricardo  considers  these  two  cases  to  comprehend  all  cases.  He 
assumes  that  there  is  everywhere  a minimum  rate  of  wages  : either 
the  lowest  with  which  it  is  physically  possible  to  keep  up  the  popula- 
tion, or  the  lowest  with  which  the  people  will  choose  to  do  so.  To 
this  minimum  he  assumes  that  the  general  rate  of  wages  always 
tends  ; that  they  can  never  be  lower,  beyond  the  length  of  time 
required  for  a diminished  rate  of  increase  to  make  itself  felt  and  can 
never  long  continue  higher.  This  assumption  contains  sufficient 
truth  to  render  it  admissible  for  the  purposes  of  abstract  science  ; 
and  the  conclusion  which  Mr.  Ricardo  draws  from  it,  namely,  that 
wages  in  the  long  run  rise  and  fall  with  the  permanent  price  of  food, 
is,  hke  almost  all  his  conclusions,  true  hypothetically,  that  is,  grant- 
ing the  suppositions  from  which  he  sets  out.  But  in  the  application 
to  practice,  it  is  necessary  to  consider  that  the  minimum  of  which 
he  speaks,  especially  when  it  is  not  a physical,  but  what  may  be 
termed  a moral  minimum,  is  itself  hable  to  vary.  If  wages  were 
previously  so  high  that  they  could  bear  reduction,  to  which  the 
ibstacle  was  a high  standard  of  comfort  habitual  among  the  labourers, 
a rise  in  the  price  of  food,  or  any  other  disadvantageous  change  in 
their  circumstances,  may  operate  in  two  ways  : it  may  correct  itself 
by  a rise  of  wages  brought  about  through  a gradual  effect  on  the 
prudential  check  to  population  ; or  it  may  permanently  lower  the 
standard  of  living  of  the  class,  in  case  their  previous  habits  in  respect 
of  population  prove  stronger  than  their  previous  habits  in  respect 
of  comfort.  In  that  case  the  injury  done  to  them  will  be  permanent, 
and  their  deteriorated  condition  will  become  a new  minimum, 
tending  to  perpetuate  itself  as  the  more  ample  minimum  did  before. 
It  is  to  be  feared  that  of  the  two  modes  in  which  the  cause  may 
operate,  the  last  is  the  most  frequent,  or  at  all  events  sufficiently  so 
to  render  all  propositions  ascribing  a self-repairing  quality  to  the 
calamities  which  befall  the  labouring  classes  practically  of  no  validity. 
There  is  considerable  evidence  that  the  circumstances  of  the  agri- 
cultural labourers  in  England  have  more  than  once  in  our  history 
sustained  great  permanent  deterioration,  from  causes  which  operated 
by  diminishing  the  demand  for  labour,  and  which,  if  population  had 
exercised  its  power  of  self-adjustment  in  obedience  to  the  previous 
standard  of  comfort,  could  only  have  had  a temporary  effect : but 


coLv~fl/o  s 
Ir-cfM  Ua\Al 

C>’j' 


348 


BOOK  II.  CHAPTER  XL  $ 2 


unliappily  the  poverty  in  which  the  class  was  plunged  during  a long 
series  of  years  brought  that  previous  standard  into  disuse  ; and  the 
next  generation,  growing  up  without  having  possessed  those  pristine 
comforts,  multiplied  in  turn  without  any  attempt  to  retrieve  them.* 
The  converse  case  occurs  when,  by  improvements  in  agriculture, 
the  repeal  of  com  laws,  or  other  such  causes,  the  necessaries  of  the 
labourers  are  cheapened,  and  they  are  enabled,  with  the  same 
wages,  to  command  greater  comforts  than  before.  Wages  will  not 
fall  immediately  ; it  is  even  possible  that  they  may  rise  ; but  they 
will  fall  at  last,  so  as  to  leave  the  labourers  no  better  ofi  than  before, 
unless  during  this  interval  of  prosperity  the  standard  of  comfort, 
regarded  as  indispensable  by  the  class,  is  permanently  raised.  Un- 
fortunately this  salutary  effect  is  by  no  means  to  be  counted  upon  : 
it  is  a much  more  difficult  thing  to  raise,  than  to  lower,  the  scale  of 
living  which  the  labourer  will  consider  as  more  indispensable  than 
marrying  and  having  a family.  If  they  content  themselves  with 
enjoying  the  greater  comfort  while  it  lasts,  but  do  not  learn  to  require 
it,  they  will  people  down  to  their  old  scale  of  living.  If  from  poverty 
their  children  had  previously  been  insufficiently  fed  or  improperly 
nursed,  a greater  number  will  now  be  reared,  and  the  competition  of 
these,  when  they  grow  up,  will  depress  wages,  probably  in  full  pro- 
portion to  the  greater  cheapness  of  food.  If  the  effect  is  not  pro- 
duced in  this  mode,  it  wiU  be  produced  by  earlier  and  more  numerous 
marriages,  or  by  an  increased  number  of  births  to  a marriage. 
According  to  all  experience,  a great  increase  invariably  takes  place 
in  the  number  of  marriages,  in  seasons  of  cheap  food  and  full  employ- 
ment. I cannot,  therefore,  agree  in  the  importance  so  often  attached 
to  the  repeal  of  the  com  laws,  considered  merely  as  a labourers’ 
question,  or  to  any  of  the  schemes,  of  which  some  one  or  other  is  at 
all  times  in  vogue,  for  making  the  labourers  a very  httle  better  off. 
Things  which  only  affect  them  a very  little  make  no  permanent" 
impression  upon  their  habits  and  requirements,  and  they  soon 
slide  back  into  their  former  state.  To  produce  permanent  advantage, 
the  temporary  cause  operating  upon  them  must  be  sufficient  to 
make  a great  change  in  their  condition — a change  such  as  will  be 
felt  for  many  years,  notwithstanding  any  stimulus  which  it  may 

* See  the  historical  sketch  of  the  condition  of  the  English  peasantry,  pre- 
pared from  the  best  authorities,  by  Mr.  William  Thornton,  in  his  work  entitled 
Over-Population  and  its  Remedy : a work  honourably  distinguished  from  most 
others  which  have  been  published  in  the  present  generation,  by  its  rational 
treatment  of  questions  affecting  the  economical  condition  of  the  labouring 
classes. 


WAGES 


349 


give  during  one  generation  to  the  increase  of  people.  When,  indeed, 
the  improvement  is  of  this  signal  character,  and  a generation  grows 
up  which  has  always  been  used  to  an  improved  scale  of  comfort,  the 
habits  of  this  new  generation  in  respect  to  population  become 
formed  upon  a higher  minimum,  and  the  improvement  in  their 
condition  becomes  permanent.  Of  cases  in  point,  the  most  remark- 
able is  France  after  the  Revolution.  The  majority  of  the  population 
being  suddenly  raised  from  misery,  to  independence  and  compara- 
tive comfort ; the  immediate  effect  was  that  population,  notwith- 
standing the  destructive  wars  of  the  period,  started  forward  with 
unexampled  rapidity,  partly  because  improved  circumstances 
enabled  many  children  to  be  reared  who  would  otherwise  have 
died,  and  partly  from  increase  of  births.  The  succeeding  generation, 
however,  grew  up  with  habits  considerably  altered  ; and  though  the 
country  was  never  before  in  so  prosperous  a state,  the  annual  number 
of  births  is  now  nearly  stationary,*  and  the  increase  of  population 
extremely  slow.j* 

§ 3.  Wages  depend,  then,  on  the  proportion  between  the  number 
of  the  labouring  population,  and  the  capital  or  other  funds  devoted 
to  the  purchase  of  labour  ; we  will  say,  for  shortness,  the  capital. 
If  wages  are  higher  at  one  time  or  place  than  at  another,  if  the  sub- 
sistence and  comfort  of  the  class  of  hired  labourers  are  more  ample, 
it  is  for  no  other  reason  than  because  capital  bears  a greater  propor- 
tion to  population.  It  is  not  the  absolute  amount  of  accumulation 

* Supra,  pp.  293-5. 

t A similar,  though  not  an  equal,  improvement  in  the  standard  of  living 
took  place  among  the  labourers  of  England  during  the  remarkable  fifty  years 
from  1715  to  1765,  which  were  distinguished  by  such  an  extraordinary  suc- 
cession of  fine  harvests  (the  years  of  decided  deficiency  not  exceeding  five  in  all 
that  period)  that  the  average  price  of  wheat  during  those  years  was  much 
lower  than  during  the  previous  half  century.  Mr.  Malthus  computes  that  on 
the  average  of  sixty  years  preceding  1720,  the  labourer  could  purchase  with  a 
day’s  earnings  only  two-thirds  of  a peck  of  wheat,  while  from  1720  to  1750  he 
co^d  purchase  a whole  peck.  The  average  price  of  wheat,  according  to  the 
Eton  tables,  for  fifty  years  ending  with  1715,  was  41s.  7|d.  per  quarter,  and 
for  the  last  twenty-three  of  these,  45s.  8d.,  while  for  the  fifty  years  following,  it 
was  no  more  than  34s.  lid.  So  considerable  an  improvement  in  the  condition  of 
the  labouring  class,  though  arising  from  the  accidents  of  seasons,  yet  continuing 
for  more  than  a generation,  had  time  to  work  a change  in  the  habitual  require- 
ments of  the  labouring  class  ; and  this  period  is  always  noted  as  the  date  of  “ a 
marked  improvement  of  the  quality  of  the  food  consumed,  and  a decided 
elevation  in  the  standard  of  their  comforts  and  conveniences.” — (Malthus, 
Principles  of  Political  Economy ^ p.  225.)  For  the  character  of  the  period,  see 
Mr.  Tooke’s  excellent  History  of  Prices^  vol.  i.  pp.  38  to  61,  and  for  the  pricei 
of  corn,  the  Appendix  to  that  work. 


350 


BOOK  II.  CHAPTER  XL  § 3 


or  of  production,  that  is  of  importance  to  the  labouring  class ; 
it  is  not  the  amount  even  of  the  funds  destined  for  distribution  among 
the  labourers  : it  is  the  proportion  between  those  funds  and  the 
numbers  among  whom  they  are  shared.  The  condition  of  the  class 
can  be  bettered  in  no  other  way  than  by  altering  that  proportion  to 
their  advantage : and  every  scheme  for  their  benefit,  which  does 
not  proceed  on  this  as  its  foundation,  is,  for  all  permanent  purposes, 
a delusion. 

In  countries  like  North  America  and  the  Australian  colonies, 
where  the  knowledge  and  arts  of  civilized  life,  and  a high  efiective 
desire  of  accumulation,  co-exist  with  a boundless  extent  of  unoccupied 
land,  the  growth  of  capital  easily  keeps  pace  with  the  utmost 
possible  increase  of  population,  and  is  chiefly  retarded  by  the  im- 
practicability of  obtaining  labourers  enough.  All,  therefore,  who 
can  possibly  be  born  can  find  employment  without  overstocking 
the  market:  every  labouring  family  enjoys  in  abundance  the 
necessaries,  many  of  the  comforts,  and  some  of  the  luxuries  of  life  ; 
and,  unless  in  case  of  individual  misconduct,  or  actual  inability  to 
work,  poverty  does  not,  and  dependence  need  not,  exist.  A similar 
advantage,  though  in  a less  degree,  is  occasionally  enjoyed  by  some 
special  class  of  labourers  in  old  countries,  from  an  extraordinarily 
rapid  growth,  not  of  capital  generally,  but  of  the  capital  employed 
in  a particular  occupation.  So  gigantic  has  been  the  progress  of 
the  cotton  manufacture  since  the  inventions  of  Watt  and  Arkwright, 
that  Se  capi^l  engaged  in  it  has  probably  quadrupled  in  the  time 
which  population  requires  for  doubling.  While,  therefore,  it  has 
attracted  from  other  employments  nearly  all  the  hands,  which  geo- 
graphical circumstances  and  the  habits  or  inclinations  of  the  people 
renderedT available ; and  while  the  demand  it  created  for  infant 
labour  has  enlisted  the  immediate  pecimiaryjbitfirest  of_the  opera- 
tives in  favour  oFpromoting,  instead  of  restraining,  theLjncrease 
of  popuTation ; nevertheless  wages  in  the  great  seats  of  the  manu- 
facture are  generally  so  high,  that  the  collective  earnings  of  a family 
amount,  on  an  average  of  years,  to  a very  satisfactory  sum ; and 
there  is,  as  yet,  no  sign  of  permanent  decrease,  while  the  efiect  has 
also  been  felt  in  raising  the  general  standard  of  agricultural  wages 
in  the  counties  adjoining. 

But  those  circumstances  of  a country,  or  of  an  occupation,  in 
which  population  can  with  impunity  increase  at  its  utmost  rate,  are 
rare,  and  transitory.  Very  few  are  the  countries  presenting  the 
needful  union  of  conditions.  Either  the  industrial  arts  are  backward 


WAGES 


351 


and  stationary,  and  capital  therefore  increases  slowly  ; or,  the 
effective  desire  of  accumulation  being  low,  the  increase  soon  reaches 
its  limit ; or,  even  though  both  these  elements  are  at  their  highest 
known  degree,  the  increase  of  capital  is  checked,  because  there  is  not  1 
fresh  land  to  be  resorted  to,  of  as  good  quality  as  that  already  occu  | 
pied.  Though  capital  should  for  a time  double  itself  simultaneously 
with  population,  if  all  this  capital  and  population  are  to  find  employ- 
ment on  the  same  land,  they  cannot  without  an  unexampled  succes- 
sion of  agricultural  inventions  continue  doubling  the  produce  ; 
therefore,  if  wages  do  not  fall,  profits  must ; and  when  profits  fall, 
increase  of  capital  is  slackened.  Besides,  even  if  wages  did  not 
fall,  the  price  of  food  (as  will  be  shown  more  fully  hereafter)  would 
in  these  circumstances  necessarily  rise  ; which  is  equivalent  to  a fall 
of  wages. 

Except,  therefore,  in  the  very  peculiar  cases  which  I have  just 
noticed,  of  which  the  only  one  of  any^  practical  imporltocejs  that 
of  a new  colony,  or  a country  in  circumstances  equivalent  to  it ; 
it  population  should  increase  at  its  utmost  rate 

without  lowering  wages.  Nor  wiU  the  fall  be  stopped  at  any  point, 
short  of  that  which  either  by  its  physical  or  its  moral  operation, 
checks  the  increase  of  population.  In  no  old  country,  therefore,  i 
does  population  increase  at  anything  like  its  utmost  rate  ; in  most  f 
at  a very  moderate  rate  : in  some  countries,  not  at  all.  These  facts 
are  only  to  be  accounted  for  in  two  ways.  Either  the  whole  number 
of  births  which  nature  admits  of,  and  which  happen  in  some  circum- 
stances, do  not  take  place  ; or  if  they  do,  a large  proportion  of  those 
who  are  born,  die.  The  retardation  of  increase  results  either  from 
mortality  or  prudence ; from  Mr.  Malthus’s  positive,  or  from  his 
preventive  check : and  one  or  the  other  of  these  must  and  does  | 
exist,  and  very  powerfully  too,  in  all  old  societies.  Wherever  I 
population  is  not  kept  down  by  the  prudence  either  of  individuals  or  1 
of  the  state,  it  is  kept  down  by  starvation  or  disease. 

Mr.  Malthus  has  taken  great  pains  to  ascertain,  for  almost  every 
country  in  the  world,  which  of  these  checks  it  is  that  operates ; 
and  the  evidence  which  he  collected  on  the  subject,  in  his  Essay  on 
Populations  may  even  now  be  read  with  advantage.  Throughout 
Asia,  and  formerly  in  most  European  countries  in  which  the  labour- 
ing classes  were  not  in  personal  bondage,  there  is,  or  was,  no  restrainer 
of  population  but  death.  The  mortality  was  not  always  the  result 
of  poverty  : much  of  it  proceeded  from  unskilful  and  careless  manage- 
ment of  children,  from  uncleanly  and  otherwise  unhealthy  habits 


352 


BOOK  II.  CHAPTER  XL  § 3 


of  life  among  the  adult  population,  and  from  the  almost  periodical 
occurrence  of  destructive  epidemics.  Throughout  Europe  these 
causes  of  shortened  life  have  much  diminished,  but  they  have  not 
ceased  to  exist.  Until  a period  not  very  remote,^  hardly  any  of 
our  large  towns  kept  up  its  population,  independently  of  the  stream 
always  flowing  into  them  from  the  rural  districts  : this  was  still 
true  of  Liverpool  until  very  recently ; and  even  in  London  the 
mortality  is  larger,  and  the  average  duration  of  life  shorter,  than  in 
rural  districts  where  there  is  much  greater  poverty.  In  Ireland, 
epidemic  fevers,  and  deaths  from  the  exhaustion  of  the  constitution 
by  insufficient  nutriment,  have  always  accompanied  even  the  most 
moderate  deficiency  of  the  potato  crop.  Nevertheless,  it  cannot 
now  be  said  that  in  any  part  of  Europe,  population  is  principally 
kept  down  by  disease,  still  less  by  starvation,  either  in  a direct  or 
in  an  indirect  form.  The  agency  by  which  it  is  limited  is  chiefly 
preventive,  not  (in  the  language  of  Mr.  Malthus)  positive.  But  the 
preventive  remedy  seldom,  I believe,  consists  in  the  unaided  opera- 
tion of  prudential  motives  on  a class  wholly  or  mainly  composed  of 
labourers  for  hire;  and  looking  forward  to  no  other  lot.  In  England, 
for  example,  I much  doubt  if  the  generality  of  agricultural  labourers 
practise  any  prudential  restraint  whatever.  They  generally  marry 
as  early,  and  have  as  many  children  to  a marriage,  as  they  would 
or  could  do  if  they  were  settlers  in  the  United  States.  During  the 
generation  which  preceded  the  enactment  of  the  present  Poor  Law, 
they  received  the  most  direct  encouragement  to  this  sort  of 
improvidence : being  not  only  assured  of  support,  on  easy  terms, 
whenever  out  of  employment,  but,  even  when  in  employment,  very 
commonly  receiving  from  the  parish  a weekly  allowance  proportioned 
to  their  number  of  children ; and  the  married  with  large  families 
being  always,  from  a short-sighted  economy,  employed  in  preference 
to  the  unmarried ; which  last  premium  on  population  still  exists. 
Under  such  prompting,  the  rural  labourers  acquired  habits  of  reck- 
lessness, which  are  so  congenial  to  the  uncultivated  mind  that,  in 
whatever  manner  produced,  they  in  general  long  survive  their 
immediate  causes.  There  are  so  many  new  elements  at  work  in 
society,  even  in  those  deeper  strata  which  are  inaccessible  to  the 
mere  movements  on  the  surface,  that  it  is  hazardous  to  affirm  any- 
thing positive  on  the  mental  state  or  practical  impulses  of  classes 
and  bodies  of  men,  when  the  same  assertion  may  be  true  to-day,  and 
may  require  great  modification  in  a few  years’  time.  It  does,  how- 
* (The  original  text  of  1848  is  practically  unchanged  in  this  paragraph.] 


WAGES 


363 


ever,  seem,  that  if  the  rate  of  increase  of  population  depended  solely 
on  the  agricultural  labourers,  it  would,  as  far  as  dependent  on  births, 
and  unless  repressed  by  deaths,  be  as  rapid  in  the  southern  counties 
of  England  as  in  America.  The  restraining  principle  hes  in  the  very 
great  proportion  of  the  population  composed  of  the  middle  classes 
and  the  skilled  artizans,  who  in  this  country  almost  equal  in  number 
the  common  labourers,  and  on  whom  prudential  motives  do,  in  a 
considerable  degree,  operate. 

§ 4.  Where  a labouring  class  who  have  no  property  but  their 
daily  wages,  and  no  hope  of  acquiring  it,  refrain  from  over-rapid 
multiplication,  the  cause,  I believe,  has  always  hitherto  been,  either 
actual  legal  restraint,  or  a custom  of  some  sort  which,  without 
intention  on  their  part,  insensibly  moulds  their  conduct,  or  affords 
immediate  inducements  not  to  marry.  It  is  not  generally  known  in 
how  many  countries  of  Europe  direct  legal  obstacles  are  opposed 
to  improvident  marriages.  The  communications  made  to  the 
original  Poor  Law  Commission  by  our  foreign  ministers  and  consuls 
in  different  parts  of  Europe,  contain  a considerable  amount  of 
information  on  this  subject.  Mr.  Senior,  in  his  preface  to  those  com- 
munications,* says  that  in  the  countries  which  recognise  a legal  right 
to  relief,  “ marriage  on  the  part  of  persons  in  the  actual  receipt  of 
relief  appears  to  be  everywhere  prohibited,  and  the  marriage  of  those 
who  are  not  likely  to  possess  the  means  of  independent  support  is 
allowed  by  very  few.  Thus  we  are  told  that  in  Norway  no  one  can 
marry  without  ‘ showing  to  the  satisfaction  of  the  clergyman,  that 
he  is  permanently  settled  in  such  a manner  as  to  offer  a fair  prospect 
that  he  can  maintain  a family.’ 

“ In  Mecklenburg,  that  ‘ marriages  are  delayed  by  conscription 
in  the  twenty-second  year,  and  military  service  for  six  years  ; besides, 
the  parties  must  have  a dwelling,  without  which  a clergyman  is 
not  permitted  to  marry  them.  The  men  marry  at  from  twenty-five 
to  thirty,  the  women  not  much  earlier,  as  both  must  first  gain  by 
service  enough  to  establish  themselves.’ 

“ In  Saxony,  that  ‘ a man  may  not  marry  before  he  is  twenty- 
one  years  old,  if  liable  to  serve  in  the  army.  In  Dresden, 
professionists  (by  which  word  artizans  are  probably  meant)  may  not 
marry  until  they  become  masters  in  their  trade.’ 

“ In  Wurtemburg,  that  ‘ no  man  is  allowed  to  marry  till  his 

♦ Forming  an  Appendix  (F)  to  the  General  Beport  of  the  Commissioners, 
and  also  published  by  authority  as  a separate  volume. 


354 


BOOK  II.  CHAPTER  XL  § 4 


twenty-fifth  year,  on  account  of  his  military  duties,  unless  per- 
mission be  especially  obtained  or  purchased  : at  that  age  he  must 
also  obtain  permission,  which  is  granted  on  proving  that  he  and 
his  wife  would  have  together  suflicient  to  maintain  a family  or  to 
establish  themselves  ; in  large  towns,  say  from  800  to  1000  florins 
(from  66L  135.  4d.  to  84L  35.  4d.)  ; in  smaller,  from  400  to  500  florins  ; 
in  villages,  200  florins  (16L  135.  4d.)  ’ ” * 

The  minister  at  Munich  says,  “ the  great  cause  why  the  number 
of  the  poor  is  kept  so  low  in  this  country  arises  from  the  prevention 
by  law  of  marriages  in  cases  in  which  it  cannot  be  proved  that  the 
parties  have  reasonable  means  of  subsistence ; and  this  regulation 
is  in  all  places  and  at  all  times  strictly  adhered  to.  The  effect  of  a 
constant  and  firm  observance  of  this  rule  has,  it  is  true,  a consider- 
able influence  in  keeping  down  the  population  of  Bavaria,  which  is 
at  present  low  for  the  extent  of  country,  but  it  has  a most  salutary 
effect  in  averting  extreme  poverty  and  consequent  misery.”  f 
At  Lubeck,  “ marriages  among  the  poor  are  delayed  by  the 
necessity  a man  is  under,  first,  of  previously  proving  that  he  is  in 
regular  employ,  work,  or  profession,  that  will  enable  him  to  maintain 
a wife  : and  secondly,  of  becoming  a burgher,  and  equipping  himself 
in  the  uniform  of  the  burgher  guard,  which  together  may  cost  him 
nearly  4L”  J At  Frankfort,  “ the  government  prescribes  no  age 
for  marrying,  but  the  permission  to  marry  is  only  granted  on  proving 
a livehhood.”  § 

The  allusion,  in  some  of  these  statements,  to  military  duties, 
points  out  an  indirect  obstacle  to  marriage,  interposed  by  the  laws 
of  some  countries  in  which  there  is  no  direct  legal  restraint.  In 
Prussia,  for  instance,  the  institutions  which  compel  every  able-bodied 
man  to  serve  for  several  years  in  the  army,  at  the  time  of  Ufe  at 
which  imprudent  marriages  are  most  hkely  to  take  place,  are 
probably  a full  equivalent,  in  effect  on  population,  for  the  legal 
restrictions  of  the  smaller  German  states. 

1 “ So  strongly,”  says  Mr.  Kay,  “ do  the  people  of  Switzerland 
understand  from  experience  the  expediency  of  their  sons  and 
daughters  postponing  the  time  of  their  marriages,  that  the  councils 
of  state  of  four  or  five  of  the  most  democratic  of  the  cantons,  elected, 
be  it  remembered,  by  universal  suffrage,  have  passed  laws  by  which 
all  young  persons  who  marry  before  they  have  proved  to  the 
* Preface,  p.  xxxix. 

t Preface,  p.  xxxiii.,  or  p.  554  of  the  Appendix  itself, 
i Appendix,  p.  419.  § Ibid.  p.  567. 

f [This  paragraph  was  added  in  the  3rd  ed.  (1852).] 


WAGliS 


356 


magistrate  of  tlieir  district  that  they  are  able  to  support  a family,  are 
rendered  liable  to  a heavy  fine.  In  Lucerne,  Argovie,  Unterwalden, 
and,  I believe,  St.  Gall,  Schweitz,  and  Uri,  laws  of  this  character 
have  been  in  force  for  many  years.”  * 

§ 5.  Where  there  is  no  general  law  restrictive  of  marriage, 
there  are  often  customs  equivalent  to  it.  When  the  guilds  or  trade 
corporations  of  the  Middle  Ages  were  in  vigour,  their  bye-laws  or 
regulations  were  conceived  with  a very  ^dgilant  eye  to  the  advantage 
which  the  trade  derived  from  limiting  competition  : and  they  made 
it  very  effectually  the  interest  of  artizans  not  to  marry  until  after 
passing  through  the  two  stages  of  apprentice  and  journeyman,  and 
attaining  the  rank  of  master.f  In  Norway,  where  the  labour  is 

* Kay,  op.  cit.  i.  68. 

t “ In  general,”  says  Sismondi,  “ the  number  of  masters  in  each  corporation 
was  fixed,  and  no  one  but  a master  could  keep  a shop,  or  buy  and  sell  on  his  own 
account.  Each  master  could  only  train  a certain  number  of  apprentices,  whom 
he  instructed  in  his  trade ; in  some  corporations  he  was  only  allowed  one. 
Each  master  could  also  employ  only  a limited  number  of  workmen,  who  were 
called  companions,  or  journeymen ; and  in  the  trades  in  which  he  could  only 
take  one  apprentice,  he  w’as  only  allowed  to  have  one,  or  at  most  two,  journey- 
men. No  one  was  allowed  to  buy,  sell,  or  work  at  a trade,  unless  he  was  either 
an  apprentice,  a journeyman,  or  a master  ; no  one  could  become  a journeyman 
without  having  served  a given  number  of  years  as  an  apprentice,  nor  a master, 
unless  he  had  served  the  same  number  of  years  as  a journeyman,  and  unless  he 
had  also  executed  what  was  cadled  his  chef  oeuvre  {master piece),  a piece  of  work 
appointed  in  his  trade,  and  which  was  to  be  judged  of  by  the  corporation.  It  is 
seen  that  this  organization  threw  entirely  into  the  hands  of  the  masters  the 
recruiting  of  the  trade.  They  alone  could  take  apprentices  ; but  they  were 
not  compelled  to  take  any ; accordingly  they  required  to  be  paid,  often  at  a 
very  high  rate,  for  the  favour  ; and  a young  man  could  not  enter  into  a trade  if 
he  had  not,  at  starting,  the  sum  required  to  be  paid  for  his  apprenticeship,  and 
the  means  necessary  for  his  support  during  that  apprenticeship  ; since  for  four, 
five,  or  seven  years,  all  his  work  belonged  to  his  master.  His  dependence  on  the 
master  during  that  time  was  complete ; for  the  master’s  will,  or  even  caprice, 
could  close  the  door  of  a lucrative  profession  upon  him.  After  the  apprentice 
became  a journeyman  he  had  a little  more  freedom  ; he  could  engage  with  any 
master  he  chose,  or  pass  from  one  to  another  ; and  as  the  condition  of  a journey- 
man was  only  accessible  through  apprenticeship,  he  now  began  to  profit  by  the 
monopoly  from  which  he  had  previously  suffered,  and  was  almost  ure  of  getting 
well  paid  for  a work  which  no  one  else  was  allowed  to  perform.  He  depended, 
however,  on  the  corporation  for  becoming  a master,  and  did  not,  therefore, 
regard  himself  as  being  yet  assured  of  his  lot,  or  as  having  a permanent  position. 
In  general  he  did  not  marry  until  he  had  passed  as  a master. 

“ It  is  certain  both  in  fact  and  in  theory  that  the  existence  of  trade  corpora- 
tions hindered,  and  could  not  but  hinder,  the  birth  of  a superabundant  popula- 
tion. By  the  statutes  of  almost  all  the  guilds,  a man  could  not  pass  as  a master 
before  the  age  of  twenty-five  : but  if  he  had  no  capital  of  his  own,  if  he  had  not 
made  sufficient  savings,  he  continued  to  work  as  a journeyman  much  longer ; 
some,  perhaps  the  majority  of  artisans,  remained  journeymen  all  their  lives. 
There  was,  however,  scarcely  an  instance  of  their  marrying  before  they  were 


BOOK  II.  CHAPTER  XI.  | 6 


356 

chiefly  agricultural,  it  is  [1848]  forbidden  by  law  to  engage  a farm- 
servant  for  less  than  a year  ; which  was  the  general  English  practice 
until  the  poor-laws  destroyed  it,  by  enabling  the  farmer  to  cast  his 
labourers  on  parish  pay  whenever  he  did  not  immediately  require 
their  labour.  In  consequence  of  this  custom,  and  of  its  enforce- 
ment by  law,  the  whole  of  the  rather  limited  class  of  agricultural 
labourers  in  Norway  have  an  engagement  for  a year  at  least,  which, 
if  the  parties  are  content  with  one  another,  naturally  becomes  a 
permanent  engagement : hence  it  is  known  in  every  neighbourhood 
whether  there  is,  or  is  likely  to  be,  a vacancy,  and  unless  there  is, 
a young  man  does  not  marry,  knowing  that  he  could  not  obtain 
employment.  The  custom  still  [1848]  exists  in  Cumberland  and 
Westmoreland,  except  that  the  term  is  half  a year  instead  of  a 
year ; and  seems  to  be  still  attended  with  the  same  consequences. 
The  farm-servants  “ are  lodged  and  boarded  in  their  masters’  houses, 
which  they  seldom  leave  until,  through  the  death  of  some  relation 
or  neighbour,  they  succeed  to  the  ownership  or  lease  of  a cottage 
farm.  What  is  called  surplus  labour  does  not  here  exist.”  * I have 
mentioned  in  another  chapter  the  check  to  population  in  England 
during  the  last  century,  from  the  difficulty  of  obtaining  a separate 
dwelhng  place. f Other  customs  restrictive  of  population  might  be 
specified : in  some  parts  of  Italy  it  is  the  practice,  according  to 
Sismondi,  among  the  poor,  as  it  is  well  known  to  be  in  the  higher 
ranks,  that  all  but  one  of  the  sons  remain  unmarried.  But  such 
family  arrangements  are  not  likely  to  exist  among  day-labourers. 
They  are  the  resource  of  small  proprietors  and  metayers,  for 
preventing  too  minute  a subdivision  of  the  land. 

In  England  generally  there  is  now  scarcely  a relic  of  these  indirect 
checks  to  population ; except  that  in  parishes  owned  by  one  or  a 
very  small  number  of  landowners,  the  increase  of  resident  labourers 
is  still  occasionally  obstructed,  by  preventing  cottages  from  being 
built,  or  by  pulhng  down  those  which  exist ; thus  restraining  the 
population  hable  to  become  locally  chargeable,  without  any  material 
effect  on  population  generally,  the  work  required  in  those  parishes 
being  performed  by  labourers  settled  elsewhere.  The  surrounding 
districts  always  feel  themselves  much  aggrieved  by  this  practice, 
against  which  they  cannot  defend  themselves  by  similar  means, 

received  as  masters  : had  they  been  so  imprudent  as  to  desire  it,  no  father  would 
have  given  his  daughter  to  a man  without  a position.” — Nouvcaux  Principes, 
book  iv.  oh.  10.  See  also  Adam  Smith,  book  i.  ch.  10,  part  2. 

* See  Thornton  on  Over-Population,  page  18,  and  the  authorities  there  cited, 

•j-  Supra,  p.  201. 


WAGES 


357 


since  a single  acre  of  land  owned  by  any  one  who  does  not  enter 
into  the  combination,  enables  him  to  defeat  the  attempt,  very 
profitably  to  himself,  by  covering  that  acre  with  cottages.  To  meet 
these  complaints  an  Act  has  within  the  last  few  years  been  passed  by 
Parliament,  by  which  the  poor-rate  is  made  a charge  not  on  the 
parish,  but  on  the  whole  union.^  This  enactment,  in  other  respects 
very  beneficial,  removes  the  small  remnant  of  what  was  once  a check 
to  population  : the  value  of  which,  however,  from  the  narrow  hmits 
of  its  operation,  had  become  very  trifling. 

§ 6.  In  the  case,  therefore,  of  the  common  agricultural  labourer, 
the  checks  to  population  may  almost  be  considered  as  non-existent. 
If  the  growth  of  the  towns,  and  of  the  capital  there  employed,  by 
which  the  factory  operatives  are  maintained  at  their  present  average 
rate  of  wages  notwithstanding  their  rapid  increase,  did  not  also 
absorb  a great  part  of  the  annual  addition  to  the  rural  population, 
there  seems  no  reason  in  the  present  habits  of  the  people  why  they 
should  not  fall  into  as  miserable  a condition  as  the  Irish  previous  to 
1846  ; and  if  the  market  for  our  manufactures  should,  I do  not  say 
fall  off,  but  even  cease  to  expand  at  the  rapid  rate  of  the  last  fifty 
years,  there  is  no  certainty  that  this  fate  may  not  be  reserved  for  us.® 
Without  carrying  our  anticipations  forward  to  such  a calamity, 
which  the  great  and  growing  intelligence  of  the  factory  population 
would,  it  may  be  hoped,  avert,  by  an  adaptation  of  their  habits 
to  their  circumstances  ; the  existing  condition  of  the  labourers  of 
some  of  the  most  exclusively  agricultural  counties,  Wiltshire,  Somer- 
setshire, Dorsetshire,  Bedfordshire,  Buckinghamshire,  is  sufficiently 
painful  to  contemplate.  The  labourers  of  these  counties,  with  large 
families,  and  eight  or  perhaps  nine  shillings  ^ for  their  weekly  wages 
when  in  full  employment,  have  for  some  time  been  one  of  the  stock 
objects  of  popular  compassion  : it  is  time  that  they  had  the  benefit 
also  of  some  application  of  common  sense. 

Unhappily,  sentimentahty  rather  than  common  sense  usually 
presides  over  the  discussion  of  these  subjects  ; and  while  there  is  a 
growing  sensitiveness  to  the  hardships  of  the  poor,  and  a ready 

^ [The  proposal  was  mentioned  in  the  1st  ed.  (1848) ; the  Act  was  referred 
to  in  the  7th  ed.  (1871).  For  the  Union  Chargeability  Act  of  1865  and  previous 
and  subsequent  legislation,  see  Majority  Beyort  of  the  Poor  Law  Commission 
(1909),  Part  iv.  ch.  4.] 

2 [The  words  here  following  in  the  original  text ; “ Especially  considering 
how  much  the  Irish  themselves  contribute  to  it,  by  migrating  to  this  country 
and  underbidding  its  native  inhabitants,”  were  omitted  from  the  5th  ed.  (1862).] 

3 [So  ed.  5 (1862).  In  1st  ed.  (1848)  “ seven  or  perhaps  eight.”] 


S58 


BOOK  II.  CHAPTER  XI.  § 6 


disposition  to  admit  claims  in  them  upon  the  good  offices  of  othet 
people,  there  is  an  all  but  universal  unwillingness  to  face  the  real 
difficulty  of  their  position,  or  advert  at  all  to  the  conditions  which 
nature  has  made  indispensable  to  the  improvement  of  their  physical 
lot.  Discussions  on  the  condition  of  the  labourers,  lamentations 
over  its  wretchedness,  denunciations  of  all  who  are  supposed  to  be 
indifferent  to  it,  projects  of  one  kind  or  another  for  improving  it, 
were  in  no  country  and  in  no  time  of  the  world  so  rife  as  in  the  present* 
generation  ; but  there  is  a tacit  agreement  to  ignore  totally  the  law 
of  wages,  or  to  dismiss  it  in  a parenthesis,  with  such  terms  as  “ hard- 
hearted Malthusianism,”  as  if  it  were  not  a thousand  times  more  hard- 
hearted to  tell  human  beings  that  they  may,  than  that  they  may  not, 
call  into  existence  swarms  of  creatures  who  are  sure  to  be  miserable, 
and  most  likely  to  be  depraved ; and  forgetting  that  the  conduct, 
which  it  is  reckoned  so  cruel  to  disapprove,  is  a degrading  slavery 
to  a brute  instinct  in  one  of  the  persons  concerned,  and  most 
commonly,  in  the  other,  helpless  submission  to  a revolting  abuse  of 
power.i 

So  long  as  mankind  remained  in  a semi-barbarous  state,  with  the 
indolence  and  the  few  wants  of  a savage,  it  probably  was  not  desir- 
able that  population  should  be  restrained  ; the  pressure  of  physical 
want  may  have  been  a necessary  stimulus,  in  that  state  of  the  human 
mind,  to  the  exertion  of  labour  and  ingenuity  required  for  accom- 
plishing that  greatest  of  all  past  changes  in  human  modes  of 
existence,  by  which  industrial  life  attained  predominance  over  the 
hunting,  the  pastoral,  and  the  military  or  predatory  state.  Want, 
in  that  age  of  the  world,  had  its  uses,  as  even  slavery  had ; and 
there  may  be  comers  of  the  earth  where  those  uses  are  not  yet 
superseded,  though  they  might  easily  be  so  were  a helping  hand 
held  out  by  more  civihzed  communities.  But  in  Europe  the  time, 
if  it  ever  existed,  is  long  past,  when  a life  of  privation  had  the 
smallest  tendency  to  make  men  either  better  workmen  or  more 
civilized  beings.  It  is,  on  the  contrary,  evident,  that  if  the  agricul- 
tural labourers  were  better  ofi,  they  would  both  work  more  efficiently, 
and  be  better  citizens.  I ask,  then,  is  it  true,  or  not,  that  if  th6ir 
numbers  were  fewer  they  would  obtain  higher  wages  ? This  is  the 
question,  and  no  other  : and  it  is  idle  to  divert  attention  from  it,  by 

^ [From  the  3rd  ed.  (1852)  was  here  omitted  a paragraph  of  the  original  text 
criticising  “ the  conduct,  during  ten  important  years,  of  a large  portion  of  the 
Tory  party  ” with  regard  to  “ an  enactment  ” (the  Poor  Law  Reform  of  1834) 
“ most  salutary  in  principle,  in  which  their  own  party  had  concurred,  but  of 
which  their  rivals  were  almost  accidentally  the  nominal  authors. 


WAGES 


359 


attacking  any  incidental  position  of  Mai  thus  or  some  other  writer, 
and  pretending  that  to  refute  that,  is  to  disprove  the  principle  of 
population.  Some,  for  instance,  have  achieved  an  easy  victory  over 
a passing  remark  of  Mr.  Malthus,  hazarded  chiefly  by  way  of 
illustration,  that  the  increase  of  food  may  perhaps  be  assumed  to 
take  place  in  an  arithmetical  ratio,  while  population  increases  in  a 
geometrical : when  every  candid  reader  knows  that  Mr.  Malthus  laid 
no  stress  on  this  unlucky  attempt  to  give  numerical  precision  to 
things  which  do  not  admit  of  it,  and  every  person  capable  of 
reasoning  must  see  that  it  is  whoUy  superfluous  to  his  argument. 
Others  have  attached  immense  importance  to  a correction  which 
more  recent  political  economists  have  made  in  the  mere  language 
of  the  earlier  followers  of  Mr.  Malthus.  Several  writers  had  said 
that  it  is  the  tendency  of  population  to  increase  faster  than  the 
means  of  subsistence.  The  assertion  was  true  in  the  sense  in  which 
they  meant  it,  namely,  that  population  would  in  most  circum- 
stances increase  faster  than  the  means  of  subsistence,  if  it  were 
not  checked  either  by  mortality  or  by  prudence.  But  inasmuch 
as  these  checks  act  with  unequal  force  at  diSerent  times  and 
places,  it  was  possible  to  interpret  the  language  of  these  writers  as 
if  they  had  meant  that  population  is  usually  gaining  ground  upon 
subsistence,  and  the  poverty  of  the  people  becoming  greater.  Under 
this  interpretation  of  their  meaning,  it  was  urged  that  the  reverse 
is  the  truth  : that  as  civilization  advances,  the  prudential  check 
tends  to  become  stronger,  and  population  to  slacken  its  rate 
of  increase,  relatively  to  subsistence ; and  that  it  is  an  error  to 
maintain  that  population,  in  any  improving  community,  tends  to 
increase  faster  than,  or  even  so  fast  as,  subsistence.  The  word 
tendency  is  here  used  in  a totally  different  sense  from  that  of  the 
writers  who  affirmed  the  proposition  : but  waiving  the  verbal  ques- 
tion, is  it  not  allowed  on  both  sides,  that  in  old  countries,  population 
presses  too  closely  upon  the  means  of  subsistence  ? And  though 
its  pressure  diminishes,  the  more  the  ideas  and  habits  of  the  poorest 
class  of  labourers  can  be  improved,  to  which  it  is  to  be  hoped  that 
there  is  always  some  tendency  in  a progressive  country,  yet  since 
that  tendency  has  hitherto  been,  and  still  is,  extremely  faint,  and 
(to  descend  to  particulars)  has  not  yet  extended  to  giving  to  the 
Wiltshire  labourers  higher  wages  than  eight  shillings  a week,  the  only 
thing  which  it  is  necessary  to  consider  is,  whether  that  is  a sufficient 
and  suitable  provision  for  a labourer  ? for  if  not,  population  does, 
as  an  existing  fact,  bear  too  great  a proportion  to  the  wages-fund ; 


360 


BOOK  II.  CHAPTER  XL  § 6 


and  whether  it  pressed  still  harder  or  not  quite  so  hard  at  some 
former  period,  is  practically  of  no  moment,  except  that,  if  the  ratio 
is  an  improving  one,  there  is  the  better  hope  that  by  proper  aids  and 
encouragements  it  may  be  made  to  improve  more  and  faster. 

It  is  not,  however,  against  reason,  that  the  argument  on  this 
subject  has  to  struggle  ; but  against  a feeling  of  dislike,  which  will 
only  reconcile  itself  to  the  unwelcome  truth,  when  every  device  is 
exhausted  by  which  the  recognition  of  that  truth  can  be  evaded. 
It  is  necessary,  therefore,  to  enter  into  a detailed  examination  of 
these  devices,  and  to  force  every  position  which  is  taken  up  by  the 
enemies  of  the  population  principle  in  their  determination  to  find 
some  refuge  for  the  labourers,  some  plausible  means  of  improving 
their  condition,  without  requiring  the  exercise,  either  enforced  or 
voluntary,  of  any  self-restraint,  or  any  greater  control  than  at  present 
over  the  animal  power  of  multiplication.  This  will  be  the  object 
of  the  next  chapter.^ 

* [See  Appendix  P.  The  Movement  of  Pojmlation.^ 


CHAPTER  XII 


OF  POPULAR  REMEDIES  FOR  LOW  WAGES 

§ 1.  The  simplest  expedient  which  can  be  imagined  for  keeping 
the  wages  of  labour  up  to  the  desirable  point,  would  be  to  fix  them 
by  law  : and  this  is  virtually  the  object  aimed  at  in  a variety  of 
plans  which  have  at  different  times  been,  or  still  are,  current,  for 
remodelling  the  relation  between  labourers  and  employers.  No 
one  probably  ever  suggested  that  wages  should  be  absolutely  fixed  ; 
since  the  interests  of  all  concerned  often  require  that  they  should 
be  variable  ; but  some  have  proposed  to  fix  a minimum  of  wages, 
leaving  the  variations  above  that  point  to  be  adjusted  by  competition. 
Another  plan  which  has  found  many  advocates  among  the  leaders  of 
the  operatives,  is  that  councils  should  be  formed,  which  in  England 
have  been  called  local  boards  of  trade,  in  France  “ conseiis  de 
prud’hommes,’*  and  other  names ; consisting  of  delegates  from  the 
workpeople  and  from  the  employers,  who,  meeting  in  conference, 
should  agree  upon  a rate  of  wages,  and  promulgate  it  from  authority, 
to  be  binding  generally  on  employers  and  workmen ; the  ground 
of  decision  being,  not  the  state  of  the  labour-market,  but  natural 
equity ; to  provide  that  the  workmen  shall  have  reasonable  wages 
and  the  capitalist  reasonable  profits. 

Others  again  (but  these  are  rather  philanthropists  interesting 
themselves  for  the  labouring  classes,  than  the  labouring  people 
themselves)  are  shy  of  admitting  the  interference  of  authority  in 
contracts  for  labour : they  fear  that  if  law  intervened,  it  would 
intervene  rashly  and  ignorantly ; they  are  convinced  that  two  parties, 
with  opposite  interests,  attempting  to  adjust  those  interests  by 
negotiation  through  their  representatives  on  principles  of  equity, 
when  no  rule  could  be  laid  down  to  determine  what  was  equitable, 
would  merely  exasperate  their  differences  instead  of  healing  them ; 
but  what  it  is  useless  to  attempt  by  the  legal  sanction,  these  persons 
desire  to  compass  by  the  moral.  Every  employer,  they  think, 
ought  to  give  sufficient  wages  ; and  if  he  does  it  not  willingly,  should 


862 


BOOK  II.  CHAPTER  XII.  § 1 


be  compelled  to  it  by  general  opinion ; the  test  of  sufficient  wages 
being  their  own  feelings,  or  what  they  suppose  to  be  those  of  the 
public.  This  is,  I think,  a fair  representation  of  a considerable  body 
of  existing  opinion  on  the  subject. 

I desire  to  confine  my  remarks  to  the  principle  involved  in  all 
these  suggestions,  without  taking  into  account  practical  difficulties, 
serious  as  these  must  at  once  be  seen  to  be.  I shall  suppose  that 
by  one  or  other  of  these  contrivances,  wages  could  be  kept  above 
the  point  to  which  they  would  be  brought  by  competition.  This 
is  as  much  as  to  say,  above  the  highest  rate  which  can  be  afforded 
by  the  existing  capital  consistently  with  employing  all  the  labourers. 
For  it  is  a mistake  to  suppose  that  competition  merely  keeps  down 
wages.  It  is  equally  the  means  by  which  they  are  kept  up.  When 
there  are  any  labourers  unemployed,  these,  unless  maintained  by 
charity,  become  competitors  for  hire,  and  wages  fall ; but  when  all 
who  were  out  of  work  have  found  employment,  wages  will  not,  under 
the  freest  system  of  competition,  fall  lower.  There  are  strange 
notions  afloat  concerning  the  nature  of  competition.  Some  people 
seem  to  imagine  that  its  effect  is  something  indefinite ; that  the 
competition  of  sellers  may  lower  prices,  and  the  competition  of 
labourers  may  lower  wages,  down  to  zero,  or  some  unassignable 
minimum.  Nothing  can  be  more  unfounded.  Goods  can  only  be 
lowered  in  price  by  competition  to  the  point  which  calls  forth  buyers 
sufficient  to  take  them  off  ; and  wages  can  only  be  lowered  by 
competition  until  room  is  made  to  admit  all  the  labourers  to  a share 
in  the  distribution  of  the  wages-fund.  If  they  fell  below  this  point, 
a portion  of  capital  would  remain  unemployed  for  want  of  labourers  ; 
a counter-competition  would  commence  on  the  side  of  capitalists, 
and  wages  would  rise. 

Since,  therefore,  the  rate  of  wages  which  results  from  competition 
distributes  the  whole  existing  wages-fund  among  the  whole  labouring 
population ; if  law  or  opinion  succeeds  in  fixing  wages  above  this 
rate,  some  labourers  are  kept  out  of  employment ; and  as  it  is  not 
the  intention  of  the  philanthropists  that  these  should  starve,  they 
must  be  provided  for  by  a forced  increase  of  the  wages-fund ; by 
a compulsory  saving.  It  is  nothing  to  fix  a minimum  of  wages, 
unless  there  be  a provision  that  work,  or  wages  at  least,  be  found  for 
all  who  apply  for  it.  This,  accordingly,  is  always  part  of  the  scheme ; 
and  is  consistent  with  the  ideas  of  more  people  than  would  approve 
of  either  a legal  or  a moral  minimum  of  wages.  Popular  sentiment 
looks  upon  it  as  the  duty  of  the  rich,  or  of  the  state,  to  find  employ- 


POPULAR  REMEDIES  FOR  LOW  WAGES 


363 


ment  for  all  the  poor.  If  the  moral  influence  of  opinion  does  not 
induce  the  rich  to  spare  from  their  consumption  enough  to  set  all  the 
poor  to  work  at  “ reasonable  wages,”  it  is  supposed  to  be  incumbent 
on  the  state  to  lay  on  taxes  for  the  purpose,  either  by  local  rates  or 
votes  of  public  money.  The  proportion  between  labour  and  the 
wages-fund  would  thus  be  modified  to  the  advantage  of  the  labourers, 
not  by  restriction  of  population,  but  by  an  increase  of  capital. 

§ 2.  If  this  claim  on  society  could  be  limited  to  the  existing 
generation ; if  nothing  more  were  necessary  than  a compulsory 
accumulation,  sufficient  to  provide  permanent  employment  at 
ample  wages  for  the  existing  numbers  of  the  people  ; such  a propo- 
sition would  have  no  more  strenuous  supporter  than  myself.  Society 
mainly  consists  of  those  who  live  by  bodily  labour  ; and  if  society, 
that  is,  if  the  labourers,  lend  their  physical  force  to  protect  indivi- 
duals in  the  enjoyment  of  superfluities,  they  are  entitled  to  do  so 
and  have  always  done  so,  with  the  reservation  of  a power  to  tax 
those  superfluities  for  purposes  of  pubhc  utihty;  among  which 
purposes  the  subsistence  of  the  people  is  the  foremost.  Since  no  one 
is  responsible  for  having  been  born,  no  pecuniary  sacrifice  is  too 
great  to  be  made  by  those  who  have  more  than  enough,  for  the 
purpose  of  securing  enough  to  all  persons  already  in  existence. 

But  it  is  another  thing  altogether,  when  those  who  have  produced 
and  accumulated  are  called  upon  to  abstain  from  consuming  until 
they  have  given  food  and  clothing,  not  only  to  aU  who  now  exist, 
but  to  all  whom  these  or  their  descendants  may  think  fit  to  call  into 
existence.  Such  an  obhgation,  acknov/ledged  and  acted  upon,  would 
suspend  all  checks,  both  positive  and  preventive ; there  would  be 
nothing  to  hinder  population  from  starting  forward  at  its  rapidest 
rate  ; and  as  the  natural  increase  of  capital  would,  at  the  best,  not 
be  more  rapid  than  before,  taxation,  to  make  up  the  growing  de- 
ficiency, must  advance  with  the  same  gigantic  strides.  The  attempt 
would  of  course  be  made  to  exact  labour  in  exchange  for  support. 
But  experience  has  shown  the  sort  of  work  to  be  expected  from 
recipients  of  pubhc  charity.  When  the  pay  is  not  given  for  the  sake 
of  the  work,  but  the  work  found  for  the  sake  of  the  pay,  inefficiency 
is  a matter  of  certainty  : to  extract  real  work  from  day-labourers 
without  the  power  of  dismissal,  is  only  practicable  by  the  power  of 
the  lash.  It  is  conceivable,^  doubtless,  that  this  objection  might  be 

^ [This  and  the  two  following  sentences  were  inserted  in  the  2nd  ed.  (1849), 
&nd  allowed  to  remain  in  subsequent  editions.] 


364 


BOOK  II.  CHAPTER  XII.  § 2 


got  over.  The  fund  raised  by  taxation  might  be  spread  over  the 
labour  market  generally,  as  seems  to  be  intended  by  the  supporters 
of  the  droit  au  travail  in  France  ; without  giving  to  any  unemployed 
labourer  a right  to  demand  support  in  a particular  place  or  from  a 
particular  functionary.  The  power  of  dismissal  as  regards  indivi- 
dual labourers  would  then  remain ; the  government  only  undertak- 
ing to  create  additional  employment  when  there  was  a deficiency, 
and  reserving,  like  other  employers,  the  choice  of  its  own  workpeople. 
But  let  them  work  ever  so  efficiently,  the  increasing  population  could 
not,  as  we  have  so  often  shown,  increase  the  produce  proportionally  : 
the  surplus,  after  all  were  fed,  would  bear  a less  and  less  proportion 
to  the  whole  produce,  and  to  the  population  : and  the  increase  of 
people  going  on  in  a constant  ratio,  while  the  increase  of  produce 
went  on  in  a diminishing  ratio,  the  surplus  would  in  time  be  wholly 
absorbed  ; taxation  for  the  support  of  the  poor  would  engross  the 
whole  income  of  the  country ; the  payers  and  the  receivers  would 
be  melted  down  into  one  mass.  The  check  to  population,  either  by 
death  or  prudence,  could  not  then  be  staved  off  any  longer,  but 
must  come  into  operation  suddenly  and  at  once  ; everything  which 
places  mankind  above  a nest  of  ants  or  a colony  of  beavers,  having 
perished  in  the  interval. 

These  consequences  have  been  so  often  and  so  clearly  pointed  out 
by  authors  of  reputation,  in  writings  known  and  accessible,  that 
ignorance  of  them  on  the  part  of  educated  persons  is  no  longer 
pardonable.  It  is  doubly  discreditable  in  any  person  setting  up  for 
a public  teacher,  to  ignore  these  considerations ; to  dismiss  them 
silently,  and  discuss  or  declaim  on  wages  and  poor-laws,  not  as  if 
these  arguments  could  be  refuted,  but  as  if  they  did  not  exist. 

Every  one  has  a right  to  live.  We  will  suppose  this  granted. 
But  no  one  has  a right  to  bring  creatures  into  fife,  to  be  supported 
by  other  people.  Whoever  means  to  stand  upon  the  first  of  these 
rights  must  renounce  all  pretension  to  the  last.  If  a man  cannot 
support  even  himself  unless  others  help  him,  those  others  are  entitled 
to  say  that  they  do  not  also  undertake  the  support  of  any  offspring 
which  it  is  physically  possible  for  him  to  summon  into  the  world. 
Yet  there  are  abundance  of  writers  and  public  speakers,  including 
many  of  most  ostentatious  pretensions  to  high  feehng,  whose  views 
of  fife  are  so  truly  brutish,  that  they  see  hardship  in  preventing 
paupers  from  breeding  hereditary  paupers  in  the  workhouse  itself. 
Posterity  will  one  day  ask,  with  astonishment,  what  sort  of  people  it 
could  be  among  whom  such  preachers  could  find  proselytes- 


POPULAR  REMEDIES  FOR  LOW  WAGES  36fi 

It  would  be  possible  for  the  state  to  guarantee  employment  at 
ample  wages  to  all  who  are  born.  But  if  it  does  this,  it  is  bound  in 
self-protection,  and  for  the  sake  of  every  purpose  for  which  govern- 
ment exists,  to  provide  that  no  person  shall  be  born  without  its 
consent.  If  the  ordinary  and  spontaneous  motives  to  self-restraint 
are  removed,  others  must  be  substituted.  Restrictions  on  marriage, 
at  least  equivalent  to  those  existing  [1848]  in  some  of  the  German 
states,  or  severe  penalties  on  those  who  have  children  when  unable 
to  support  them,  would  then  be  indispensable.  Society  can  feed  the 
necessitous,  if  it  takes  their  multiplication  under  its  control : or 
(if  destitute  of  all  moral  feeling  for  the  wretched  offspring)  it  can  leave 
the  last  to  their  discretion,  abandoning  the  first  to  their  own  care. 
But  it  cannot  with  impunity  take  the  feeding  upon  itself,  and  leave 
the  multiplying  free. 

To  give  profusely  to  the  people,  whether  under  the  name  of 
charity  or  of  employment,  without  placing  them  under  such 
influences  that  prudential  motives  shall  act  powerfully  upon  them, 
is  to  lavish  the  means  of  benefiting  mankind,  without  attaining  the 
object.  Leave  the  people  in  a situation  in  which  their  condition 
manifestly  depends  upon  their  numbers,  and  the  greatest  permanent 
benefit  may  be  derived  from  any  sacrifice  made  to  improve  the 
physical  well-being  of  the  present  generation,  and  raise,  by  that 
means,  the  habits  of  their  children.  But  remove  the  regulation  of 
their  wages  from  their  own  control ; guarantee  to  them  a certain 
payment,  either  by  law,  or  by  the  feeling  of  the  community ; and 
no  amount  of  comfort  that  you  can  give  them  will  make  either  them 
or  their  descendants  look  to  their  own  self-restraint  as  the  proper 
means  of  preserving  them  in  that  state.  You  will  only  make  them 
indignantly  claim  the  continuance  of  your  guarantee  to  themselves 
and  their  full  complement  of  possible  posterity. 

On  these  grounds  some  writers  have  altogether  condemned  the 
English  poor-law,  and  any  system  of  relief  to  the  able-bodied,  at 
least  when  uncombined  with  systematic  legal  precautions  against 
over-population.  The  famous  Act  of  the  43*'^  of  Elizabeth  under- 
took, on  the  part  of  the  public,  to  provide  work  and  wages  for  all  the 
destitute  able-bodied  : and  there  is  little  doubt  that  if  the  intent 
of  that  Act  had  been  fully  carried  out,  and  no  means  had  been 
adopted  by  the  administrators  of  relief  to  neutralize  its  natural 
tendencies,  the  poor-rate  would  by  this  time  have  absorbed  the 
whole  net  produce  of  the  land  and  labour  of  the  country.  It  is  not 
at  all  surprising,  therefore,  that  Mr.  Malthus  and  others  should  at 


366 


BOOK  II.  CHAPTER  XII.  § 3 


first  liave  concluded  against  all  poor  laws  whatever.  It  required 
much  experience,  and  careful  examination  of  different  modes  of 
poor-law  management,  to  give  assurance  that  the  admission  of  an 
absolute  right  to  be  supported  at  the  cost  of  other  people,  could 
exist  in  law  and  in  fact,  without  fatally  relaxing  the  springs  of 
industry  and  the  restraints  of  prudence.  This,  however,  was 
fully  substantiated  by  the  investigations  of  the  original  Poor  Law 
Commissioners.  Hostile  as  they  are  unjustly  accused  of  being  to 
the  principle  of  legal  relief,  they  are  the  first  who  fully  proved  the 
compatibility  of  any  Poor  Law,  in  which  a right  to  relief  was  re- 
cognised, with  the  permanent  interests  of  the  labouring  class  and  of 
posterity.  By  a collection  of  facts,  experimentally  ascertained  in 
parishes  scattered  throughout  England,  it  was  shown  that  the 
guarantee  of  support  could  be  freed  from  its  injurious  effects  upon 
the  minds  and  habits  of  the  people,  if  the  relief,  though  ample  in 
respect  to  necessaries,  was  accompanied  with  conditions  which  they 
disliked,  consisting  of  some  restraints  on  their  freedom,  and  the 
privation  of  some  indulgences.  Under  this  proviso,  it  may  be 
regarded  as  irrevocably  established,  that  the  fate  of  no  member  of 
the  community  needs  be  abandoned  to  chance  ; that  society  can  and 
therefore  ought  to  insure  every  individual  belonging  to  it  against 
the  extreme  of  want ; that  the  condition  even  of  those  who  are  un- 
able to  find  their  own  support,  needs  not  be  one  of  physical  suffering, 
or  the  dread  of  it,  but  only  of  restricted  indulgence,  and  enforced 
rigidity  of  discipline.  This  is  surely  something  gained  for  humanity, 
important  in  itself,  and  still  more  so  as  a step  to  something  beyond  ; 
and  humanity  has  no  worse  enemies  than  those  who  lend  themselves, 
either  knowingly  or  unintentionally,  to  bring  odium  on  this  law, 
or  on  the  principles  in  which  it  originated. 

§ 3.  Next  to  the  attempts  to  regulate  wages,  and  provide 
artificially  that  all  who  are  willing  to  work  shaU  receive  an  adequate 
price  for  their  labour,  we  have  to  consider  another  class  of  popular 
remedies,  which  do  not  profess  to  interfere  with  freedom  of  contract ; 
which  leave  wages  to  be  fixed  by  the  competition  of  the  market,  but, 
when  they  are  considered  insufficient,  endeavour  by  some  subsidiary 
resource  to  make  up  to  the  labourers  for  the  insufficiency.  Of  this 
nature  was  the  expedient  resorted  to  by  parish  authorities  during 
thirty  or  forty  years  previous  to  1834,  generally  known  as  the 
Allowance  System.  This  was  first  introduced  when,  through 
a succession  of  bad  seasons,  and  consequent  high  prices  of  food,  the 


POPULAR  REMEDIES  FOR  LOW  WAGES 


367 


wages  of  labour  had  become  inadequate  to  afford  to  the  families  of 
the  agricultural  labourers  the  amount  of  support  to  which  they  had 
been  accustomed.  Sentiments  of  humanity,  joined  with  the  idea 
then  inculcated  in  high  quarters,  that  people  ought  not  to  be  allowed 
to  suffer  for  having  enriched  their  country  with  a multitude  of 
inhabitants,  induced  the  magistrates  of  the  rural  districts  to  com- 
mence giving  parish  relief  to  persons  already  in  private  employment ; 
and  when  the  practice  had  once  been  sanctioned,  the  immediate 
interest  of  the  farmers,  whom  it  enabled  to  throw  part  of  the  support 
of  their  labourers  upon  the  other  inhabitants  of  the  parish,  led  to  a 
great  and  rapid  extension  of  it.  The  principle  of  this  scheme  being 
avowedly  that  of  adapting  the  means  of  every  family  to  its  necessities, 
it  was  a natural  consequence  that  more  should  be  given  to  the 
married  than  to  the  single,  and  to  those  who  had  large  families 
than  to  those  who  had  not : in  fact,  an  allowance  was  usually 
granted  for  every  child.  So  direct  and  positive  an  encouragement 
to  population  is  not,  however,  inseparable  from  the  scheme  : the 
allowance  in  aid  of  wages  might  be  a fixed  thing,  given  to  all  labourers 
alike,  and  as  this  is  the  least  objectionable  form  which  the  system 
can  assume,  we  will  give  it  the  benefit  of  the  supposition 

It  is  obvious  that  this  is  merely  another  mode  of  fixing  a minimum* 
of  wages  ; no  otherwise  differing  from  the  direct  mode,  than  in 
allowing  the  employer  to  buy  the  labour  at  its  market  price,  the 
difference  being  made  up  to  the  labourer  from  a public  fund.  The 
one  kind  of  guarantee  is  open  to  all  the  objections  which  have  been 
urged  against  the  other.  It  promises  to  the  labourers  that  they  shall 
all  have  a certain  amount  of  wages,  however  numerous  they  may  be 
and  removes,  therefore,  alike  the  positive  and  the  prudential  obstacles 
to  an  unlimited  increase.  But  besides  the  objections  common  to  all 
attempts  to  regulate  wages  without  regulating  population,  the 
allowance  system  has  a peculiar  absurdity  of  its  own.  This  is, 
that  it  inevitably  takes  from  wages  with  one  hand  what  it  adds  to 
them  with  the  other.  There  is  a rate  of  wages,  either  the  lowest  on 
which  the  people  can,  or  the  lowest  on  which  they  will  consent,  to 
live.  We  will  suppose  this  to  be  seven  shillings  a week.  Shocked 
at  the  wretchedness  of  this  pittance,  the  parish  authorities  humanely 
make  it  up  to  ten.  But  the  labourers  are  accustomed  to  seven,  and 
though  they  would  gladly  have  more,  will  live  on  that  (as  the  fact 
proves)  rather  than  restrain  the  instinct  of  multiplication.  Their 
habits  will  not  be  altered  for  the  better  by  giving  them  parish  pay. 
Receiving  three  shillings  from  the  parish,  they  will  be  as  well  off 


BOOK  II.  CHAPTER  XII.  § 4 


as  before  tbongb  they  should  increase  sufficiently  to  bring  dowc 
wages  to  four  shillings.  They  will  accordingly  people  down  to  that 
point ; or  perhaps,  without  waiting  for  an  increase  of  numbers, 
there  are  unemployed  labourers  enough  in  the  workhouse  to  produce 
the  effect  at  once.  It  is  well  known  that  the  allowance  system  did 
practically  operate  in  the  mode  described,  and  that  under  its  influence 
wages  sank  to  a lower  rate  than  had  been  known  in  England  before. 
During  the  last  century,  under  a rather  rigid  administration  of  the 
poor  laws,  population  increased  slowly,  and  agricultural  wages  were 
considerably  above  the  starvation  point.  Under  the  allowance 
system  the  people  increased  so  fast,  and  wages  sank  so  low,  that  with 
wages  and  allowance  together,  families  were  worse  off  than  they 
had  been  before  with  wages  alone.  When  the  labourer  depends 
solely  on  wages,  there  is  a virtual  minimum.  If  wages  fall  below  the 
lowest  rate  which  will  enable  the  population  to  be  kept  up,  depopula- 
tion at  least  restores  them  to  that  lowest  rate.  But  if  the  deficiency 
is  to  be  made  up  by  a forced  contribution  from  all  who  have  anything 
to  give,  wages  may  fall  below  starvation  point ; they  may  fall 
almost  to  zero.  This  deplorable  system,  worse  than  any  other 
form  of  poor-law  abuse  yet  invented,  inasmuch  as  it  pauperizes  not 
•merely  the  unemployed  part  of  the  population  but  the  whole,  received 
a severe  check  from  the  Poor  Law  of  1834  : I wish  it  could  be  said 
that  there  are  no  signs  of  its  revival.^ 

§ 4.  But  while  this  is  generally  condemned,  there  is  another 
mode  of  relief  in  aid  of  wages,  which  is  still  highly  popular  ; a mode 
greatly  preferable,  morally  and  socially,  to  parish  allowance,  but 
tending,  it  is  to  be  feared,  to  a very  similar  economical  result : I 
mean  the  much-boasted  Allotment  System.  This,  too,  is  a con- 
trivance to  compensate  the  labourer  for  the  insufficiency  of  his 
wages,  by  giving  him  something  else  as  a supplement  to  them  : but 
instead  of  having  them  made  up  from  the  poor-rate,  he  is  enabled 
to  make  them  up  for  himself,  by  renting  a small  piece  of  ground, 
which  he  cultivates  like  a garden  by  spade  labour,  raising  potatoes 
and  other  vegetables  for  home  consumption,  with  perhaps  some 
additional  quantity  for  sale.  If  he  hires  the  ground  ready  manured, 
he  sometimes  pays  for  it  at  as  high  a rate  as  eight  pounds  an  acre  : 
but  getting  his  own  labour  and  that  of  his  family  for  nothing,  he 

1 [The  present  text  dates  only  from  the  7th  ed.  (1871).  Until  then  it  had 
read  : “ This  deplorable  system  . . . has  been  abolished,  and  of  this  one  abuse 
at  least  it  may  be  said  that  nobody  professes  to  wish  for  its  revival.”] 


POPULAR  REMEDIES  FOR  LOW  WAGES 


369 


is  able  to  gain  several  pounds  by  it  even  at  so  high  a rent.*  The 
patrons  of  the  system  make  it  a great  point  that  the  allotment  shall 
be  in  aid  of  wages,  and  not  a substitute  for  them  ; that  it  shall  not 
be  such  as  a labourer  can  live  on,  but  only  sufficient  to  occupy  the 
spare  hours  and  days  of  a man  in  tolerably  regular  agricultural 
employment,  with  assistance  from  his  wife  and  children.  They 
usually  limit  the  extent  of  a single  allotment  to  a quarter, 
or  something  between  a quarter  and  half  an  acre.  If  it  exceeds  this, 
without  being  enough  to  occupy  him  entirely,  it  will  make  him,  they 
say,  a bad  and  uncertain  workman  for  hire : if  it  is  sufficient  to 
take  him  entirely  out  of  the  class  of  hired  labourers,  and  to  become 
his  sole  means  of  subsistence,  it  will  make  him  an  Irish  cottier : 
for  which  assertion,  at  the  enormous  rents  usually  demanded,  there 
is  some  foundation.  But  in  their  precautions  against  cottierism, 
these  well-meaning  persons  do  not  perceive,  that  if  the  system  they 
patronize  is  not  a cottier  system,  it  is,  in  essentials,  neither  more 
nor  less  than  a system  of  conacre. 

There  is  no  doubt  a material  difference  between  eking  out 
insufficient  wages  by  a fund  raised  by  taxation,  and  doing  the 
same  thing  by  means  which  make  a clear  addition  to  the  gross 
produce  of  the  country.  There  is  also  a difference  between  helping 
a labourer  by  means  of  his  own  industry,  and  subsidizing  him  in  a 
mode  which  tends  to  make  him  careless  and  idle.  On  both  these 
points,  allotments  have  an  unquestionable  advantage  over  parish 
allowances.  But  in  their  effect  on  wages  and  population,  I see  no 
reason  why  the  two  plans  should  substantially  differ.  Ail  subsidies 
in  aid  of  wages  enable  the  labourer  to  do  with  less  remuneration, 
and  therefore  ultimately  bring  down  the  price  of  labour  by  the  full 
amount,  unless  a change  be  wrought  in  the  ideas  and  requirements 
of  the  labouring  class ; an  alteration  in  the  relative  value  which 
they  set  upon  the  gratification  of  their  instincts,  and  upon  the 
increase  of  their  comforts  and  the  comforts  of  those  connected 
with  them.  That  any  such  change  in  their  character  should  be 
produced  by  the  allotment  system,  appears  to  me  a thing  not  to  be 
expected.  The  possession  of  land,  we  are  sometimes  told,  renders 
the  labourer  provident.  Property  in  land  does  so ; or  what  is 
equivalent  to  property,  occupation  on  fixed  terms  and  on  a 
permanent  tenure.  But  mere  hiring  from  year  to  year  was  never 
found  to  have  any  such  effect.  Did  possession  of  land  render  the 

* See  the  Evidence  on  the  subject  of  Allotments,  collected  by  the  Com 
missioners  of  Poor  Law  Enquiry. 


BOOK  II.  CHAMEB  XII.  § 4 


Irishman  provident  ? Testimonies,  it  is  true,  abound,  and  I do 
not  seek  to  discredit  them,  of  the  beneficial  change  produced  in  the 
conduct  and  condition  of  labourers,  by  receiving  allotments.  Such 
an  effect  is  to  be  expected  while  those  who  hold  them  are  a small 
number  ; a privileged  class,  having  a status  above  the  common  level, 
which  they  are  unwilling  to  lose.  They  are  also,  no  doubt,  almost 
ilways,  originally  a select  class,  composed  of  the  most  favourable 
specimens  of  the  labouring  people : which,  however,  is  attended 
with  the  inconvenience  that  the  persons  to  whom  the  system 
facilitates  marrying  and  having  children,  are  precisely  those  who 
would  otherwise  be  the  most  hkely  to  practise  prudential  restraint. 
As  affecting  the  general  condition  of  the  labouring  class,  the  scheme, 
as  it  seems  to  me,  must  be  either  nugatory  or  mischievous.  If 
only  a few  labourers  have  allotments,  they  are  naturally  those  who 
could  do  best  without  them,  and  no  good  is  done  to  the  class  : while, 
if  the  system  were  general,  and  every  or  almost  every  labourer  had 
an  allotment,  I believe  the  effect  would  be  much  the  same  as  when 
every  or  almost  every  .labourer  had  an  allowance  in  aid  of  wages.  I 
think  there  can  be  no  doubt  that  if,  at  the  end  of  the  last  century, 
the  Allotment  instead  of  the  Allowance  system  had  been  generally 
adopted  in  England,  it  would  equally  have  broken  down  the  practical 
restraints  on  population  which  at  that  time  did  really  exist ; popula- 
tion would  have  started  forward  exactly  as  in  fact  it  did  ; and  in 
twenty  years,  wages  plus  the  allotment  would  have  been,  as  wages 
plus  the  allowance  actually  were,  no  more  than  equal  to  the  former 
wages  without  any  allotment.  The  only  difference  in  favour  of 
allotments  would  have  been,  that  they  make  the  people  grow  their 
own  poor-rates. 

I am  at  the  same  time  quite  ready  to  allow,  that  in  some  circum- 
stances, the  possession  of  land  at  a fair  rent,  even  without  ownership, 
by  the  generahty  of  labourers  for  hire,  operates  as  a cause  not  of  low, 
but  of  high  wages.  This,  however,  is  when  their  land  renders  them, 
to  the  extent  of  actual  necessaries,  independent  of  the  market  for 
labour.  There  is  the  greatest  difference  between  the  position  of 
people  who  live  by  wages,  with  land  as  an  extra  resource,  and  of 
people  who  can,  in  case  of  necessity,  subsist  entirely  on  their  land, 
and  only  work  for  hire  to  add  to  their  comforts.  Wages  are  likely 
to  be  high  where  none  are  compelled  by  necessity  to  sell  their  labour. 
“ People  who  have  at  home  some  kind  of  property  to  apply  their 
labour  to,  will  not  sell  their  labour  for  wages  that  do  not  afford  them 
a better  diet  than  potatoes  and  maize,  although  in  saving  for 


POPULAR  REMEDIES  FOR  LOW  WAGES 


371 


themselves,  they  may  live  very  much  on  potatoes  and  maize.  We  are 
often  surprised  in  travelling  on  the  Continent,  to  hear  of  a rate  of 
day’s  wages  very  high,  considering  the  abundance  and  cheapness 
of  food.  It  is  want  of  the  necessity  or  the  inclination  to  take  work, 
that  makes  day-labour  scarce,  and,  considering  the  price  of  pro- 
visions, dear,  in  many  parts  of  the  Continent,  where  property  in 
land  is  widely  diffused  among  the  people.”*  There  are  parts  of  the 
Continent,  where,  even  of  the  inhabitants  of  the  towns,  scarcely  one 
seems  to  be  exclusively  dependent  on  his  ostensible  employment ; 
and  nothing  else  can  explain  the  high  price  they  put  on  their  services, 
and  the  carelessness  they  evince  as  to  whether  they  are  employed 
at  all.  But  the  effect  would  be  far  different  if  their  land  or  other 
resources  gave  them  only  a fraction  of  a subsistence,  leaving  them 
under  an  undiminished  necessity  of  selling  their  labour  for  wages 
in  an  overstocked  market.  Their  land  would  then  merely  enable 
them  to  exist  on  smaller  wages,  and  to  carry  their  multiplication  so 
much  the  further  before  reaching  the  point  below  which  they  either 
could  not,  or  would  not  descend. 

To  the  view  I have  taken  of  the  effect  of  allotments,  I see  no  argu- 
ment which  can  be  opposed,  but  that  employed  by  Mr.  Thornton,f 
with  whom  on  this  subject  I am  at  issue.  His  defence  of  allotments 
is  grounded  on  the  general  doctrine,  that  it  is  only  the  very  poor  who 
multiply  without  regard  to  consequences,  and  that  if  the  condition 
of  the  existing  generation  could  be  greatly  improved,  which  he  thinks 
might  be  done  by  the  allotment  system,  their  successors  would  grow 
up  with  an  increased  standard  of  requirements,  and  would  not  have 
families  until  they  could  keep  them  in  as  much  comfort  as  that  in 
which  they  had  been  brought  up  themselves.  I agree  in  as  much  of 
this  argument  as  goes  to  prove  that  a sudden  and  very  great  improve- 
ment in  the  condition  of  the  poor  has  always,  through  its  effect  on 
their  habits  of  hfe,  a chance  of  becoming  permanent.  What  hap- 
pened at  the  time  of  the  French  Revolution  is  an  example.  But 
I cannot  think  that  the  addition  of  a quarter  or  even  half  an  acre 
to  every  labourer’s  cottage,  and  that  too  at  a rack  rent,  would  (after 
the  fall  of  wages  which  would  be  necessary  to  absorb  the  already 
existing  mass  of  pauper  labour)  make  so  great  a difference  in  the 
comforts  of  the  family  for  a generation  to  come,  as  to  raise  up 
from  childhood  a labouring  population  with  a really  higher  per- 
manent standard  of  requirements  and  habits.  So  small  a portion 

* Laing’s  Notes  of  a Traveller,  p.  456. 

f See  Thornton  on  Over -Population,  ch.  viiL 


372 


BOOK  II.  CHAPTER  XH.  § 4 


of  land  could  only  be  made  a permanent  benefit,  by  holding  out 
encouragement  to  acquire  by  industry  and  saving,  the  means  of 
buying  it  outright : a permission  which,  if  extensively  made  use  of, 
would  be  a kind  of  education  in  forethought  and  frugality  to  the 
entire  class,  the  effects  of  which  might  not  cease  with  the  occasion. 
The  benefit  would  however  arise,  not  from  what  was  given  them,  but 
from  what  they  were  stimulated  to  acquire. 

No  remedies  for  low  wages  have  the  smallest  chance  of  being 
efficacious,  which  do  not  operate  on  and  through  the  minds  and 
habits  of  the  people.  While  these  are  unaffected,  any  contrivance, 
even  if  successful,  for  temporarily  improving  the  condition  of  the 
very  poor,  would  but  let  slip  the  reins  by  which  population  was 
previously  curbed  ; and  could  only,  therefore,  continue  to  produce 
its  effect,  if,  by  the  whip  and  spur  of  taxation,  capital  were 
compelled  to  follow  at  an  equally  accelerated  pace.  But  this  process 
could  not  possibly  continue  for  long  together,  and  whenever  it 
stopped,  it  would  leave  the  country  with  an  increased  number  of 
the  poorest  class,  and  a diminished  proportion  of  all  except  the 
poorest,  or,  if  it  continued  long  enough,  with  none  at  all.  For  “ to 
this  complexion  must  come  at  last  ” all  social  arrangements,  which 
remove  the  natural  checks  to  population  without  substituting  any 
others. 


CHAPTER  XIII 


THE  REMEDIES  FOR  LOW  WAGES  FURTHER  CONSIDERED 

§ 1.  By  what  means,  then,  is  poverty  to  be  contended  against  ? 
How  is  the  evil  of  low  wages  to  be  remedied  ? If  the  expedients 
usually  recommended  for  the  purpose  are  not  adapted  to  it,  can  no 
others  be  thought  of  ? Is  the  problem  incapable  of  solution  ? 
Can  political  economy  do  nothing,  but  only  object  to  everything, 
and  demonstrate  that  nothing  can  be  done  ? 

If  this  were  so,  political  economy  might  have  a needful,  but 
would  have  a melancholy,  and  a thankless  task.  If  the  bulk  of 
the  human  race  are  always  to  remain  as  at  present,  slaves  to  toil 
in  which  they  have  no  interest,  and  therefore  feel  no  interest — 
drudging  from  early  morning  till  late  at  night  for  bare  necessaries, 
and  with  all  the  intellectual  and  moral  deficiencies  which  that 
implies — without  resources  either  in  mind  or  feelings — untaught,  for 
they  cannot  be  better  taught  than  fed  ; selfish,  for  all  their  thoughts 
are  acquired  for  themselves ; without  interests  or  sentiments  as 
citizens  and  members  of  society,  and  with  a sense  of  injustice 
rankling  in  their  minds,  equally  for  what  they  have  not,  and  for 
what  others  have ; I know  not  what  there  is  which  should  make  a 
person  with  any  capacity  of  reason,  concern  himself  about  the 
destinies  of  the  human  race.  There  would  be  no  wisdom  for  any 
one  but  in  extracting  from  life,  with  Epicurean  indifference,  as 
much  personal  satisfaction  to  himself  and  those  with  whom  he 
sympathises,  as  it  can  yield  without  injury  to  any  one,  and  letting 
the  unmeaning  bustle  of  so-called  civilized  existence  roll  by  unheeded. 
But  there  is  no  ground  for  such  a view  of  human  affairs.  Poverty, 
like  most  social  evils,  exists  because  men  follow  their  brute  instincts 
without  due  consideration.  But  society  is  possible,  precisely  because 
man  is  not  necessarily  a brute.  Civilization  in  every  one  of  its 
aspects  is  a struggle  against  the  animal  instincts.  Over  some  even 
of  the  strongest  of  them,  it  has  shown  itself  capable  of  acquiring 


374 


BOOK  II.  CHAPTER  XHI.  § 1 


abundant  control.  It  has  artificialized  large  portions  of  mankind 
to  such  an  extent,  that  of  many  of  their  most  natural  inclinations 
they  have  scarcely  a vestige  or  a remembrance  left.  If  it  has  not 
brought  the  instinct  of  population  under  as  much  restraint  as  is 
needful,  we  must  remember  that  it  has  never  seriously  tried.  What 
efforts  it  has  made,  have  mostly  been  in  the  contrary  direction. 
Keligion,  morality,  and  statesmanship  have  vied  with  one  another  in 
incitements  to  marriage,  and  to  the  multiplication  of  the  species, 
so  it  be  but  in  wedlock.  Religion  has  not  even  yet  discontinued 
its  encouragements.  The  Roman  Catholic  clergy  (of  any  other 
clergy  it  is  unnecessary  to  speak,  since  no  other  have  any  considerable 
influence  over  the  poorer  classes)  everywhere  think  it  their  duty  to 
promote  marriage,  in  order  to  prevent  fornication.  There  is  still 
in  many  minds  a strong  religious  prejudice  against  the  true  doctrine. 
The  rich,  provided  the  consequences  do  not  touch  themselves,  think 
it  impugns  the  wisdom  of  Providence  to  suppose  that  misery  can 
result  from  the  operation  of  a natural  propensity : the  poor  think 
that  “ God  never  sends  mouths  but  he  sends  meat.”  No  one  would 
guess  from  the  language  of  either,  that  man  had  any  voice  or  choice 
in  the  matter.  So  complete  is  the  confusion  of  ideas  on  the  whole 
subject ; owing  in  a great  degree  to  the  mystery  in  which  it  is 
shrouded  by  a spurious  delicacy,  which  prefers  that  right  and 
wrong  should  be  mismeasured  and  confounded  on  one  of  the  subjects 
most  momentous  to  human  welfare,  rather  than  that  the  subject 
should  be  freely  spoken  of  and  discussed.  People  are  little  aware 
of  the  cost  to  mankind  of  this  scrupulosity  of  speech.  The  diseases 
of  society  can,  no  more  than  corporal  maladies,  be  prevented  or 
cured  without  being  spoken  about  in  plain  language.  All  experience 
shows  that  the  mass  of  mankind  never  judge  of  moral  questions  for 
themselves,  never  see  anything  to  be  right  or  wrong  until  they  have 
been  frequently  told  it ; and  who  tells  them  that  they  have  any  duties 
in  the  matter  in  question,  while  they  keep  within  matrimonial 
limits  ? Who  meets  with  the  smallest  condemnation,  or  rather, 
who  does  not  meet  with  sympathy  and  benevolence,  for  any 
amount  of  evil  which  he  may  have  brought  upon  himself  and  those 
dependent  on  him,  by  this  species  of  incontinence  ? While  a man 
who  is  intemperate  in  drink,  is  discoimtenanced  and  despised  by 
all  who  profess  to  be  moral  people,^  it  is  one  of  the  chief  grounds 

* [The  remainder  of  this  sentence  appeared  first  in  the  3rd  ed.  (1852).  In 
the  1st  and  2nd  ed.  (1848,  1849),  the  text  ran ; “ Is  it  not  to  this  hour  the 
favourite  recommendation  for  any  parochial  office  bestowed  by  popular  election 


REMEDIES  FOR  LOW  WAGES 


3^6 


made  use  of  in  appeals  to  the  benevolent,  that  the  applicant  has  a 
large  family  and  is  unable  to  maintain  them.* 

One  cannot  wonder  that  silence  on  this  great  department  of 
human  duty  should  produce  unconsciousness  of  moral  obligations, 
when  it  produces  oblivion  of  physical  facts.  That  it  is  possible  to 
delay  marriage,  and  to  live  in  abstinence  while  unmarried,  most 
people  are  willing  to  allow  ; but  when  persons  are  once  married,  the 
idea,  in  this  country,  never  seems  to  enter  any  one’s  mind  that 
having  or  not  having  a family,  or  the  number  of  which  it  shall 
consist,  is  amenable  to  their  own  control.  One  would  imagine  that 
children  were  rained  down  upon  married  people,  direct  from  heaven, 
without  their  being  art  or  part  in  the  matter  ; that  it  was  really,  as 
the  common  phrases  have  it,  God’s  will,  and  not  their  own,  which 
decided  the  numbers  of  their  offspring.  Let  us  see  what  is  a Con- 
tinental philosopher’s  opinion  on  this  point ; a man  among  the  most 
benevolent  of  his  time,  and  the  happiness  of  whose  married  life  has 
been  celebrated. 

“ When  dangerous  prejudices,”  says  Sismondi,t  “ have  not 
become  accredited,  when  a morality  contrary  to  our  true  duties 
towards  others,  and  especially  towards  those  to  whom  we  have  given 
life,  is  not  inculcated  in  the  name  of  the  most  sacred  authority ; 
no  prudent  man  contracts  matrimony  before  he  is  in  a condition 
which  gives  him  an  assured  means  of  living,  and  no  married  man  has 
a greater  number  of  children  than  he  can  properly  bring  up.  The 
head  of  a family  thinks,  with  reason,  that  his  children  may  be 
contented  with  the  condition  in  which  he  himself  has  lived  ; and  his 
desire  will  be  that  the  rising  generation  should  represent  exactly 
the  departing  one  : that  one  son  and  one  daughter  arrived  at  the 
marriageable  age  should  replace  his  own  father  and  mother ; that 
the  children  of  his  children  should  in  their  turn  replace  himself  and 
his  wife  ; that  his  daughter  should  find  in  another  family  the  precise 
equivalent  of  the  lot  which  will  be  given  in  his  own  family  to  the 
daughter  of  another,  and  that  the  income  which  sufficed  for  the 
parents  will  suffice  for  the  children.”  In  a country  increasing  in 

to  have  a large  family  and  to  be  unable  to  maintain  them  ? Do  not  the  candidates 
placard  their  intemperence  upon  walls,  and  publish  it  through  the  town 
in  circulars  ? ” Cf.  Dickens,  The  Election  for  Beadle  in  Sketches  by  Boz,  “ Our 
Parish,”  ch.  iv.] 

* Little  improvement  can  be  expected  in  morality  until  the  producing  large 
families  is  regarded  with  the  same  feelings  as  drunkenness  or  any  other  physical 
excess.  But  while  the  aristocracy  and  clergy  are  foremost  to  set  the  example 
of  this  kind  of  incontinence,  what  can  be  expected  of  the  poor  ? 

I Nouveanx  Princi'pes,  liv.  vii.  ch.  5. 


376 


BOOK  II.  CHAPTER  XTIL  § 2 


-wealtli,  some  increase  of  numbers  would  be  admissible,  but  that  is  a 
question  of  detail,  not  of  principle.  “ Whenever  this  family  has 
been  formed,  justice  and  humanity  require  that  he  should  impose 
on  himself  the  same  restraint  which  is  submitted  to  by  the  unmarried. 
When  we  consider  how  small,  in  every  country,  is  the  number  of 
natural  children,  we  must  admit  that  this  restraint  is  on  the  whole 
sufficiently  effectual.  In  a country  where  population  has  no  room 
to  increase,  or  in  which  its  progress  must  be  so  slow  as  to  be  hardly 
perceptible,  when  there  are  no  places  vacant  for  new  establishments, 
a father  who  has  eight  children  must  expect,  either  that  six  of  them 
will  die  in  childhood,  or  that  three  men  and  three  women  among  his 
cotemporaries,  and  in  the  next  generation  three  of  his  sons  and  three 
of  his  daughters,  will  remain  unmarried  on  his  account.” 

§ 2.  Those  who  think  it  hopeless  that  the  labouring  classes 
should  be  induced  to  practise  a sufficient  degree  of  prudence  in  regard 
to  the  increase  of  their  families,  because  they  have  hitherto  stopt 
short  of  that  point,  show  an  inability  to  estimate  the  ordinary 
principles  of  human  action.  Nothing  more  would  probably  be 
necessary  to  secure  that  result,  than  an  opinion  generally  diffused 
that  it  was  desirable.  As  a mqral  principle,  such  an  opinion  has 
never  yet  existed  in  any  country  : it  is  curious  that  it  does  not  so 
exist  in  coimtries  in  which,  from  the  spontaneous  operation  of 
individual  forethought,  population  is,  comparatively  speaking, 
efficiently  repressed.  What  is  practised  as  prudence  is  still  not 
recognised  as  duty  ; the  talkers  and  writers  are  mostly  on  the  other 
side,  even  in  France,  where  a sentimental  horror  of  Malthus  is  almost 
as  rife  as  in  this  country.  Many  causes  may  be  assigned,  besides  the 
modern  date  of  the  doctrine,  for  its  not  having  yet  gained  possession 
of  the  general  mind.  Its  truth  has,  in  some  respects,  been  its 
detriment.  One  may  be  permitted  to  doubt  whether,  except  among 
the  poor  themselves  (for  whose  prejudices  on  this  subject  there  is 
no  difficulty  in  accounting)  there  has  ever  yet  been,  in  any  class  of 
society,  a sincere  and  earnest  desire  that  wages  should  be  high.  There 
has  been  plenty  of  desire  to  keep  down  the  poor-rate ; but,  that 
done,  people  have  been  very  willing  that  the  working  classes  should 
be  ill  off.  Nearly  all  who  are  not  labourers  themselves,  are 
employers  of  labour,  and  are  not  sorry  to  get  the  commodity  cheap. 
It  is  a fact,  that  even  Boards  of  Guardians,  who  are  supposed  to 
be  official  apostles  of  anti-population  doctrines,  will  seldom  hear 
patiently  of  anything  which  they  are  pleased  to  designate  as 


REMEDIES  FOR  LOW  WAGES 


377 


Malthusianism.  Boards  of  Guardians  in  rural  districts,  principally 
consist  of  farmers,  and  farmers,  it  is  well  known,  in  general  dislike 
even  allotments,  as  making  the  labourers  “ too  independent.”  From 
the  gentry,  who  are  in  less  immediate  contact  and  collision  of  interest 
with  the  labourers,  better  things  might  be  expected,  and  the  gentry 
of  England  are  usually  charitable.  But  charitable  people  have 
human  infirmities,  and  would,  very  often,  be  secretly  not  a little 
dissatisfied  if  no  one  needed  their  charity  : it  is  from  them  one 
oftenest  hears  the  base  doctrine,  that  God  has  decreed  there  shall 
always  be  poor.  When  one  adds  to  this,  that  nearly  every  person 
who  has  had  in  him  any  active  spring  of  exertion  for  a social  object, 
has  had  some  favourite  reform  to  effect  which  he  thought  the 
admission  of  this  great  principle  would  throw  into  the  shade ; has 
had  corn  laws  to  repeal,  or  taxation  to  reduce,  or  small  notes  to 
issue,  or  the  charter  to  carry,  or  the  church  to  revive  or  abolish,  or 
the  aristocracy  to  pull  down,  and  looked  upon  every  one  as  an  enemy 
who  thought  anything  important  except  his  object ; it  is  scarcely 
wonderful  that  since  the  population  doctrine  was  first  promulgated, 
nine-tenths  of  the  talk  has  always  been  against  it,  and  the 
remaining  tenth  only  audible  at  intervals  ; and  that  it  has  not  yet 
penetrated  far  among  those  who  might  be  expected  to  be  the  least 
willing  recipients  of  it,  the  labourers  themselves. 

But  let  us  try  to  imagine  what  would  happen  if  the  idea  became 
general  among  the  labouring  class,  that  the  competition  of  too  great 
numbers  was  the  special  cause  of  their  poverty;  so  that  every 
labourer  looked  (with  Sismondi)  upon  every  other  who  had  more' 
than  the  number  of  children  which  the  circumstances  of  society 
allowed  to  each,  as  doing  him  a wrong — as  filling  up  the  place  which 
he  was  entitled  to  share.  Any  one  who  supposes  that  this  state  of 
opinion  would  not  have  a great  effect  on  conduct,  must  be 
profoundly  ignorant  of  human  nature  ; can  never  have  considered 
how  large  a portion  of  the  motives  which  induce  the  generality  of 
men  to  take  care  even  of  their  own  interest,  is  derived  from  regard 
for  opinion — from  the  expectation  of  being  disliked  or  despised  for 
not  doing  it.  In  the  particular  case  in  question,  it  is  not  too  much 
to  say  that  over-indulgence  is  as  much  caused  by  the  stimulus  of 
opinion  as  by  the  mere  animal  propensity  ; since  opinion  universally, 
and  especially  among  the  most  uneducated  classes,  has  connected 
ideas  of  spirit  and  power  with  the  strength  of  the  instinct,  and  of 
inferiority  with  its  moderation  or  absence ; a perversion  of  senti- 
ment caused  by  its  being  the  means,  and  the  stamp,  of  a dominion 


378 


BOOK  II.  CHAPTER  XIII.  § 2 


exercised  over  other  human  beings.  The  effect  would  be  great  of 
merely  removing  this  factitious  stimulus ; and  when  once  opinion 
shall  have  turned  itself  into  an  adverse  direction,  a revolution  will 
soon  take  place  in  this  department  of  human  conduct.  We  are 
often  told  that  the  most  thorough  perception  of  the  dependence  of 
wages  on  population  will  not  influence  the  conduct  of  a labouring 
man,  because  it  is  not  the  children  he  himself  can  have  that  will 
produce  any  effect  in  generally  depressing  the  labour  market.  True : 
and  it  is  also  true,  that  one  soldier’s  running  away  will  not  lose  the 
battle  ; accordingly  it  is  not  that  consideration  which  keeps  each 
soldier  in  his  rank : it  is  the  disgrace  which  naturally  and  inevitably 
attends  on  conduct  by  any  one  individual,  which  if  pursued  by  a 
majority  everybody  can  see  would  be  fatal.  Men  are  seldom  found 
to  brave  the  general  opinion  of  their  class,  unless  supported  either 
by  some  principle  higher  than  regard  for  opinion,  or  by  some  strong 
body  of  opinion  elsewhere. 

It  must  be  borne  in  mind  also,  that  the  opinion  here  in  question, 
as  soon  as  it  attained  any  prevalence,  would  have  powerful  auxiliaries 
in  the  great  majority  of  women.  It  is  seldom  by  the  choice  of  the 
wife  that  families  are  too  numerous  ; on  her  devolves  (along  with  all 
the  physical  suffering  and  at  least  a full  share  of  the  privations)  the 
whole  of  the  intolerable  domestic  drudgery  resulting  from  the  excess. 
To  be  reheved  from  it  would  be  hailed  as  a blessing  by  multitudes  of 
women  who  now  never  venture  to  urge  such  a claim,  but  who  would 
urge  it,  if  supported  by  the  moral  feehngs  of  the  community.  Among 
the  barbarisms  which  law  and  morals  have  not  yet  ceased  to  sanction, 
the  most  disgusting  surely  is,  that  any  human  being  should  be 
permitted  to  consider  himself  as  having  a right  to  the  person  of 
another. 

If  the  opinion  were  once  generally  established  among  the  labour- 
ing class  that  their  welfare  required  a due  regulation  of  the  numbers 
of  families,  the  respectable  and  well-conducted  of  the  body  would 
conform  to  the  prescription,  and  only  those  would  exempt  them- 
selves from  it,  who  were  in  the  habit  of  making  light  of  social 
obligations  generally;  and  there  would  be  then  an  evident  justification 
for  converting  the  moral  obligation  against  bringing  children  into 
the  world  who  are  a burthen  to  the  community,  into  a legal  one  ; 
just  as  in  many  other  cases  of  the  progress  of  opinion,  the  law  ends 
by  enforcing  against  recalcitrant  minorities  obligations  which  to  be 
useful  must  be  general,  and  which,  from  a sense  of  their  utility,  a 
large  majority  have  voluntarily  consented  to  take  upon  themselves. 


REMEDIES  FOR  LOW  WAGES 


379 


There  would  be  no  need,  however,  of  legal  sanctions,  if  women 
were  admitted,  as  on  all  other  grounds  they  have  the  clearest 
title  to  be,  to  the  same  rights  of  citizenship  with  men.  Let  them 
cease  to  be  confined  by  custom  to  one  physical  function  as  their 
means  of  living  and  their  source  of  influence,  and  they  would  have 
for  the  first  time  an  equal  voice  with  men  in  what  concerns  that 
function  : and  of  all  the  improvements  in  reserve  for  manldnd 
which  it  is  now  possible  to  foresee,  none  might  be  expected  to  be  so 
fertile  as  this  in  almost  every  kind  of  moral  and  social  benefit.^ 

It  remains  to  consider  what  chance  there  is  that  opinions  and 
feelings,  grounded  on  the  law  of  the  dependence  of  wages  on 
population,  will  arise  among  the  labouring  classes ; and  by  what 
means  such  opinions  and  feelings  can  be  called  forth.  Before  con- 
sidering the  grounds  of  hope  on  this  subject,  a hope  which  many 
persons,  no  doubt,  will  be  ready,  without  consideration,  to  pronounce 
chimerical,  I will  remark,  that  unless  a satisfactory  answer  can 
be  made  to  these  two  questions,  the  industrial  system  prevailing 
in  this  country,  and  regarded  by  many  writers  as  the  ne  plus  ultra 
of  civilization — the  dependence  of  the  whole  labouring  class  of  the 
community  on  the  wages  of  hired  labour,  is  irrevocably  condemned. 
The  question  we  are  considering  is,  whether,  of  this  state  of  things, 
over-population  and  a degraded  condition  of  the  labouring  class 
are  the  inevitable  consequence.  If  a prudent  regulation  of  popula- 
tion be  not  reconcilable  with  the  system  of  hired  labour,  the  system 
is  a nuisance,  and  the  grand  object  of  economical  statesmanship 
should  be  (by  whatever  arrangements  of  property,  and  alterations  in 
the  modes  of  applying  industry),  to  bring  the  labouring  people  under 
the  influence  of  stronger  and  more  obvious  inducements  to  this 
kind  of  prudence,  than  the  relation  of  workmen  and  employers  can 
afford. 

But  there  exists  no  such  incompatibility.  The  causes  of  poverty 
are  not  so  obvious  at  first  sight  to  a population  of  hired  labourers, 
as  they  are  to  one  of  proprietors,  or  as  they  would  be  to  a socialist 
community.  They  are,  however,  in  no  way  mysterious.  The 
dependence  of  wages  on  the  number  of  the  competitors  for  employ- 
ment, is  so  far  from  hard  of  comprehension,  or  unintelligible  to  the 
labouring  classes,  that  by  great  bodies  of  them  it  is  already 
recognised  and  habitually  acted  on.  It  is  familiar  to  all  Trade 
Unions  : every  successful  combination  to  keep  up  wages  owes  its 


[The  two  last  sentences  were  added  in  the  3rd  ed.  (1852).] 


380 


BOOK  II.  CHAPTER  XIU.  § 3 


success  to  contrivances  for  restricting  the  number  of  the  competitors ; 
all  skilled  trades  are  anxious  to  keep  down  their  own  numbers,  and 
many  impose,  or  endeavour  to  impose,  as  a condition  upon  employers, 
that  they  shall  not  take  more  than  a prescribed  number  of  appren- 
tices. There  is,  of  course,  a great  difference  between  limiting  their 
numbers  by  excluding  other  people,  and  doing  the  same  thing  by  a 
restraint  imposed  on  themselves  : but  the  one  as  much  as  the  other 
shows  a clear  perception  of  the  relation  between  their  numbers  and 
their  remuneration.  The  principle  is  understood  in  its  application 
to  any  one  employment,  but  not  to  the  general  mass  of  employment. 
For  this  there  are  several  reasons : first,  the  operation  of  causes  is 
more  easily  and  distinctly  seen  in  the  more  circumscribed  field  ; 
secondly,  skilled  artizans  are  a more  intelligent  class  than  ordinary 
manual  labourers  : and  the  habit  of  concert,  and  of  passing  in 
review  their  general  condition  as  a trade,  keeps  up  a better  under- 
standing of  their  collective  interests  : thirdly  and  lastly,  they  are 
the  most  provident,  because  they  are  the  best  off,  and  have  the  most 
to  preserve.  What,  however,  is  clearly  perceived  and  admitted  in 
particular  instances,  it  cannot  be  hopeless  to  see  understood  and 
acknowledged  as  a general  truth.  Its  recognition,  at  least  in 
theory,  seems  a thing  which  must  necessarily  and  immediately  come 
to  pass,  when  the  minds  of  the  labouring  classes  become  capable  of 
taking  any  rational  view  of  their  own  aggregate  condition.  Of  this 
the  great  majority  of  them  have  until  now  been  incapable,  either 
from  the  uncultivated  state  of  their  intelligence,  or  from  poverty, 
which  leaving  them  neither  the  fear  of  worse,  nor  the  smallest  hppe 
of  better,  makes  them  careless  of  the  consequences  of  their  actions, 
and  without  thought  for  the  future. 

§ 3.  For  the  purpose  therefore  of  altering  the  habits  of  the 
labouring  people,  there  is  need  of  a twofold  action,  directed 
simultaneously  upon  their  intelligence  and  their  poverty.  An 
effective  national  education  of  the  children  of  the  labouring  class,  is 
the  first  thing  needful ; and,  coincidently  with  this,  a system  of 
measures  which  shall  (as  the  Revolution  did  in  France)  extinguish 
extreme  poverty  for  one  whole  generation. 

This  is  not  the  place  for  discussing,  even  in  the  most  general 
manner,  either  the  principles  or  the  machinery  of  national  education. 
But  it  is  to  be  hoped  that  opinion  on  the  subject  is  advancing,  and 
that  an  education  of  mere  words  would  not  now  be  deemed  sufficient, 
slow  as  our  progress  is  toward  providing  anything  better  even  for 


REMEDIES  FOR  LOW  WAGES 


381 


the  classes  to  whom  society  professes  to  give  the  very  best  education 
it  can  devise.  Without  entering  into  disputable  points,  it  may  be 
asserted  without  scruple,  that  the  aim  of  all  intellectual  training  for 
the  mass  of  the  people  should  be  to  cultivate  common  sense ; to 
qualify  them  for  forming  a sound  practical  judgment  of  the  circum- 
stances by  which  they  are  surrounded.  Whatever,  in  the  intellectual 
department,  can  be  superadded  to  this,  is  chiefly  ornamental ; 
while  this  is  the  indispensable  groundwork  on  which  education 
must  rest.  Let  this  object  be  acknowledged  and  kept  in  view  a? 
the  thing  to  be  first  aimed  at,  and  there  will  be  little  difficulty  in 
deciding  either  what  to  teach,  or  in  what  manner  to  teach  it. 

An  education  directed  to  diffuse  good  sense  among  the  people, 
with  such  knowledge  as  would  qualify  them  to  judge  of  the  ten- 
dencies of  their  actions,  would  be  certain,  even  without  any  direct 
inculcation,  to  raise  up  a public  opinion  by  which  intemperance 
and  improvidence  of  every  kind  would  be  held  discreditable,  and 
the  improvidence  which  overstocks  the  labour  market  would  be 
severely  condemned,  as  an  offence  against  the  common  weal.  But 
though  the  sufficiency  of  such  a state  of  opinion,  supposing  it  formed, 
to  keep  the  increase  of  population  within  proper  limits,  cannot,  I 
think,  be  doubted  ; yet,  for  the  formation  of  the  opinion,  it  would 
not  do  to  trust  to  education  alone.  Education  is  not  compatible 
with  extreme  poverty.  It  is  impossible  effectually  to  teach  an 
indigent  population.  And  it  is  difficult  to  make  those  feel  the  value 
of  comfort  who  have  never  enjoyed  it,  or  those  appreciate  the 
wretchedness  of  a precarious  subsistence,  who  have  been  made 
reckless  by  always  living  from  hand  to  mouth.  Individuals  often 
struggle  upwards  into  a condition  of  ease ; but  the  utmost  that 
can  be  expected  from  a whole  people  is  to  maintain  themselves  in 
it ; and  improvement  in  the  habits  and  requirements  of  the  mass  of 
unskilled  day-labourers  will  be  difficult  and  tardy,  unless  means 
can  be  contrived  of  raising  the  entire  body  to  a state  of  tolerable 
comfort,  and  maintaining  them  in  it  until  a new  generation  grows  up. 

Towards  effecting  this  object  there  are  two  resources  available, 
without  wrong  to  any  one,  without  any  of  the  liabilities  of  mischief 
attendant  on  voluntary  or  legal  charity,  and  not  only  without 
weakening,  but  on  the  contrary  strengthening,  every  incentive  to 
industry,  and  every  motive  to  forethought. 

§ 4.  The  first  is  a great  national  measure  of  colonization.  I 
mean,  a grant  of  public  money,  sufficient  to  remove  at  once,  and 


BOOK  II.  CHAPTEU  XIII.  § 4 


astablisli  in  the  colonies,  a considerable  fraction  of  the  youthful 
agricultural  population.  By  giving  the  preference,  as  Mr. 
Wakefield  proposes,  to  young  couples,  or  when  these  cannot  be 
obtained,  to  families  with  children  nearly  grown  up,  the  expenditure 
would  be  made  to  go  the  farthest  possible  towards  accompHshing  the 
end,  while  the  colonies  would  be  supplied  with  the  greatest  amount 
of  what  is  there  in  deficiency  and  here  in  superfluity,  present  and 
prospective  labour.  It  has  been  shown  by  others,  and  the  grounds 
of  the  opinion  will  be  exhibited  in  a subsequent  part  of  the  present 
work,  that  colonization  on  an  adequate  scale  might  be  so  conducted 
as  to  cost  the  country  nothing,  or  nothing  that  would  not  be 
certainly  repaid ; and  that  the  funds  required,  even  by  way  of 
advance,  would  not  be  drawn  from  the  capital  employed  in 
maintaining  labour,  but  from  that  surplus  which  cannot  find 
employment  at  such  profit  as  constitutes  an  adequate  remuneration 
for  the  abstinence  of  the  possessor,  and  which  is  therefore  sent 
abroad  for  investment,  or  wasted  at  home  in  reckless  speculations. 
That  portion  of  the  income  of  the  country  which  is  habitually 
ineffective  for  any  purpose  of  benefit  to  the  labouring  class, 
would  bear  any  draught  which  it  could  be  necessary  to  make  on  it 
for  the  amount  of  emigration  which  is  here  in  view. 

1 The  second  resource  would  be,  to  devote  all  common  land, 
hereafter  brought  into  cultivation,  to  raising  a class  of  small 
proprietors.  It  has  long  enough  been  the  practice  to  take  these 
lands  from  public  use  for  the  mere  purpose  of  adding  to  the 
domains  of  the  rich.  It  is  time  that  what  is  left  of  them  should  be 
retained  as  an  estate  sacred  to  the  benefit  of  the  poor.  The 
machine  for  administering  it  already  exists,  having  been  created 
by  the  General  Inclosure  Act.  AVhat  I would  propose  (though 

^ [The  following  sentences  of  the  original  text  were  omitted  in  the  3rd  ed. 
(1852)  from  the  beginning  of  this  paragraph  : “ To  the  case  of  Ireland,  in  her 
present  crisis  of  transition,  colonization,  as  the  exclusive  remedy,  is,  I conceive, 
unsuitable.  The  Irish  are  nearly  the  worst  adapted  people  in  Europe  for  settlers 
in  the  wilderness  : nor  should  the  founders  of  nations,  destined  perhaps  to  be 
the  most  powerful  in  the  world,  be  drawn  principally  from  the  least  civilized  and 
least  improved  inhabitants  of  old  countries.  It  is  most  fortunate  therefore 
that  the  unoccupied  lands  of  Ireland  herself  afford  a resource  so  nearly  adequate 
to  the  emergency,  as  reduces  emigration  to  a rank  merely  subsidiary.  In 
England  and  Scotland,  with  a population  much  less  excessive,  and  better  adapted 
to  a settler’s  life,  colonization  must  be  the  chief  resource  for  easing  the  labour 
market,  and  improving  the  condition  of  the  existing  generation  of  labourers  so 
materially  as  to  raise  the  permanent  standard  of  habits  in  the  generation 
following.  But  England  too  has  waste  lands,  though  less  extensive  than  those 
of  Ireland  : and  the  second  resource^  &c.”l 


REMEDIES  FOR  LOW  WAGES 


383 


I confess,  with  small  hope  of  its  being  soon  adopted)  is,  that  in 
all  future  cases  in  which  common  land  is  permitted  to  be  enclosed, 
such  portion  should  first  be  sold  or  assigned  as  is  sufficient  to 
compensate  the  owners  of  manorial  or  common  rights,  and  that 
the  remainder  should  be  divided  into  sections  of  five  acres  or 
thereabouts,  to  be  conferred  in  absolute  property  on  individuals 
of  the  labouring  class  who  would  reclaim  and  bring  them  into 
cultivation  by  their  own  labour.  The  preference  should  be  given 
to  such  labourers,  and  there  are  many  of  them,  as  had  saved 
enough  to  maintain  them  until  their  first  crop  was  got  in,  or 
whose  character  was  such  as  to  induce  some  responsible  person 
to  advance  to  them  the  requisite  amount  on  their  personal 
security.  The  tools,  the  manure,  and  in  some  cases  the  subsistence 
also  might  be  supplied  by  the  parish,  or  by  the  state ; interest 
for  the  advance,  at  the  rate  yielded  by  the  public  funds,  being 
laid  on  as  a perpetual  quit-rent,  with  power  to  the  peasant  to 
redeem  it  at  any  time  for  a moderate  number  of  years’  purchase. 
These  little  landed  estates  might,  if  it  were  thought  necessary, 
be  made  indivisible  by  law ; though,  if  the  plan  worked  in  the 
manner  designed,  I should  not  apprehend  any  objectionable 
degree  of  subdivision.  In  case  of  intestacy,  and  in  default  of 
amicable  arrangement  among  the  heirs,  they  might  be  bought  by 
government  at  their  value,  and  regranted  to  some  other  labourer 
who  would  give  security  for  the  price.  The  desire  to  possess  one 
of  these  small  properties  would  probably  become,  as  on  the 
Continent,  an  inducement  to  prudence  and  economy  pervading  the 
whole  labouring  population  ; and  that  great  desideratum  among  a 
people  of  hired  labourers  would  be  provided,  an  intermediate  class 
between  them  and  their  employers ; affording  them  the  double 
advantage,  of  an  object  for  their  hopes,  and,  as  there  would  be  good 
reason  to  anticipate,  an  example  for  their  imitation. 

It  would,  however,  be  of  little  avail  that  either  or  both  of  these 
measures  of  reUef  should  be  adopted,  unless  on  such  a scale  as  would 
enable  the  whole  body  of  hired  labourers  remaining  on  the  soil  to 
obtain  not  merely  employment,  but  a large  addition  to  the  present 
wages — such  an  addition  as  would  enable  them  to  live  and  bring  up 
their  children  in  a degree  of  comfort  and  independence  to  which 
they  have  hitherto  been  strangers.  When  the  object  is  to  raise  the 
permanent  condition  of  a people,  small  means  do  not  merely 
produce  small  effects,  they  produce  no  efiect  at  all.  Unless  comfort 
can  be  made  as  habitual  to  a whole  generation  as  indigence  is  now. 


384 


BOOK  II.  CHAPTER  XIII.  § 4 


nothing  is  accomplished ; and  feeble  half-measures  do  but  fritter 
away  resources,  far  better  reserved  until  the  improvement  of  public 
opinion  and  of  education  shall  raise  up  politicians  who  will  not  think 
that  merely  because  a scheme  promises  much,  the  part  of 
statesmanship  is  to  have  nothing  to  do  with  it. 

1 1 have  left  the  preceding  paragraphs  as  they  were  written,  since 
they  remain  true  in  principle,  though  it  is  no  longer  urgent  to  apply 
these  specific  recommendations  to  the  present  state  of  this  country. 
The  extraordinary  cheapening  of  the  means  of  transport,  which  is 
one  of  the  great  scientific  achievements  of  the  age,  and  the 
knowledge  which  nearly  all  classes  of  the  people  have  now  acquired,  or 
are  in  the  way  of  acquiring,  of  the  condition  of  the  labour  market  in 
remote  parts  of  the  world,  have  opened  up  a spontaneous  emigration 
from  these  islands  to  the  new  countries  beyond  the  ocean,  which 
does  not  tend  to  diminish,  but  to  increase  ; and  which,  without  any 
national  measure  of  systematic  colonization,  may  prove  sufficient 
to  effect  a material  rise  of  wages  in  Great  Britain,  as  it  has  already 
done  in  Ireland,  and  to  maintain  that  rise  unimpaired  for  one  or 
more  generations.  Emigration,  instead  of  an  occasional  vent,  is 
becoming  a steady  outlet  for  superfluous  numbers ; and  this  new 
fact  in  modem  history,  together  with  the  flush  of  prosperity 
occasioned  by  free  trade,  have  granted  to  this  overcrowded  country  a 
temporary  breathing-time,  capable  of  being  employed  in  accomplish- 
ing those  moral  and  intellectual  improvements  in  all  classes  of  the 
people,  the  very  poorest  included,  which  would  render  improbable 
any  relapse  into  the  over-peopled  state.  Whether  this  golden 
opportunity  will  be  properly  used,  depends  on  the  wisdom  of  our 
councils  ; and  whatever  depends  on  that,  is  always  in  a high  degree 
precarious.  The  grounds  of  hope  are,  that  there  has  been  no  time 
in  our  history  when  mental  progress  has  depended  so  little  on  govern- 
ments, and  so  much  on  the  general  disposition  of  the  people  ; none 
in  which  the  spirit  of  improvement  has  extended  to  so  many  branches 
of  human  affairs  at  once,  nor  in  which  all  kinds  of  suggestions  tend- 
ing to  the  public  good  in  every  department,  from  the  humblest 
physical  to  the  highest  moral  or  intellectual,  were  heard  with  so 
little  prejudice,  and  had  so  good  a chance  of  becoming  known  and 
being  fairly  considered. 


* [Added  in  the  6th  ed.  (1865).^ 


CHAPTER  XIV 


OF  THE  DIPFEEENCES  OF  WAGES  IN  DIFFERENT 
EMPLOYMENTS 

§ 1.  In  treating  of  wages,  we  have  hitherto  confined  ourselves 
to  the  causes  which  operate  on  them  generally,  and  en  masse ; the 
laws  which  govern  the  remuneration  of  ordinary  or  average  labour  : 
without  reference  to  the  existence  of  different  kinds  of  work  which 
are  habitually  paid  at  different  rates,  depending  in  some  degree  on 
different  laws.  We  will  now  take  into  consideration  these  differences, 
and  examine  in  what  manner  they  affect  or  are  affected  by  the 
conclusions  already  established. 

A well-known  and  very  popular  chapter  of  Adam  Smith  ♦ 
contains  the  best  exposition  yet  given  of  this  portion  of  the  subject, 
I cannot  indeed  think  his  treatment  so  complete  and  exhaustive  as 
it  has  sometimes  been  considered  ; but,  as  far  as  it  goes,  his  analysis 
is  tolerably  successful. 

The  differences,  he  says,  arise  partly  from  the  policy  of  Europe, 
which  nowhere  leaves  things  at  perfect  liberty,  and  partly  “ from 
certain  circumstances  in  the  employments  themselves,  which  either 
really,  or  at  least  in  the  imaginations  of  men,  make  up  for  a small 
pecuniary  gain  in  some,  and  counterbalance  a great  one  in  others.” 
These  circumstances  he  considers  to  be  : “ First,  the  agreeableness 
or  disagreeableness  of  the  employments  themselves ; secondly,  the 
easiness  and  cheapness,  or  the  difficulty  and  expense  of  learning 
them ; thirdly,  the  constancy  or  inconstancy  of  employment  in  them ; 
fourthly,  the  small  or  great  trust  which  must  be  reposed  in  those  who 
exercise  them ; and  fifthly,  the  probability  or  improbability  of 
success  in  them.” 

Several  of  these  points  he  has  very  copiously  illustrated  : though 
his  examples  are  sometimes  drawn  from  a state  of  facts  now  no 
longer  existing.  “ The  wages  of  labour  vary  with  the  ease  or 
* Wealth  of  Nations,  book  i.  ch.  10. 

o 


BOOK  II.  CHAPTER  XIV.  § 1 


hardship,  the  cleanliness  or  dirtiness,  the  honourableness  or  dishonour- 
ableness of  the  employment.  Thus,  in  most  places,  take  the  year 
round,  a journeyman  tailor  earns  less  than  a journeyman  weaver. 
His  work  is  much  easier.”  Things  have  much  altered,  as  to  a 
weaver’s  remuneration,  since  Adam  Smith’s  time  ; and  the  artizan 
whose  work  was  more  difficult  than  that  of  a tailor,  can  never,  I 
think,  have  been  the  common  weaver;  “ A journeyman  weaver 
earns  less  than  a journeyman  smith.  His  work  is  not  always  easier, 
but  it  is  much  cleanlier.”  A more  probable  explanation  is,  that  it 
requires  less  bodily  strength.  “ A journeyman  blacksmith,  though 
an  artificer,  seldom  earns  so  much  in  twelve  hours  as  a collier,  who  is 
only  a labourer,  does  in  eight.  His  work  is  not  quite  so  dirty,  is  less 
dangerous,  and  is  carried  on  in  daylight,  and  above  ground.  Honour 
makes  a great  part  of  the  reward  of  all  honourable  professions.  In 
point  of  pecuniary  gain,  all  things  considered,”  their  recompense  is, 
in  his  opinion,  below  the  average.  “ Disgrace  has  the  contrary 
effect.  The  trade  of  a butcher  is  a brutal  and  an  odious  business  ; 
but  it  is  in  most  places  more  profitable  than  the  greater  part  of 
common  trades.  The  most  detestable  of  all  employments,  that  of 
public  executioner,  is,  in  proportion  to  the  quantity  of  work  done, 
better  paid  than  any  common  trade  whatever.” 

One  of  the  causes  which  make  handloom  weavers  cling  [1848]  to 
their  occupation  in  spite  of  the  scanty  remuneration  which  it  now 
yields,  is  said  to  be  a peculiar  attractiveness  arising  from  the  freedom 
of  action  which  it  allows  to  the  workman.  “ He  can  play  or  idle,’' 
says  a recent  authority.*  “ as  feeling  or  inclination  lead  him  ; rise 
early  or  late,  apply  himself  assiduously  or  carelessly,  as  he  pleases, 
and  work  up  at  any  time,  by  increased  exertion,  hours  previously 
sacrificed  to  indulgence  or  recreation.  There  is  scarcely  another 
condition  of  any  portion  of  our  working  population  thus  free  from 
external  control.  The  factory  operative  is  not  only  mulcted  of 
his  wages  for  absence,  but,  if  of  frequent  occurrence,  discharged 
altogether  from  his  employment.  The  bricklayer,  the  carpenter,  the 
painter,  the  joiner,  the  stonemason,  the  outdoor  labourer,  have 
each  their  appointed  daily  hours  of  labour,  a disregard  of  which 
would  lead  to  the  same  result.”  Accordingly,  “ the  weaver  will  stand 
by  his  loom  while  it  will  enable  him  to  exist,  however  miserably ; 
and  many,  induced  temporarily  to  quit  it,  have  returned  to  it  again, 
when  work  was  to  be  had.” 

“ Employment  is  much  more  constant,”  continues  Adam 
^ Mr.  Muggeridge’s  Report  to  the  Handloom  Weavers  Inquiry  Commissioru 


DIFFERENCES  OF  WAGES 


387 


Smith,  “ in  some  trades  than  in  others.  In  the  greater  part  of  manu- 
factures, a journeyman  may  be  pretty  sure  of  employment  almost 
every  day  in  the  year  that  he  is  able  to  work  ” (the  interruptions 
of  business  arising  from  overstocked  markets  or  from  a suspension 
of  demand,  or  from  a commercial  crisis,  must  be  excepted).  “ A 
mason  or  bricklayer,  on  the  contrary,  can  work  neither  in  hard 
frost  nor  in  foul  weather,  and  his  employment  at  all  other  times 
depends  upon  the  occasional  calls  of  his  customers.  He  is  liable, 
in  consequence,  to  be  frequently  without  any.  What  he  earns, 
therefore,  while  he  is  employed,  must  not  only  maintain  him  while 
he  is  idle,  but  make  him  some  compensation  for  those  anxious  and 
desponding  moments  which  the  thought  of  so  precarious  a situation 
must  sometimes  occasion.  When  the  computed  earnings  of  the 
greater  part  of  manufacturers,  accordingly,  are  nearly  upon  a level 
with  the  day  wages  of  common  labourers,  those  of  masons  and 
bricklayers  are  generally  from  one-half  more  to  double  those  wages. 
No  species  of  skilled  labour,  however,  seems  more  easy  to  learn  than 
that  of  masons  and  bricklayers.  The  high  wages  of  those  workmen, 
therefore,  are  not  so  much  the  recompense  of  their  skill,  as  the 
compensation  for  the  inconstancy  of  their  employment. 

“ When  the  inconstancy  of  the  employment  is  combined  with  the 
hardship,  disagreeableness,  and  dirtiness  of  the  work,  it  sometimes 
raises  the  wages  of  the  most  common  labour  above  those  of  the 
most  skilled  artificers.  A collier  working  by  the  piece  is  supposed, 
at  Newcastle,  to  earn  commonly  about  double,  and  in  many  parts 
of  Scotland  about  three  times,  the  wages  of  common  labour.  His 
high  wages  arise  altogether  from  the  hardship,  disagreeableness, 
and  dirtiness  of  his  work.  His  employment  may,  upon  most 
occasions,  be  as  constant  as  he  pleases.  The  coal-heavers  in  London 
exercise  a trade  which  in  hardship,  dirtiness,  and  disagreeableness, 
almost  equals  that  of  colliers  ; and  from  the  unavoidable  irregularity 
in  the  arrival  of  coal-ships,  the  employment  of  the  greater  part  of 
them  is  necessarily  very  inconstant.  If  colliers,  therefore,  commonly 
earn  double  and  triple  the  wages  of  common  labour,  it  ought  not 
to  seem  unreasonable  that  coal-heavers  should  sometimes  earn 
four  or  five  times  those  wages.  In  the  inquiry  made  into  their 
condition  a few  years  ago,  it  was  found  that  at  the  rate  at  which 
they  were  then  paid,  they  could  earn  about  four  times  the  wages  of 
common  labour  in  London.  How  extravagant  soever  these  earnings 
may  appear,  if  they  were  more  than  sufficient  to  compensate  all  the 
disagreeable  circumstances  of  the  business,  there  would  soon  be  so 


^88 


BOOK  II.  CHAPTER  XIV.  § 1 


great  a number  of  competitors  as,  in  a trade  which  has  no  exclusive 
privilege,  would  quickly  reduce  them  to  a lower  rate.” 

These  inequalities  of  remuneration,  which  are  supposed  to 
compensate  for  the  disagreeable  circumstances  of  particular  employ- 
ments, would,  under  certain  conditions,  be  natural  consequences 
of  perfectly  free  competition  : and  as  between  employments  of 
about  the  same  grade,  and  filled  by  nearly  the  same  description  of 
people,  they  are,  no  doubt,  for  the  most  part,  realized  in  practice. 
But  it  IS  altogether  a false  view  of  the  state  of  facts,  to  present 
this  as  the  relation  which  generally  exists  between  agreeable  and 
disagreeable  employments.  The  really  exhausting  and  the  really 
repulsive  labours,  instead  of  being  better  paid  than  others,  are 
almost  invariably  paid  the  worst  of  all,  because  performed  by  those 
who  have  no  choice.  It  would  be  otherwise  in  a favourable  state 
of  the  general  labour  market.  If  the  labourers  in  the  aggregate, 
instead  of  exceeding,  fell  short  of  the  amount  of  employment,  work 
which  was  generally  disliked  would  not  be  undertaken,  except  for 
more  than  ordinary  wages.  But  when  the  supply  of  labour  so  far 
exceeds  the  demand  that  to  find  employment  at  all  is  an  uncertainty, 
and  to  be  offered  it  on  any  terms  a favour,  the  case  is  totally  the 
reverse.  Desirable  labourers,  those  whom  every  one  is  anxious 
to  have,  can  still  exercise  a choice.  The  undesirable  must  take 
what  they  can  get.  The  more  revolting  the  occupation,  the  more 
certain  it  is  to  receive  the  minimum  of  remuneration,  because  it 
devolves  on  the  most  helpless  and  degraded,  on  those  who  from 
squalid  poverty,  or  from  want  of  skill  and  education,  are  rejected 
from  all  other  employments.  Partly  from  this  cause,  and  partly 
from  the  natural  and  artificial  monopolies  which  will  be  spoken  of 
presently,  the  inequalities  of  wages  are  generally  in  an  opposite 
direction  to  the  equitable  principle  of  compensation  erroneously 
represented  by  Adam  Smith  as  the  general  law  of  the  remuneration 
of  labour.  The  hardships  and  the  earnings,  instead  of  being  directly 
proportional,  as  in  any  just  arrangements  of  society  they  would  be, 
are  generally  in  an  inverse  ratio  to  one  another.^ 

^ [This  paragraph  was  inserted  in  the  3rd  ed.  (1852).  At  the  same  time  the 
following  paragraph  disappeared  from  the  preceding  page : “ There  is  no 
difficulty  in  understanding  the  operative  principle  in  all  these  cases.  If,  with 
complete  freedom  of  competition,  labour  of  different  degrees  of  desireableness 
were  paid  alike,  competitors  would  crowd  into  the  more  attractive  employ- 
ments, and  desert  the  less  eligible,  thus  lowering  wages  in  the  first,  and  raising 
them  in  the  second,  until  there  would  be  such  a difference  of  reward  as  to  balance 
in  common  estimation  the  difference  of  eligibility.  Under  the  unobstructed 
influence  of  competition,  wages  tend  to  adjust  themselves  in  such  a manner 


DIFFERENCES  OF  WAGES 


389 


One  of  the  points  best  illustrated  by  Adam  Smith  is  the  influence 
exercised  on  the  remuneration  of  an  employment  by  the  uncertainty 
of  success  in  it.  If  the  chances  are  great  of  total  failure,  the  reward 
in  case  of  success  must  be  suflicient  to  make  up,  in  the  general 
estimation,  for  those  adverse  chances.  But,  owing  to  another 
principle  of  human  nature,  if  the  reward  comes  in  the  shape  of  a 
few  great  prizes,  it  usually  attracts  competitors  in  such  numbers, 
that  the  average  remuneration  may  be  reduced  not  only  to  zero, 
but  even  to  a negative  quantity.  The  success  of  lotteries  proves 
that  this  is  possible : since  the  aggregate  body  of  adventurers  in 
lotteries  necessarily  lose,  otherwise  the  undertakers  could  not  gain. 
The  case  of  certain  professions  is  considered  by  Adam  Smith  to  be 
similar.  “ The  probability  that  any  particular  person  shall  ever 
be  qualified  for  the  employment  to  which  he  is  educated,  is  very 
different  in  different  occupations.  In  the  greater  part  of  mechanic 
trades,  success  is  almost  certain,  but  very  uncertain  in  the  liberal 
professions.  Put  your  son  apprentice  to  a shoemaker,  there  is  little 
doubt  of  his  learning  to  make  a pair  of  shoes ; but  send  him  to  study 
the  law,  it  is  at  least  twenty  to  one  if  ever  he  makes  such  proficiency 
as  will  enable  him  to  live  by  the  business.  In  a perfectly  fair  lottery 
those  who  draw  the  prizes  ought  to  gain  all  that  is  lost  by  those  who 
draw  the  blanks.  In  a profession  where  twenty  fail  for  one  that 
succeeds,  that  one  ought  to  gain  all  that  should  have  been  gained  by 
the  unsuccessful  twenty.  The  counsellor-at-law,  who,  perhaps,  at 
near  forty  years  of  age,  begins  to  make  something  by  his  profession, 
ought  to  receive  the  retribution,  not  only  of  his  own  so  tedious  and 
expensive  education,  but  of  that  of  more  than  twenty  others  who 
are  never  likely  to  make  anything  by  it.  How  extravagant  soever 
the  fees  of  counsellors-at-law  may  sometimes  appear,  their  real 
retribution  is  never  equal  to  this.  Compute,  in  any  particular  place, 
what  is  likely  to  be  annually  gained,  and  what  is  likely  to  be 
annually  spent,  by  all  the  different  workmen  in  any  common  trade, 
such  at  that  of  shoemakers  or  weavers,  and  you  will  find  that  the 
former  sum  will  generally  exceed  the  latter.  But  make  the  same 
computation  with  regard  to  all  the  counsellors  and  students  of  law, 
in  all  the  different  inns  of  court,  and  you  will  find  that  their  annual 
gains  bear  but  a small  proportion  to  their  annual  expense,  even 
though  you  rate  the  former  as  high,  and  the  latter  as  low,  as  can 
well  be  done.” 

that  the  situation  and  prospects  of  the  labourers  in  all  employments  shall  be, 
in  the  general  estimation,  as  nearly  as  possible  on  a par.”] 


390 


BOOK  II.  CHAPTER  XIV.  § 2 


Whether  this  is  true  in  our  own  day,  when  the  gains  of  the  few 
are  incomparably  greater  than  in  the  time  of  Adam  Smith,  but  also 
the  unsuccessful  aspirants  much  more  numerous,  those  who  have 
the  appropriate  information  must  decide.  It  does  not,  however, 
seem  to  be  sufficiently  considered  by  Adam  Smith,  that  the  prizes 
which  he  speaks  of  comprise  not  the  fees  of  counsel  only,  but  the 
places  of  emolument  and  honour  to  which  their  profession  gives 
access,  together  with  the  coveted  distinction  of  a conspicuous 
position  in  the  public  eye. 

Even  where  there  are  no  great  prizes,  the  mere  love  of  excitement 
is  sometimes  enough  to  cause  an  adventurous  employment  to  be 
overstocked.  This  is  apparent  “ in  the  readiness  of  the  common 
people  to  enlist  as  soldiers,  or  to  go  to  sea.  . . . The  dangers  and 
hair-breadth  escapes  of  a life  of  adventures,  instead  of  disheartening 
young  people,  seem  frequently  to  recommend  a trade  to  them. 
A tender  mother,  among  the  inferior  ranks  of  people,  is  often 
afraid  to  send  her  son  to  school  at  a seaport  town,  lest  the  sight  of 
the  ships  and  the  conversation  and  adventures  of  the  sailors  should 
entice  him  to  go  to  sea.  The  distant  prospect  of  hazards  from 
which  we  can  hope  to  extricate  ourselves  by  courage  and  address, 
is  not  disagreeable  to  us,  and  does  not  raise  the  wages  of  labour  in 
any  employment.  It  is  otherwise  with  those  in  which  courage  and 
address  can  be  of  no  avail.  In  trades  which  are  known  to  be  very 
unwholesome,  the  wages  of  labour  are  always  remarkably  high. 
Unwholesomeness  is  a species  of  disagreeableness,  and  its  efiect  upon 
the  wages  of  labour  are  to  be  ranked  under  that  general  head.” 

§ 2.  The  preceding  are  cases  in  which  inequality  of  remuneration 
is  necessary  to  produce  equality  of  attractiveness,  and  are  examples 
of  the  equalizing  efiect  of  free  competition.  The  following  are 
cases  of  real  inequality,  and  arise  from  a difierent  principle.  “ The 
wages  of  labour  vary  according  to  the  small  or  great  trust  which 
must  be  reposed  in  the  workmen.  The  wages  of  goldsmiths  and 
jewellers  are  everywhere  superior  to  those  of  many  other  workmen, 
not  only  of  equal,  but  of  much  superior  ingenuity ; on  account  of 
the  precious  materials  with  which  they  are  intrusted.  We  trust  our 
health  to  the  physician,  our  fortune  and  sometimes  our  life  and 
reputation  to  the  lawyer  and  attorney.  Such  confidence  could 
not  safely  be  reposed  in  people  of  a very  mean  or  low  condition. 
Their  reward  must  be  such,  therefore,  as  may  give  them  that  rank  in 
society  which  so  important  a trust  requires.” 


DIFFERENCES  OF  WAGES 


301 


The  superiority  of  reward  is  not  here  the  consequence  of  com- 
petition, but  of  its  absence  : not  a compensation  for  disadvantages 
inherent  in  the  employment,  but  an  extra  advantage ; a kind  of 
monopoly  price,  the  effect  not  of  a legal,  but  of  what  has  been  termed 
a natural  monopoly.  If  all  labourers  were  trustworthy,  it  would 
not  be  necessary  to  give  extra  pay  to  working  goldsmiths  on  account 
of  the  trust.  The  degree  of  integrity  required  being  supposed 
to  be  uncommon,  those  who  can  make  it  appear  that  they  possess 
it  are  able  to  take  advantage  of  the  peculiarity,  and  obtain  higher 
pay  in  proportion  to  its  rarity.  This  opens  a class  of  considerations 
which  Adam  Smith,  and  most  other  political  economists,  have  taken 
into  far  too  little  account,  and  from  inattention  to  which,  he  has 
given  a most  imperfect  exposition  of  the  wide  difference  between 
the  remuneration  of  common  labour  and  that  of  skilled  employments. 

Some  employments  require  a much  longer  time  to  learn,  and  a 
much  more  expensive  course  of  instruction  than  others  ; and  to  this 
extent  there  is,  as  explained  by  Adam  Smith,  an  inherent  reason 
for  their  being  more  highly  remunerated.  If  an  artizan  must  work 
several  years  at  learning  his  trade  before  he  can  earn  anything,  and 
several  years  more  before  becoming  sufficiently  skilful  for  its  finer 
operations,  he  must  have  a prospect  of  at  last  earning  enough  to 
pay  the  wages  of  all  this  past  labour,  with  compensation  for  the 
delay  of  payment,  and  an  indemnity  for  the  expenses  of  his  education. 
His  wages,  consequently,  must  yield,  over  and  above  the  ordinary 
amount,  an  annuity  sufficient  to  repay  these  sums,  with  the  common 
rate  of  profit,  within  the  number  of  years  he  can  expect  to  live 
and  to  be  in  working  condition.  This,  which  is  necessary  to  place 
the  skilled  employments,  all  circumstances  taken  together,  on  the 
same  level  of  advantage  with  the  unskilled,  is  the  smallest  difference 
which  can  exist  for  any  length  of  time  between  the  two  remunerations, 
since  otherwise  no  one  would  learn  the  skilled  employments.  And 
this  amount  of  difference  is  all  which  Adam  Smith’s  principles 
account  for.  When  the  disparity  is  greater,  he  seems  to  think  that 
it  must  be  explained  by  apprentice  laws,  and  the  rules  of  corporations 
which  restrict  admission  into  many  of  the  skilled  employments. 
But,  independently  of  these  or  any  other  artificial  monopolies,  there 
is  a natural  monopoly  in  favour  of  skilled  labourers  against  the 
unskilled,  which  makes  the  difference  of  reward  exceed,  sometimes 
in . a manifold  proportion,  what  is  sufficient  merely  to  equalize 
their  advantages.  If  unskilled  labourers  had  it  in  their  power  to 
compete  with  skilled,  by  merely  taking  the  trouble  of  learning  the 


392 


BOOK  II.  CHAPTER  XIV.  § 2 


trade,  the  difference  of  wages  might  not  exceed  what  would  com- 
pensate them  for  that  trouble,  at  the  ordinary  rate  at  which  labour 
is  remunerated.  But  the  fact  that  a course  of  instruction  is  required, 
of  even  a low  degree  of  costliness,  or  that  the  labourer  must  be 
maintained  for  a considerable  time  from  other  sources,  suffices 
everywhere  to  exclude  the  great  body  of  the  labouring  people 
from  the  possibility  of  any  such  competition.  Until  lately,^  all 
employments  which  required  even  the  humble  education  of  reading 
and  writing,  could  be  recruited  only  from  a select  class,  the  majority 
having  had  no  opportunity  of  acquiring  those  attainments.  All 
such  improvements,  accordingly,  were  immensely  overpaid,  as 
measured  by  the  ordinary  remuneration  of  labour.  Since  reading 
and  writing  have  been  brought  within  the  reach  of  a multitude, 
the  monopoly  price  of  the  lower  grade  of  educated  employments 
has  greatly  fallen,  the  competition  for  them  having  increased  in 
an  almost  incredible  degree.  There  is  still,  however,  a much 
greater  disparity  than  can  be  accounted  for  on  the  principle  of 
competition.  A clerk  from  whom  nothing  is  required  but  the 
mechanical  labour  of  copying,  gains  more  than  an  equivalent  for 
his  mere  exertion  if  he  receives  the  wages  of  a bricklayer’s  labourer. 
His  work  is  not  a tenth  part  as  hard,  it  is  quite  as  easy  to  learn, 
and  his  condition  is  less  precarious,  a clerk’s  place  being  generally 
a place  for  life.  The  higher  rate  of  his  remuneration,  therefore, 
must  be  partly  ascribed  to  monopoly,  the  small  degree  of  education 
required  being  not  even  yet  so  generally  diffused  as  to  call  forth 
the  natural  number  of  competitors;  and  partly  to  the  remaining 
influence  of  an  ancient  custom,  which  requires  that  clerks  should 
maintain  the  dress  and  appearance  of  a more  highly  paid  class. 
In  some  manual  employments,  requiring  a nicety  of  hand  which 
can  only  be  acquired  by  long  practice,  it  is  difficult  to  obtain  at  any 
cost  workmen  in  sufficient  numbers,  who  are  capable  of  the  most 
delicate  kind  of  work  ; and  the  wages  paid  to  them  are  only  limited 
by  the  price  which  purchasers  are  willing  to  give  for  the  commodity 
they  produce.  This  is  the  case  with  some  working  watchmakers, 
and  with  the  makers  of  some  astronomical  and  optical  instruments. 
If  workmen  competent  to  such  employments  were  ten  times  as 
numerous  as  they  are,  there  would  be  purchasers  for  all  which  they 
could  make,  not  indeed  at  the  present  prices,  but  at  those  lower 
prices  which  would  be  the  natural  consequence  of  lower  wages. 
Similar  considerations  apply  in  a still  greater  degree  to  employments 
' [Writing  in  1848.] 


DIFFERENCES  OF  WAGES 


893 


which  it  is  attempted  to  confine  to  persons  of  a certain  social  rank, 
such  as  what  are  called  the  liberal  professions  ; into  which  a person 
of  what  is  considered  too  low  a class  of  society  is  not  easily 
admitted,  and  if  admitted,  does  not  easily  succeed. 

So  complete,  indeed,  has  hitherto  been  the  separation,  so  strongly 
marked  the  line  of  demarcation,  between  the  different  grades  of 
labourers,  as  to  be  almost  equivalent  to  an  hereditary  distinction  of 
caste ; each  employment  being  chiefiy  recruited  from  the  children 
of  those  already  employed  in  it,  or  in  employments  of  the  same 
rank  with  it  in  social  estimation,  or  from  the  children  of  persons  who, 
if  originally  of  a lower  rank,  have  succeeded  in  raising  themselves 
by  their  exertions.  The  liberal  professions  are  mostly  supplied  by 
the  sons  of  either  the  professional,  or  the  idle  classes  : the  more 
highly  skilled  manual  employments  are  filled  up  from  the  sons  of 
skilled  artizans,  or  the  class  of  tradesmen  who  rank  with  them  : the 
lower  classes  of  skilled  employments  are  in  a similar  case ; and 
unskilled  labourers,  with  occasional  exceptions,  remain  from  father  to 
son  in  their  pristine  condition.  Consequently  the  wages  of  each 
class  have  hitherto  been  regulated  by  the  increase  of  its  own  popula- 
tion, rather  than  of  the  general  population  of  the  country.  If  the 
professions  are  overstocked,  it  is  because  the  class  of  society  from 
which  they  have  always  mainly  been  supplied,  has  greatly  increased 
in  number,  and  because  most  of  that  class  have  numerous  families, 
and  bring  up  some  at  least  of  their  sons  to  professions.  If  the 
wages  of  artizans  remain  so  much  higher  than  those  of  common 
labourers,  it  is  because  artizans  are  a more  prudent  class,  and  do 
not  marry  so  early  or  so  inconsiderately.  The  changes,  however, 
now  so  rapidly  taking  place  in  usages  and  ideas,  are  undermining 
all  these  distinctions ; the  habits  or  disabilities  which  chained 
people  to  their  hereditary  condition  are  fast  wearing  away,  and  every 
class  is  exposed  to  increased  and  increasing  competition  from  at 
least  the  class  immediately  below  it.  The  general  relaxation  of 
conventional  barriers,  and  the  increased  facilities  of  education 
which  already  are,  and  will  be  in  a much  greater  degree,  brought 
within  the  reach  of  aU,  tend  to  produce,  among  many  excellent 
effects,  one  which  is  the  reverse  ; they  tend  to  bring  down  the  wages 
of  skilled  labour.  The  inequality  of  remuneration  between  the 
skilled  and  the  unskilled  is,  without  doubt,  very  much  greater  than 
is  justifiable ; but  it  is  desirable  that  this  should  be  corrected  by 
raising  the  unskilled,  not  by  lowering  the  skilled.  If,  however,  the 
other  changes  taking  place  in  society  are  not  accompanied  by  a 


394 


BOOR  II.  CHAPTER  XIV.  § 3 


strengthening  of  the  checks  to  population  on  the  part  of  labourers 
generally,  there  will  be  a tendency  to  bring  the  lower  grades  of 
skilled  labourers  under  the  influence  of  a rate  of  increase  regulated 
by  a lower  standard  of  living  than  their  own,  and  thus  to  deteriorate 
their  condition  without  raising  that  of  the  general  mass  ; the  stimulus 
given  to  the  multiplication  of  the  lowest  class  being  sufficient  to  fill 
up  without  difficulty  the  additional  space  gained  by  them  from  those 
immediately  above. 

§ 3.  A modifying  circumstance  still  remains  to  be  noticed, 
which  interferes  to  some  extent  with  the  operation  of  the  principles 
thus  far  brought  to  view.  While  it  is  true,  as  a general  rule,  that 
the  earnings  of  skilled  labour,  and  especially  of  any  labour  which 
requires  school  education,  are  at  a monopoly  rate,  from  the  im- 
possibility, to  the  mass  of  the  people,  of  obtaining  that  education  ; 
it  is  also  true  that  the  policy  of  nations,  or  the  bounty  of  individuals, 
formerly  did  much  to  counteract  the  effect  of  this  limitation  of 
competition,  by  offering  eleemosynary  instruction  to  a much  larger 
class  of  persons  than  could  have  obtained  the  same  advantages  by 
paying  their  price.  Adam  Smith  has  pointed  out  the  operation  of 
this  cause  in  keeping  down  the  remuneration  of  scholarly  or  bookish 
occupations  generally,  and  in  particular  of  clergymen,  literary  men, 
and  schoolmasters,  or  other  teachers  of  youth.  I cannot  better  set 
forth  this  part  of  the  subject  than  in  his  words. 

“ It  has  been  considered  as  of  so  much  importance  that  a proper 
number  of  young  people  should  be  educated  for  certain  professions, 
that  sometimes  the  public,  and  sometimes  the  piety  of  private 
founders,  have  estabhshed  many  pensions,  scholarships,  exhibitions, 
bursaries,  &c.  for  this  purpose,  which  draw  many  more  people  into 
those  trades  than  could  otherwise  pretend  to  follow  them.  In  all 
Christian  countries,  I believe,  the  education  of  the  greater  part  of 
churchmen  is  paid  for  in  this  manner.  Very  few  of  them  are 
educated  altogether  at  their  own  expense.  The  long,  tedious,  and 
expensive  education,  therefore,  of  those  who  are,  will  not  always 
procure  them  a suitable  reward,  the  Church  being  crowded  with 
people  who,  in  order  to  get  employment,  are  willing  to  accept  of  a 
much  smaller  recompense  than  what  such  an  education  would 
otherwise  have  entitled  them  to  : and  in  this  manner  the  com- 
petition of  the  poor  takes  away  the  reward  of  the  rich.  It  would  be 
indecent,  no  doubt,  to  compare  either  a curate  or  a chaplain  with 
a journeyman  in  any  common  trade.  The  pay  of  a curate  or  a 


DIFFERENCES  OF  WAGES 


396 


chaplain,  however,  may  very  properly  be  considered  as  of  the  same 
nature  with  the  wages  of  a journeyman.  They  are.  all  three,  paid 
for  their  work  according  to  the  contract  which  they  may  happen  to 
make  with  their  respective  superiors.  Till  after  the  middle  of  the 
fourteenth  century,  five  marks,  containing  as  much  silver  as  ten 
pounds  of  our  present  money,  was  in  England  the  usual  pay  of  a 
curate  or  a stipendiary  parish  priest,  as  we  find  it  regulated  by  the 
decrees  of  several  different  national  councils.  At  the  same  period 
fourpence  a day,  containing  the  same  quantity  of  silver  as  a shilling 
of  our  present  money,  was  declared  to  be  the  pay  of  a master-mason, 
and  threepence  a day,  equal  to  ninepence  of  our  present  money, 
that  of  a journeyman  mason.*  The  wages  of  both  these  labourers, 
therefore,  supposing  them  to  have  been  constantly  employed,  were 
much  superior  to  those  of  the  curate.  The  wages  of  the  master- 
mason,  supposing  him  to  have  been  without  employment  one-third 
of  the  year,  would  have  fully  equalled  them.  By  the  12th  of  Queen 
Anne,  c.  12,  it  is  declared,  ‘ That  whereas  for  want  of  sufficient 
maintenance  and  encouragement  to  curates,  the  cures  have  in 
several  places  been  meanly  supplied,  the  bishop  is  therefore  em- 
powered to  appoint  by  writing  under  his  hand  and  seal  a sufficient 
certain  stipend  or  allowance,  not  exceeding  fifty,  and  not  less  than 
twenty  pounds  a year.’  Forty  pounds  a year  is  reckoned  at  present 
very  good  pay  for  a curate,  and  notwithstanding  this  act  of  parlia- 
ment, there  are  many  curacies  under  twenty  pounds  a year.  This 
last  sum  does  not  exceed  what  is  frequently  earned  by  common 
labourers  in  many  country  parishes.  Whenever  the  law  has 
attempted  to  regulate  the  wages  of  workmen,  it  has  always  been 
rather  to  lower  them  than  to  raise  them.  But  the  law  has  upon 
many  occasions  attempted  to  raise  the  wages  of  curates,  and  for  the 
dignity  of  the  Church,  to  oblige  the  rectors  of  parishes  to  give  them 
more  than  the  wretched  maintenance  which  they  themselves  might 
be  willing  to  accept  of.  And  in  both  cases  the  law  seems  to  have 
been  equally  ineffectual,  and  has  never  been  either  able  to  raise  the 
wages  of  curates  or  to  sink  those  of  labourers  to  the  degree  that  was 
intended,  because  it  has  never  been  able  to  hinder  either  the  one 
from  being  willing  to  accept  of  less  than  the  legal  allowance,  on 
account  of  the  indigence  of  their  situation  and  the  multitude  of 
their  competitors  ; or  the  other  from  receiving  more,  on  account  of 
the  contrary  competition  of  those  who  expected  to  derive  either 
profit  or  pleasure  from  employing  them.” 

* See  the  Statute  of  Labourers,  25  Edw.  IIL 


396 


BOOK  II.  CHAPTER  KIV.  § 3 


“ In  professions  in  which  there  are  no  benefices,  such  as  law  (?) 
and  physic,  if  an  equal  proportion  of  people  were  educated  at  the 
public  expense,  the  competition  would  soon  be  so  great  as  to  sink 
very  much  their  pecuniary  reward.  It  might  then  not  be  worth 
any  man’s  while  to  educate  his  son  to  either  of  those  professions  at 
his  own  expense.  They  would  be  entirely  abandoned  to  such  as 
had  been  educated  by  those  public  charities ; whose  numbers  and 
necessities  would  oblige  them  in  general  to  content  themselves  with 
a very  miserable  recompense. 

“ That  unprosperous  race  of  men,  commonly  called  men  of 
letters,  are  pretty  much  in  the  situation  which  lawyers  and  physicians 
probably  would  be  in  upon  the  foregoing  supposition.  In  every 
part  of  Europe,  the  greater  part  of  them  have  been  educated  for  the 
Church,  but  have  been  hindered  by  different  reasons  from  entering 
into  holy  orders.  They  have  generally,  therefore,  been  educated 
at  the  public  expense,  and  their  numbers  are  everywhere  so 
great  as  to  reduce  the  price  of  their  labour  to  a very  paltry 
recompense. 

“ Before  the  invention  of  the  art  of  printing,  the  only  employ- 
ment by  which  a man  of  letters  could  make  anything  by  his  talents, 
was  that  of  a public  or  private  teacher,  or  by  communicating  to 
other  people  the  curious  and  useful  knowledge  which  he  had  acquired 
himself : and  this  is  still  surely  a more  honourable,  a more  useful, 
and  in  general  even  a more  profitable  employment  than  that  other 
of  writing  for  a bookseller,  to  which  the  art  of  printing  has  given 
occasion.  The  time  and  study,  the  genius,  knowledge,  and  apphca- 
tion  requisite  to  qualify  an  eminent  teacher  of  the  sciences,  are  at 
least  equal  to  what  is  necessary  for  the  greatest  practitioners  in 
law  and  physic.  But  the  usual  reward  of  the  eminent  teacher 
bears  no  proportion  to  that  of  the  lawyer  or  physician  ; because  the 
trade  of  the  one  is  crowded  with  indigent  people  who  have  been 
brought  up  to  it  at  the  public  expense,  whereas  those  of  the  other 
two  are  encumbered  with  very  few  who  have  not  been  educated  at 
their  own.  The  usual  recompense,  however,  of  public  and  private 
teachers,  small  as  it  may  appear,  would  undoubtedly  be  less  than 
it  is,  if  the  competition  of  those  yet  more  indigent  men  of  letters  who 
write  for  bread  was  not  taken  out  of  the  market.  Before  the  in- 
vention of  the  art  of  printing,  a scholar  and  a beggar  seem  to  have 
been  terms  very  nearly  synonymous.  The  different  governors  of 
the  universities  before  that  time  appear  to  have  often  granted 
licences  to  their  scholars  to  beg.” 


DIFFERENCES  OF  WAGES 


397 


§ 4.  The  demand  for  literary  labour  has  so  greatly  increased  since 
Adam  Smith  wrote,  while  the  provisions  for  eleemosynary  educa- 
tion have  nowhere  been  much  added  to,  and  in  the  countries  which 
have  undergone  revolutions  have  been  much  diminished,  that  little 
effect  in  keeping  down  the  recompense  of  literary  labour  can  now 
be  ascribed  to  the  influence  of  those  institutions.  But  an  effect 
nearly  equivalent  is  now  produced  by  a cause  somewhat  similar — 
the  competition  of  persons  who,  by  analogy  with  other  arts,  may  be 
called  amateurs.  Literary  occupation  is  one  of  those  pursuits  in 
which  success  may  be  attained  by  persons  the  greater  part  of  whose 
time  is  taken  up  by  other  employments ; and  the  education 
necessary  for  it  is  the  common  education  of  all  cultivated  persons. 
The  inducements  to  it,  independently  of  money,  in  the  present  state 
of  the  world,  to  all  who  have  either  vanity  to  gratify,  or  personal  or 
public  objects  to  promote,  are  strong.  These  motives  now  attract 
into  this  career  a great  and  increasing  number  of  persons  who  do  not 
need  its  pecuniary  fruits,  and  who  would  equally  resort  to  it  if  it 
afforded  no  remuneration  at  all.  In  our  own  country  (to  cite  known 
examples),  the  most  influential,  and  on  the  whole  most  eminent 
philosophical  writer  of  recent  times  (Bentham),  the  greatest 
political  economist  (Bicardo),  the  most  ephemerally  celebrated, 
and  the  really  greatest  poets  (Byron  and  Shelley),  and  the  most 
successful  writer  of  prose  fiction  (Scott),  were  none  of  them  authors 
by  profession  ; and  only  two  of  the  five,  Scott  and  Byron,  could  have 
supported  themselves  by  the  works  which  they  wrote.  Nearly  all 
the  higher  departments  of  authorship  are,  to  a great  extent,  similarly 
filled.  In  consequence,  although  the  highest  pecuniary  prizes  of 
successful  authorship  are  incomparably  greater  than  at  any  former 
period,  yet  on  any  rational  calculation  of  the  chances,  in  the  exist- 
ing competition,  scarcely  any  writer  can  hope  to  gain  a living  by 
books,  and  to  do  so  by  magazines  and  reviews  becomes  [1848]  daily 
more  difficult.  It  is  only  the  more  troublesome  and  disagreeable 
kinds  of  literary  labour,  and  those  which  confer  no  personal  celebrity, 
such  as  most  of  those  connected  with  newspapers,  or  with  the  smaller 
periodicals,  on  which  an  educated  person  can  now  rely  for  subsistence. 
Of  these,  the  remuneration  is,  on  the  whole,  decidedly  high  ; because, 
though  exposed  to  the  competition  of  what  used  to  be  called  “ poor 
scholars  (persons  who  have  received  a learned  education  from 
some  public  or  private  charity),  they  are  exempt  from  that  of 
amateurs,  those  who  have  other  means  of  support  being  seldom 
candidates  for  such  employments.  Whether  these  considerations 


398 


BOOK  II.  CHAPTER  XIV.  § 4 


are  not  connected  with  something  radically  amiss  in  the /idea  of 
authorship  as  a profession,  and  whether  any  social  arrangement 
under  which  the  teachers  of  mankind  consist  of  persons  giving  out 
doctrines  for  bread,  is  suited  to  be,  or  can  possibly  be,  a permanent 
thing — would  be  a subject  well  worthy  of  the  attention  of  thinkers. 

The  clerical,  like  the  literary  profession,  is  frequently  adopted 
by  persons  of  independent  means,  either  from  religious  zeal,  or  for 
the  sake  of  the  honour  or  usefulness  which  may  belong  to  it,  or 
for  a chance  of  the  high  prizes  which  it  holds  out : and  it  is  now  prin- 
cipally for  this  reason  that  the  salaries  of  curates  are  so  low  ; those 
salaries,  though  considerably  raised  by  the  influence  of  public 
opinion,  being  still  generally  insufiicient  as  the  sole  means  of  support 
for  one  who  has  to  maintain  the  externals  expected  from  a clergyman 
of  the  established  church. 

When  an  occupation  is  carried  on  chiefly  by  persons  who  derive 
the  main  portion  of  their  subsistence  from  other  sources,  its  remunera- 
tion may  be  lower  almost  to  any  extent  than  the  wages  of  equally 
severe  labour  in  other  employments.  The  principal  example  of 
the  kind  is  domestic  manufactures.  When  spinning  and  knitting 
were  carried  on  in  every  cottage,  by  families  deriving  their  principal 
support  from  agriculture,  the  price  at  which  their  produce  was  sold 
(which  constituted  the  remuneration  of  the  labour)  was  often  so 
low,  that  there  would  have  been  required  great  perfection  of 
machinery  to  undersell  it.  The  amount  of  the  remimeration  in 
such  a case  depends  chiefly  upon  whether  the  quantity  of  the 
commodity,  produced  by  this  description  of  labour,  suffices  to  supply 
the  whole  of  the  demand.  If  it  does  not,  and  there  is  consequently 
a necessity  for  some  labourers  who  devote  themselves  entirely  to 
the  employment,  the  price  of  the  article  must  be  sufficient  to  pay 
those  labourers  at  the  ordinary  rate,  and  to  reward  therefore  very 
handsomely  the  domestic  producers.  But  if  the  demand  is  so 
limited  that  the  domestic  manufacture  can  do  more  than  satisfy  it, 
the  price  is  naturally  kept  down  to  the  lowest  rate  at  which  peasant 
families  think  it  worth  while  to  continue  the  production.  It  is,  no 
doubt,  because  the  Swiss  artizans  do  not  depend  for  the  whole  of 
their  subsistence  upon  their  looms,  that  Zurich  is  able  to  maintain 
a competition  in  the  European  market  with  English  capital,  and 
English  fuel  and  machinery.*  Thus  far,  as  to  the  remuneration  of 

* Four-fifths  of  the  manufacturers  of  the  Canton  of  Zurich  are  small 
farmers,  generally  proprietors  of  their  farms.  The  cotton  manufacture  occu- 
pies either  wholly  or  partially  23,000  people,  nearly  a tenth  part  of  the  popu- 


DIFFERENCES  OF  WAGES 


390 


the  subsidiary  employment ; but  the  effect  to  the  labourers  of 
having  this  additional  resource,  is  almost  certain  to  be  (unless 
peculiar  counteracting  causes  intervene)  a proportional  diminution 
of  the  wages  of  their  main  occupation.  The  habits  of  the  people 
(as  has  already  been  so  often  remarked)  everywhere  require  some 
particular  scale  of  hving,  and  no  more,  as  the  condition  without 
which  they  will  not  bring  up  a family.  Whether  the  income  which 
maintains  them  in  this  condition  comes  from  one  source  or  from  two, 
makes  no  difference ; if  there  is  a second  source  of  income,  they 
require  less  from  the  first ; and  multiply  (at  least  this  has  always 
hitherto  been  the  case)  to  a point  which  leaves  them  no  more  from 
both  employments,  than  they  would  probably  have  had  from  either 
if  it  had  been  their  sole  occupation. 

For  the  same  reason  it  is  found  that,  cceteris  paribus,  those  trades 
are  generally  the  worst  paid,  in  which  the  wife  and  children  of  the 
artizan  aid  in  the  work.  The  income  which  the  habits  of  the  class 
demand,  and  down  to  which  they  are  almost  sure  to  multiply,  is 
made  up,  in  those  trades,  by  the  earnings  of  the  whole  family,  while 
in  others  the  same  income  must  be  attained  by  the  labour  of  the 
man  alone.  It  is  even  probable  that  their  collective  earnings  will 
amount  to  a smaller  sum  than  those  of  the  man  alone  in  other 
trades ; because  the  prudential  restraint  on  marriage  is  unusually 
weak  when  the  only  consequence  immediately  felt  is  an  improve- 
ment of  circumstances,  the  joint  earnings  of  the  two  going  further  in 
their  domestic  economy  after  marriage  than  before.  Such  accord- 
ingly is  the  fact,  in  the  case  of  handloom  weavers.  In  most  kinds  of 
weaving,  women  can  and  do  earn  as  much  as  men,  and  children  are 
employed  at  a very  early  age ; but  the  aggregate  earnings  of  a 
family  are  lower  than  in  almost  any  other  kind  of  industry,  and  the 
marriages  earher.  It  is  noticeable  also  that  there  are  certain 
branches  of  handloom  weaving  in  which  wages  are  much  above  the 
rate  common  in  the  trade,  and  that  these  are  the  branches  in  which 
neither  women  nor  young  persons  are  employed.  These  facts  were 
authenticated  by  the  inquiries  of  the  Handloom  Weavers  Com- 
mission, which  made  its  report  in  1841.  ^No  argument  can  be 
hence  derived  for  the  exclusion  of  women  from  the  hberty  of 
competing  in  the  labour  market : since,  even  when  no  more  is  earned 

lation,  and  they  consume  a greater  quantity  of  cotton  per  inhabitant  than 
either  France  or  England.  See  the  Statistical  Account  of  Zurich  formerly 
cited,  pp.  105,  108,  110. 

^ [The  first  and  third  of  the  following  sentences  were  added  in  the  3rd  ed. 
(1852) ; the  second  was  inserted  in  the  6th  ed.  (1865).] 


400 


BOOK  II.  CHAPTER  XIV.  § 6 


by  the  labour  of  a man  and  a woman  than  would  have  beeu  earned 
by  the  man  alone,  the  advantage  to  the  woman  of  not  depending  on 
a master  for  subsistence  may  be  more  than  an  equivalent.  It  cannot, 
however,  be  considered  desirable  as  a fermanent  element  in  the 
condition  of  a labouring  class,  that  the  mother  of  the  family  (the  case 
of  a single  woman  is  totally  different)  should  be  under  the  necessity 
of  working  for  subsistence,  at  least  elsewhere  than  in  their  place  of 
abode.  In  the  case  of  children,  who  are  necessarily  dependent,  the 
influence  of  their  competition  in  depressing  the  labour  market  is  an 
important  element  in  the  question  of  hmiting  their  labour,  in  order 
to  provide  better  for  their  education. 

§ 5.  It  deserves  consideration,  why  the  wages  of  women  are 
generally  lower,  and  very  much  lower,  than  those  of  men.  They 
are  not  universally  so.  Where  men  and  women  work  at  the  same 
employment,  if  it  be  one  for  which  they  are  equally  fitted  in  point 
of  physical  power,  they  are  not  always  unequally  paid.i  Women, 
in  factories,  sometimes  ^ earn  as  much  as  men  ; and  so  they  do  in 
handloom  weaving,  which,  being  paid  by  the  piece,  brings  their 
efficiency  to  a sure  test.  When  the  efficiency  is  equal,  but  the  pay 
unequal,  the  only  explanation  that  can  be  given  is  custom ; grounded 
either  in  a prejudice,  or  in  the  present  constitution  of  society, 
which,  making  almost  every  woman,  socially  speaking,  an  appendage 
of  some  man,  enables  men  to  take  systematically  the  hon’s  share  of 
whatever  belongs  to  both.^  But  the  principal  question  relates  to 
the  peculiar  employments  of  women.  The  remuneration  of  these 
is  always,  I believe,  greatly  below  that  of  employments  of  equal 
skill  and  equal  disagreeableness,  carried  on  by  men.  In  some  of 
these  cases  the  explanation  is  evidently  that  already  given : as  in 
the  case  of  domestic  servants,  whose  wages,  speaking  generally, 
are  not  determined  by^ompetition,  but  are  greatly  in  excess  of  the 
market  value  of  the  labour,  and  in  this  excess,  as  in  almost  all  things 
which  are  regulated  by  custom,  the  male  sex  obtains  by  far  the 
largest  share.  In  the  occupations  in  which  employers  take  full 

^ [So  from  the  3rd  ed.  (1852).  The  original  text  ran  ; “ it  does  not  appear 
that  they  are  in  general  unequally  paid.’*] 

2 [“  Sometimes  ” added  in  the  3rd  ed.] 

* [Here  the  following  passage  was  omitted  from  the  3rd  ed.  : “ When  an 

employment  (as  is  the  case  with  many  trades)  is  divided  into  several  parts,  of 
some  of  which  men  alone  are  considered  capable,  while  women  or  children  are 
employed  in  the  others,  it  is  natural  that  those  who  cannot  be  dispensed  with, 
should  be  able  to  make  better  terms  for  themselves  than  those  who  can.”] 


DIFFERENCES  OF  WAGES 


401 


advantage  of  competition,  the  low  wages  of  women  as  compared  with 
the  ordinary  earnings  of  men  are  a proof  that  the  employments  are 
overstocked : that  although  so  much  smaller  a number  of  women, 
than  of  men,  support  themselves  by  wages,  the  occupations  which 
law  and  usage  make  accessible  to  them  are  comparatively  so  few, 
that  the  field  of  their  employment  is  still  more  overcrowded.  It 
must  be  observed,  that  as  matters  now  stand,  a sufficient  degree 
of  overcrowding  may  depress  the  wages  of  women  to  a much  lower 
minimum  than  those  of  men.  The  wages,  at  least  of  single  women, 
must  be  equal  to  their  support,  but  need  not  be  more  than  equal 
to  it ; the  minimum,  in  their  case,  is  the  pittance  absolutely  requi- 
site for  the  sustenance  of  one  human  being.  Now  the  lowest  point 
to  which  the  most  superabundant  competition  can  permanently 
depress  the  wages  of  a man  is  always  somewhat  more  than  this. 
Where  the  wife  of  a labouring  man  does  not  by  general  custom 
contribute  to  his  earnings,  the  man’s  wages  must  be  at  least  sufficient 
to  support  himself,  a wife,  and  a number  of  children  adequate  to  keep 
up  the  population,  since  if  it  were  less  the  population  would  not  be 
kept  up.  And  even  if  the  wife  earns  something,  their  joint  wages 
must  be  sufficient  not  only  to  support  themselves,  but  (at  least 
for  some  years)  their  children  also.  The  ne  'plus  ultra  of  low 
wages,  therefore  (except  during  some  transitory  crisis,  or  in  some 
decaying  employment),  can  hardly  occur  in  any  occupation  which 
the  person  employed  has  to  live  by,  except  the  occupations  of 
women. 

§ 6.  Thus  far,  we  have,  throughout  this  discussion,  proceeded 
on  the  supposition  that  competition  is  free,  so  far  as  regards  human 
interference ; being  limited  only  by  natural  causes,  or  by  the 
unintended  effect  of  general  social  circumstances.  But  law  or  custom 
may  interfere  to  limit  competition.  If  apprentice  laws,  or  the 
regulations  of  corporate  bodies,  make  the*  access  to  a particular 
employment  slow,  costly,  or  difficult,  the  wages  of  that  employment 
may  be  kept  much  above  their  natural  proportion  to  the  wages  of 
common  labour.  They  might  be  so  kept  without  any  assignable 
limit,  were  it  not  that  wages  which  exceed  the  usual  rate  require 
corresponding  prices,  and  that  there  is  a limit  to  the  price  at  which 
even  a restricted  number  of  producers  can  dispose  of  all  they  produce. 
In  most  civilized  countries,  the  restrictions  of  this  kind  which  once 
existed  have  been  either  abolished  or  very  much  relaxed,  and  will, 
no  doubt,  soon  disappear  entirely.  In  some  trades,  however,  and 


402 


BOOK  II.  CHAPTER  XIV.  § 6 


to  some  extent,  the  combinations  of  workmen  produce  a similar 
effect.  Those  combinations  always  fail  to  uphold  wages  at  an 
artificial  rate,  unless  they  also  limit  the  number  of  competitors. 
But  they  do  occasionally  succeed  in  accomphshing  this.  In  several 
trades  the  workmen  have  been  able  to  make  it  almost  impractic- 
able for  strangers  to  obtain  admission  either  as  journeymen  or 
as  apprentices,  except  in  limited  numbers,  and  under  such  re- 
strictions as  they  choose  to  impose.  It  was  given  in  evidence  to 
the  Handloom  Weavers  Commission,  that  this  is  one  of  the  hard- 
ships which  aggravate  the  grievous  condition  of  that  depressed 
class.  Their  own  employment  is  overstocked  and  almost  ruined ; 
but  there  are  many  other  trades  which  it  would  not  be  difficult  for 
them  to  learn : to  this,  however,  the  combinations  of  workmen 
in  those  other  trades  are  said  to  interpose  an  obstacle  hitherto 
insurmountable. 

Notwithstanding,  however,  the  cruel  manner  in  which  the 
exclusive  principle  of  these  combinations  operates  in  a case  of 
this  peculiar  nature,  the  question,  whether  they  are  on  the  whole 
more  useful  or  mischievous,  requires  to  be  decided  on  an  enlarged 
consideration  of  consequences,  among  which  such  a fact  as  this  is 
not  one  of  the  most  important  items.  Putting  aside  the  atrocities 
sometimes  committed  by  workmen  in  the  way  of  personal  outrage 
or  intimidation,  which  cannot  be  too  rigidly  repressed ; if  the 
present  state  of  the  general  habits  of  the  people  were  to  remain 
for  ever  unimproved,  these  partial  combinations,  in  so  far  as  they  do 
succeed  in  keeping  up  the  wages  of  any  trade  by  limiting  its  numbers, 
might  be  looked  upon  as  simply  intrenching  around  a particular 
spot  against  the  inroads  of  over-population,  and  making  the  wages 
of  the  class  depend  upon  their  own  rate  of  increase,  instead  of  depend- 
ing on  that  of  a more  reckless  and  improvident  class  than  themselves. 
What  at  first  sight  seems  the  injustice  of  excluding  the  more 
numerous  body  from  sharing  the  gains  of  a comparatively  few, 
disappears  when  we  consider  that  by  being  admitted  they  would 
not  be  made  better  off,  for  more  than  a short  time ; the  only 
permanent  effect  which  their  admission  would  produce,  would 
be  to  lower  the  others  to  their  own  level.  To  what  extent 
the  force  of  this  consideration  is  annulled  when  a tendency 
commences  towards  diminished  over-crowding  in  the  labour- 
ing classes  generally,  and  what  grounds  of  a different  nature 
there  may  be  for  regarding  the  existence  of  trade  combinations 
as  rather  to  be  desired  than  deprecated,  will  be  considered  in 


DIFFERENCES  OF  WAGES 


403 


a subsequent  chapter  of  this  work  with  the  subject  of  Combination 
Laws.^ 

§ 7.  To  conclude  this  subject,  I must  repeat  an  observation 
already  made,  that  there  are  kinds  of  labour  of  which  the  wages  are 
fixed  by  custom,  and  not  by  competition.  Such  are  the  fees  or 

^ [The  present  text  of  this  paragraph  dates  from  the  5th  ed.  (1862).  In  the 
original  of  1848  it  ran,  after  the  words  “ this  peculiar  nature  ” : “I  find  it 
impossible  to  wish,  in  the  present  state  of  the  generahhabits  of  the  people,  that 
no  such  combinations  existed.  Acts  of  atrocity  are  sometimes  committed  by 
them,  in  the  way  . . . repressed  : and  even  their  legitimate  liberty  of  refusing 
to  work  unless  their  own  terms  are  conceded  to  them,  they  not  unfrequently 
exercise  in  an  injudicious,  unenlightened  manner,  ultimately  very  injurious  to 
themselves.  But  in  so  far  as  they  do  succeed  in  keeping  up  the  wages  of  any 
trade  by  limiting  its  numbers,  I look  upon  them  as  simply  intrenching  , . . 
themselves.  And  I should  rejoice  if  by  trade  regulations,  or  even  by  trades 
unions,  the  employments  thus  specially  protected  could  be  multiplied  to  a much 
greater  extent  than  experience  has  shown  to  be  practicable.  What  at  first 
sight  seems  the  injustice  . . . level.  If  indeed  the  general  mass  of  the  people 
were  so  improved  in  their  standard  of  living,  as  not  to  press  closer  against  the 
means  of  employment  than  those  trades  do  ; if,  in  other  words,  there  were  no 
greater  degree  of  overcrowding  outside  the  barrier,  than  within  it — there  would 
be  no  need  of  a barrier,  and  if  it  had  any  effects  at  all,  they  must  be  bad  ones  ; 
but  in  that  case  the  barrier  would  fall  of  itself,  since  there  would  no  longer  be 
any  motive  for  keeping  it  up.  On  similar  grounds,  if  there  were  no  other  escape 
from  that  fatal  immigration  of  Irish,  which  has  done  and  is  doing  so  much  to 
degrade  the  condition  of  our  agricultural,  and  some  classes  of  our  town  popula- 
tion, I should  see  no  injustice,  and  the  greatest  possible  expediency,  in  checking 
that  destructive  inroad  by  prohibitive  laws.  But  there  is  a better  mode  of 
putting  an  end  to  this  mischief,  namely,  by  improving  the  condition  of  the 
Irish  themselves  ; and  England  owes  an  atonement  to  Ireland  for  past  injuries, 
which  she  ought  to  suffer  almost  any  inconvenience  rather  than  fail  to  make 
good,  by  using  her  power  in  as  determined  a manner  for  the  elevation  of  that 
unfortunate  people,  as  she  used  it  through  so  many  dreary  centuries  for  their 
abasement  and  oppression.” 

In  the  3rd  ed.  (1852)  this  was  replaced  by  the  following  (which  appeared  also 
in  the  4th  (1857) ) : “ their  existence,  it  is  probable,  has,  in  time  past,  produced 
more  good  than  evil.  Putting  aside  the  atrocities  sometimes  committed  by 
them,  in  the  way  . . . themselves.  The  time,  however,  is  past  when  the 
friends  of  human  improvement  can  look  with  complacency  on  the  attempts  of 
small  sections  of  the  community,  whether  belonging  to  the  labouring  or  any 
other  class,  to  organize  a separate  class  interest  in  antagonism  to  the  general 
body  of  labourers,  and  to  protect  that  interest  by  shutting  out,  even  if  only  by 
a moral  compulsion,  all  competitors  from  their  more  highly  paid  department. 
The  mass  of  the  people  are  no  longer  to  be  thrown  out  of  the  account,  as  too 
hopelessly  brutal  to  be  capable  of  benefiting  themselves  by  any  opening  made 
for  them,  and  sure  only,  if  admitted  into  competition,  to  lower  others  to  their 
own  level.  The  aim  of  all  efforts  should  now  be,  not  to  keep  up  the  monopoly 
of  separate  knots  of  labourers  against  the  rest,  but  to  raise  the  moral  state  and 
social  condition  of  the  whole  body  ; and  of  this  it  is  an  indispensable  part  that 
no  one  should  be  excluded  from  the  superior  advantages  of  any  skilled 
employment,  who  has  intelligence  enough  to  learn  it,  and  honesty  enough  to  be 
entrusted  with  it.”] 


404 


BOOK  II.  CHAPTER  XIV.  § 7 


charges  of  professional  persons  : of  physicians,  surgeons,  barristers^ 
and  even  attorneys.  These,  as  a general  rule,  do  not  vary,  and 
though  competition  operates  upon  those  classes  as  much  as  upon 
any  others,  it  is  by  dividing  the  business,  not,  in  general,  by  diminish- 
ing the  rate  at  which  it  is  paid.  The  cause  of  this,  perhaps,  has  been 
the  prevalence  of  an  opinion  that  such  persons  are  more  trustworthy 
if  paid  highly  in  proportion  to  the  work  they  perform  ; insomuch  that 
if  a lawyer  or  a physician  offered  his  services  at  less  than  the  ordinary 
rate,  instead  of  gaining  more  practice,  he  would  probably  lose  that 
which  he  already  had.  For  analogous  reasons  it  is  usual  to  pay 
greatly  beyond  the  market  price  of  their  labour  all  persons  in 
whom  the  employer  wishes  to  place  peculiar  trust,  or  from  whom 
he  requires  something  besides  their  mere  services.  For  example, 
most  persons  who  can  afiord  it  pay  to  their  domestic  servants 
higher  wages  than  would  purchase  in  the  market  the  labour  of 
persons  fully  as  competent  to  the  work  required.  They  do  this,  not 
merely  from  ost^tation,  but  also  from  more  reasonable  motives  : 
either  because  they  desire  that  those  they  employ  should  serve 
them  cheerfully,  and  be  anxious  to  remain  in  their  service ; or 
because  they  do  not  like  to  drive  a hard  bargain  with  people  whom 
they  are  in  constant  intercourse  with ; or  because  they  dislike  to 
have  near  their  persons,  and  continually  in  their  sight,  people  with 
the  appearance  and  habits  which  are  the  usual  accompaniments 
of  a mean  remuneration.  Similar  feelings  operate  in  the  minds  of 
persons  in  business,  with  respect  to  their  clerks,  and  other  employes. 
Liberality,  generosity,  and  the  credit  of  the  employer,  are  motives 
which,  to  whatever  extent  they  operate,  preclude  taking  the  utmost 
advantage  of  competition  : and  doubtless  such  motives  might,  and 
even  now  do,  operate  on  employers  of  labour  in  all  the  great 
departments  of  industry  ; and  most  desirable  is  it  that  they  should. 
But  they  can  never  raise  the  average  wages  of  labour  beyond  the 
ratio  of  population  to  capital.  By  giving  more  to  each  person 
employed,  they  limit  the  power  of  giving  employment  to  numbers  ; 
and  however  excellent  their  moral  efiect,  they  do  little  good  economi- 
cally, unless  the  pauperism  of  those  who  are  shut  out  leads  indirectly 
to  a readjustment  by  means  of  an  increased  restraint  on  population. 


CHAPTER  XV 


OF  PROFITS 

§ 1.  Having  treated  of  the  labourer’s  share  of  the  produce,  we 
next  proceed  to  the  share  of  the  capitahst ; the  profits  of  capital 
or  stock ; the  gains  of  the  person  who  advances  the  expenses  of 
production — who,  from  funds  in  his  possession,  pays  the  wages  of 
the  labourers,  or  supports  them  during  the  work  ; who  supplies  the 
requisite  buildings,  materials,  and  tools  or  machinery ; and  to 
whom,  by  the  usual  terms  of  the  contract,  the  produce  belongs, 
to  be  disposed  of  at  his  pleasure.  After  indemnifying  him  for  his 
outlay,  there  commonly  remains  a surplus,  which  is  his  profit ; 
the  net  income  from  his  capital : the  amount  which  he  can  afford 
to  spend  in  necessaries  or  pleasures,  or  from  which  by  further 
saving  he  can  add  to  his  wealth. 

As  the  wages  of  the  labourer  are  the  remuneration  of  labour,  so 
the  profits  of  the  capitalist  are  properly,  according  to  Mr.  Senior’s 
well-chosen  expression,  the  remuneration  of  abstinence.  They  are 
what  he  gains  by  forbearing  to  consume  his  capital  for  his  own  uses, 
and  allowing  it  to  be  consumed  by  productive  labourers  for  their 
uses.  For  this  forbearance  he  requires  a recompense.  Very  often 
in  personal  enjoyment  he  would  be  a gainer  by  squandering  his 
capital,  the  capital  amounting  to  more  than  the  sum  of  the  profits 
which  it  will  yield  during  the  years  he  can  expect  to  live.  But 
while  he  retains  it  undiminished,  he  has  always  the  power  of  con- 
suming it  if  he  wishes  or  needs  ; he  can  bestow  it  upon  others  at  his 
death ; and  in  the  meantime  he  derives  from  it  an  income,  which 
he  can  without  impoverishment  apply  to  the  satisfaction  of  his  own 
wants  or  inclinations. 

Of  the  gains,  however,  which  the  possession  of  a capital  enables 
a person  to  make,  a part  only  is  properly  an  equivalent  for  the  use 
of  the  capital  itself ; namely,  as  much  as  a solvent  person  would 
be  willing  to  pay  for  the  loan  of  it.  This,  which  as  everybody 


406 


BOOK  II.  CHAPTER  XV.  § 1 


knows  is  called  intereat,  is  all  that  a person  is  enabled  to  get  by 
merely  abstaining  from  the  immediate  consumption  of  his  capital, 
and  allowing  it  to  be  used  for  productive  purposes  by  others.  The 
remuneration  which  is  obtained  in  any  country  for  mere  abstinence, 
is  measured  by  the  current  rate  of  interest  on  the  best  security: 
such  security  as  precludes  any  appreciable  chance  of  losing  the 
principal.  What  a person  expects  to  gain,  who  superintends  the 
employment  of  his  own  capital,  is  always  more,  and  generally 
much  more,  than  this.  The  rate  of  profit  greatly  exceeds  the  rate 
of  interest.  The  surplus  is  partly  compensation  for  risk.  By 
lending  his  capital,  on  unexceptionable  security,  he  runs  httle  or 
no  risk.  But  if  he  embarks  in  business  on  his  own  account,  he 
always  exposes  his  capital  to  some,  and  in  many  cases  to  very  great, 
danger  of  partial  or  total  loss.  For  this  danger  he  must  be  com- 
pensated, otherwise  he  will  not  incur  it.  He  must  likewise  be 
remunerated  for  the  devotion  of  his  time  and  labour.  The  control 
of  the  operations  of  industry  usually  belongs  to  the  person  who 
supphes  the  whole  or  the  greatest  part  of  the  funds  by  which  they 
are  carried  on,  and  who,  according  to  the  ordinary  arrangement,  is 
either  alone  interested,  or  is  the  person  most  interested  (at  least 
directly),  in  the  result.  To  exercise  this  control  with  efficiency,  if  the 
concern  is  large  and  complicated,  requires  great  assiduity,  and  often, 
no  ordinary  skill.  This  assiduity  and  skill  must  be  remunerated. 

The  gross  profits  from  capital,  the  gains  returned  to  those  who 
supply  the  funds  for  production,  must  suffice  for  these  three  purposes. 
They  must  afford  a sufficient  equivalent  for  abstinence,  indemnity 
for  risk,  and  remuneration  for  the  labour  and  skill  required  for 
superintendence.  These  different  compensations  may  be  either 
paid  to  the  same,  or  to  different  persons.  The  capital,  or  some  part 
of  it,  may  be  borrowed  : may  belong  to  some  one  who  does  not 
undertake  the  risks  or  the  trouble  of  business.  In  that  case,  the 
lender  or  owner  is  the  person  who  practises  the  abstinence ; and 
is  remunerated  for  it  by  the  interest  paid  to  him,  while  the  difference 
between  the  interest  and  the  gross  profits  remunerates  the  exertions 
and  risks  of  the  undertaker.*  Sometimes,  again,  the  capital,  or 
a part  of  it,  is  supphed  by  what  is  called  a sleeping  partner  ; 
who  shares  the  risks  of  the  employment,  but  not  the  trouble,  and 
who,  in  consideration  of  those  risks,  receives  not  a mere  interest, 

* It  is  to  be  regretted  that  this  word,  in  this  sense,  is  not  familiar  to  an 
English  ear.  French  political  economists  enjoy  a great  advantage  in  being 
able  to  speak  currently  of  les  profits  de  V entrepreneur. 


PROFITS 


407 


but  a stipulated  share  of  the  gross  profits.  Sometimes  the  capital 
is  supplied  and  the  risk  incurred  by  one  person,  and  the  business 
carried  on  exclusively  in  his  name,  while  the  trouble  of  management 
is  made  over  to  another,  who  is  engaged  for  that  purpose  at  a fixed 
salary.  Management,  however,  by  hired  servants,  who  have  no 
interest  in  the  result  but  that  of  preserving  their  salaries,  is  pro- 
verbially inefficient,  unless  they  act  under  the  inspecting  eye,  if  not 
the  controlling  hand,  of  the  person  chiefly  interested  : and  prudence 
almost  always  recommends  giving  to  a manager  not  thus,  controlled 
a remuneration  partly  dependent  on  the  profits ; which  virtually 
reduces  the  case  to  that  of  a sleeping  partner.  Or  finally,  the  same 
person  may  own  the  capital,  and  conduct  the  business ; adding, 
if  he  will  and  can,  to  the  management  of  his  own  capital,  that  of 
as  much  more  as  the  owners  may  be  willing  to  trust  him  with.  But 
under  any  or  all  of  these  arrangements,  the  same  three  things 
require  their  remuneration,  and  must  obtain  it  from  the  gross  profit : 
abstinence,  risk,  exertion.  And  the  three  parts  into  which  profit 
may  be  considered  as  resolving  itself,  may  be  described  respectively 
as  interest,  insurance,  and  wages  of  superintendence. 

§ 2.  The  lowest  rate  of  profit  which  can  permanently  exist,  is 
thatjvhich  is  barely  adequate,  at  the  given  place  and  time,  to  aflord 
an  equivalent  for  the  abstinence,  risk,  and  exertion  implied  in  the 
employment  of  capital.  From  the  gross  profit  has  first  to  be 
deducted  as  much  as  will  form  a fund  sufficient  on  the  average  to 
cover  all  losses  incident  to  the  employment.  Next,  it  must  afford 
such  an  equivalent  to  the  owner  of  the  capital  for  forbearing  to 
consume  it,  as  is  then  and  there  a sufficient  motive  to  him  to  persist 
in  his  abstinence.  How  much  will  be  required  to  form  this  equiva- 
lent depends  on  the  comparative  value  placed,  in  the  given  society, 
upon  the  present  and  the  future  : (in  the  words  formerly  used)  on 
the  strength  of  the  effective  desire  of  accumulation.  Further,  after 
covering  all  losses,  and  remunerating  the  owner  for  forbearing  to 
consume,!  there  must  be  something  left  to  recompense  the  labour 
and  skill  of  the  person  who  devotes  his  time  to  the  business.  This 
recompense  too  must  be  sufficient  to  enable  at  least  the  owners  of 
the  larger  capitals  to  receive  for  their  trouble,  or  to  pay  to  some 
manager  for  his,  what  to  them  or  him  will  be  a sufficient  inducement 
for  undergoing  it.  If  the  surplus  is  no  more  than  this,  none  but 


[So  from  the  3rd  ed.  (1852).  The  original  text  had  “ for  his  self-denial.”] 


408 


BOOK  II.  CHAPTER  XV.  § 2 


large  masses  of  capital  will  be  employed  productively ; and  if  it  did 
not  even  amount  to  this,  capital  would  be  withdrawn  from  production, 
and  unproductively  consumed,  until,  by  an  indirect  consequence 
of  its  diminished  amount,  to  be  explained  hereafter,  the  rate  of 
profit  was  raised. 

Such,  then,  is  the  minimum  of  profits  : but  that  minimum  is 
exceedingly  variable,  and  at  some  times  and  places  extremely  low ; 
on  account  of  the  great  variableness  of  two  out  of  its  three  elements. 
That  the  rate  of  necessary  remuneration  for  abstinence,  or  in  other 
words  the  effective  desire  of  accumulation,  differs  widely  in  different 
states  of  society  and  civilization,  has  been  seen  in  a former  chapter. 
There  is  a still  wider  difference  in  the  element  which  consists  in  com- 
pensation for  risk.  I am  not  now  speaking  of  the  differences  in  point 
of  risk  between  different  employments  of  capital  in  the  same  society, 
but  of  the  very  different  degrees  of  security  of  property  in  different 
states  of  society.  Where,  as  in  many  of  the  governments  of  Asia, 
property  is  in  perpetual  danger  of  spoliation  from  a tyrannical 
government,  or  from  its  rapacious  and  ill-controUed  officers  ; where 
to  possess  or  to  be  suspected  of  possessing  wealth,  is  to  be  a mark  not 
only  for  plunder,  but  perhaps  for  personal  ill-treatment  to  extort 
the  disclosure  and  surrender  of  hidden  valuables ; or  where,  as  in 
the  European  Middle  Ages,  the  weakness  of  the  government,  even 
when  not  itself  inclined  to  oppress,  leaves  its  subjects  exposed 
without  protection  or  redress  to  active  spoliation,  or  audacious  with- 
holding of  just  rights,  by  any  powerful  individual ; the  rate  of  profit 
which  persons  of  average  dispositions  will  require,  to  make  them 
forego  the  immediate  enjoyment  of  what  they  happen  to  possess, 
for  the  purpose  of  exposing  it  and  themselves  to  these  perils,  must 
be  something  very  considerable.  And  these  contingencies  affect 
those  who  live  on  the  mere  interest  of  their  capital,  in  common 
with  those  who  personally  engage  in  production.  In  a generally 
secure  state  of  society,  the  risks  which  may  be  attendant  on  the 
nature  of  particular  employments  seldom  faU  on  the  person  who 
lends  his  capital,  if  he  lends  on  good  security ; but  in  a state  of 
society  like  that  of  many  parts  of  Asia,  no  security  (except  perhaps 
the  actual  pledge  of  gold  or  jewels)  is  good  : and  the  mere  possession 
of  a hoard,  when  known  or  suspected,  exposes  it  and  the  possessor 
to  risks,  for  which  scarcely  any  profit  he  could  expect  to  obtain 
would  be  an  equivalent ; so  that  there  would  be  still  less  accumula- 
tion than  there  is,  if  a state  of  insecurity  did  not  also  multiply  the 
occasions  on  which  the  possession  of  a treasure  may  be  the  means 


PROFITS 


409 


of  saving  life  or  averting  serious  calamities.  Those  who  lend  under 
these  wretched  governments,  do  it  at  the  utmost  peril  of  never 
being  paid.  In  most  of  the  native  states  of  India,  the  lowest  terms 
on  which  any  one  will  lend  money,  even  to  the  government,  are  such, 
that  if  the  interest  is  paid  only  for  a few  years,  and  the  principal  not 
at  all,  the  lender  is  tolerably  well  indemnified.  If  the  accumulation 
of  principal  and  compound  interest  is  ultimately  compromised  at  a 
few  shillings  in  the  pound,  he  has  generally  made  an  advantageous 
bargain. 

§ 3.  The  remuneration  of  capital  in  different  employments, 
much  more  than  ^ the  remuneration  of  labour,  varies  according  to 
the  circumstances  which  render  one  employment  more  attractive, 
or  more  repulsive,  than  another.  The  profits,  for  example,  of  retail 
trade,  in  proportion  to  the  capital  employed,  exceed  those  of  whole- 
sale dealers  or  manufacturers,  for  this  reason  among  others,  that 
there  is  less  consideration  attached  to  the  employment.  The 
greatest,  however,  of  these  differences,  is  that  caused  by  difference 
of  risk.  The  profits  of  a gunpowder  manufacturer  must  be 
considerably  greater  than  the  average,  to  make  up  for  the  peculiar 
risks  to  which  he  and  his  property  are  constantly  exposed.  When, 
however,  as  in  the  case  of  marine  adventure,  the  peculiar  risks  are 
capable  of  being,  and  commonly  are,  commuted  for  a fix:ed  payment, 
the  premium  of  insurance  takes  its  regular  place  among  the  charges 
of  production,  and  the  compensation  which  the  owner  of  the  ship 
or  cargo  receives  for  that  payment,  does  not  appear  in  the  estimate  of 
his  profits,  but  is  included  in  the  replacement  of  his  capital. 

The  portion,  too,  of  the  gross  profit,  which  forms  the  remunera- 
tion for  the  labour  and  skill  of  the  dealer  or  producer,  is  very  different 
in  different  employments.  This  is  the  explanation  always  given  of 
the  extraordinary  rate  of  apothecaries’  profit ; the  greatest  part, 
as  Adam  Smith  observes,  being  frequently  no  more  than  the  reason- 
able wages  of  professional  attendance;  for  which,  until  a late 
alteration  of  the  law,  the  apothecary  could  not  demand  any  re- 
muneration, except  in  the  prices  of  his  drugs.  Some  occupations 
require  a considerable  amount  of  scientific  or  technical  education, 
and  can  [1848]  only  be  carried  on  by  persons  who  combine  with 
that  education  a considerable  capital.  Such  is  the  business  of  an 
engineer,  both  in  the  original  sense  of  the  term,  a machine-maker, 

^ [“  Much  more  than  ” replaced  in  the  3rd  ed.(1852)  the  “ like  ” of  the  original 
text.  Cf.  supra,  book  ii.  ch.  xiv.  § l.j 


410 


BOOK  II.  CHAPTER  XV.  § 4 


and  in  its  popular  or  derivative  sense,  an  undertaker  of  public  works. 
These  are  always  the  most  profitable  employments  There  are 
cases,  again,  in  which  a considerable  amount  of  labour  and  skill  is 
required  to  conduct  a business  necessarily  of  limited  extent.  In 
such  cases,  a higher  than  common  rate  of  profit  is  necessary  to  yield 
only  the  common  rate  of  remuneration.  “ In  a small  seaport  town,” 
says  Adam  Smith,  “ a httle  grocer  will  make  forty  or  fifty  per  cent 
upon  a stock  of  a single  hundred  pounds,  while  a considerable 
wholesale  merchant  in  the  same  place  will  scarce  make  eight  or  ten 
per  cent  upon  a stock  of  ten  thousand.  The  trade  of  the  grocer  may 
be  necessary  for  the  conveniency  of  the  inhabitants,  and  the  narrow- 
ness of  the  market  may  not  admit  the  employment  of  a larger  capital 
in  the  business.  The  man,  however,  must  not  only  live  by  his  trade, 
but  live  by  it  suitably  to  the  qualifications  which  it  requires.  Besides 
possessing  a little  capital,  he  must  be  able  to  read,  write,  and  account 
and  must  be  a tolerable  judge,  too,  of  perhaps  fifty  or  sixty  different 
sorts  of  goods,  their  prices,  qualities,  and  the  markets  where  they 
are  to  be  had  cheapest.  Thirty  or  forty  pounds  a year  cannot  be 
considered  as  too  great  a recompense  for  the  labour  of  a person  so 
accomplished.  Deduct  this  from  the  seemingly  great  profits  of  his 
capital,  and  little  more  will  remain,  perhaps,  than  the  ordinary 
profits  of  stock.  The  greater  part  of  the  apparent  profit  is,  in  this 
case,  too,  real  wages.” 

All  the  natural  monopohes  (meaning  thereby  those  which  are 
created  by  circumstances,  and  not  by  law)  which  produce  or  aggravate 
the  disparities  in  the  remuneration  of  different  kinds  of  labour, 
operate  similarly  between  different  employments  of  capital.  If 
a business  can  only  be  advantageously  carried  on  by  a large  capital, 
this  in  most  countries  limits  so  narrowly  the  class  of  persons  who 
can  enter  into  the  employment,  that  they  are  enabled  to  keep  their 
rate  of  profit  above  the  general  level.  A trade  may  also,  from  the 
nature  of  the  case,  be  confined  to  so  few  hands,  that  profits  may 
admit  of  being  kept  up  by  a combination  among  the  dealers.  It  is 
well  known  that  even  among  so  numerous  a body  as  the  London 
booksellers,  this  sort  of  combination  long  continued  to  exist.^  I 
have  already  mentioned  the  case  of  the  gas  and  water  companies. 

§ 4.  After  due  allowance  is  made  for  these  various  causes 

' [So  from  the  4th  ed.  (1857).  In  earlier  editions  ; “ this  sort  of  combination 
exists  ; though  individual  interest  is  often  too  strong  for  its  rules  ; nor,  indeed, 
does  the  combination  itself  include  the  whole  trade.”] 


PROFITS 


411 


of  inequality,  namely,  differences  in  the  risk  or  agreeableness  of 
different  employments,  and  natural  or  artificial  monopolies;  th^ 
rate  of  profit  on  capital  in  all  employments  tends  to  an  equality 
Such  is  the  proposition  usually  laid  down  by  political  economists, 
and  under  proper  explanations  it  is  true. 

That  portion  of  profit  which  is  properly  interest,  and  which 
forms  the  remuneration  for  abstinence,  is  strictly  the  same,  at  the 
same  time  and  place,  whatever  be  the  employment.  The  rate 
of  interest,  on  equally  good  security,  does  not  vary  according  to 
the  destination  of  the  principal,  though  it  does  vary  from  time 
to  time  very  much  according  to  the  circumstances  of  the  market. 
There  is  no  employment  in  which,  in  the  present  state  of  industry, 
competition  is  so  active  and  incessant  as  in  the  lending  and  borrowing 
of  money.  All  persons  in  business  are  occasionally,  and  most  of 
them  constantly,  borrowers  : while  all  persons  not  in  business,  who 
possess  monied  property,  are  lenders.  Between  these  two  great 
bodies  there  is  a numerous,  keen,  and  intelligent  class  of  middlemen, 
composed  of  bankers,  stockbrokers,  discount  brokers,  and  others, 
alive  to  the  slightest  breath  of  probable  gain.  The  smallest  circum- 
stance, or  the  most  transient  impression  on  the  public  mind,  which 
tends  to  an  increase  or  diminution  of  the  demand  for  loans  either 
at  the  time  or  prospectively,  operates  immediately  on  the  rate  of 
interest : and  circumstances  in  the  general  state  of  trade,  really 
tending  to  cause  this  difference  of  demand,  are  continually  occurring, 
sometimes  to  such  an  extent,  that  the  rate  of  interest  on  the  best 
mercantile  bills  has  been  known  to  vary  in  little  more  than  a year 
(even  without  the  occurrence  of  the  great  derangement  called  a 
commercial  crisis)  from  four,  or  less,  to  eight  or  nine  per  cent. 
But,  at  the  same  time  and  place,  the  rate  of  interest  is  the  same, 
to  all  who  can  give  equally  good  security.  The  market  rate  of 
interest  is  at  all  times  a known  and  definite  thing. 

It  is  far  otherwise  with  gross  profit ; which,  though  (as  will 
presently  be  seen)  it  does  not  vary  much  from  employment  to-. 
employment,  ve^a-Yfiry-gigaAly  from  individual  to  individual,  and 
can  scarceljUifi  imai^twQ  cases  the  same.  It  depends  on  tEe  know-  ^ 
ledge,  talents,  economy,  and  energy  of  the  capitalist  himself,  or 
of  tEe  ag^ts  whom  he  employs,;  on  the  accidents  of  personal 
connexion ; and  even  on  chance.  Hardly  any  two  dealers  in  the 
same  trade,  even  if  their  commodities  are  equally  good  and  equally 
cheap,  carry  on  their  business  at  the  same  expense,  or  turn  over 
their  capital  in  the  same  time.  That  equal  capitals  give  equal 


412 


BOOK  II.  CHAPTER  XV.  § 4 


profits,  as  a general  maxim  of  trade,  would  be  as  false  as  that  equal 
age  or  size  gives  equal  bodily  strength,  or  that  equal  reading  or 
experience  gives  equal  knowledge.  The  efiect  depends  as  much 
upon  twenty  other  things,  as  upon  the  single  cause  specified. 

But  though  profits  thus  vary,  the  parity,  on  the  whole,  of  different 
modes  of  employing  capital  (in  the  absence  of  any  natural  or  artificial 
monopoly)  is,  in  a certain  and  a very  important  sense,  maintained. 
Oii  an  average  (whatever  may  be  the  occasional  fluctuations)  the 
various  employments  of  capital  are  on  such  a footing  as  to  hold  out, 
not  equal  profits,  but  equal  expectations  ^ of  profit,  to  persons  of 
average  abilities  and  advantages.  By  equal,  I mean  after  making 
compensation  for  any  inferiority  in  the  agreeableness  or  safety  of  an 
employment.  If  the  case  were  not  so  ; if  there  were,  evidently,  and 
to  common  experience,  more  favourable  chances  of  pecuniary  success 
in  one  business  than  in  others,  more  persons  would  engage  their 
capital  in  the  business,  or  would  bring  up  their  sons  to  it ; which 
in  fact  always  happens  when  a business,  like  that  of  an  engineer 
at  present  [1848],  or  like  any  newly  estabhshed  and  prosperous 
manufacture,  is  seen  to  be  a growing  and  thriving  one.  If,  on  the 
contrary,  a business  is  not  considered  thriving ; if  the  chances  of 
profit  in  it  are  thought  to  be  inferior  to  those  in  other  employments  ; 
capital  gradually  leaves  it,  or  at  least  new  capital  is  not  attracted  to 
it ; and  by  this  change  in  the  distribution  of  capital  between  the 
less  profitable  and  the  more  profitable  employments,  a sort  of  balance 
is  restored.  The  expectations  of  profit,  therefore,  in  different  employ- 
ments, cannot  long  continue  very  different : they  tend  to  a common 
average,  though  they  are  generally  oscillating  from  one  side  to  the 
other  side  of  the  medium. 

This  equalizing  process,  commonly  described  as  the  transfer 
of  capital  from  one  employment  to  another,  is  not  necessarily 
the  onerous,  slow,  and  almost  impracticable  operation  which  it 
is  very  often  represented  to  be.  In  the  first  place,  it  does  not 
always  imply  the  actual  removal  of  capital  already  embarked  in 
an  employment.  In  a rapidly  progressive  state  of  capital,  the 
adjustment  often  takes  place  by  means  of  the  new  accumulations 
of  each  year,  which  direct  themselves  in  preference  towards  the 
more  thriving  trades.  Even  when  a real  transfer  of  capital  is 
necessary,  it  is  by  no  means  implied  that  any  of  those  who  are 
engaged  in  the  unprofitable  employment  relinquish  business  and 


® [Altered  from  “ chances  " as  late  as  the  6th  ed.  (1862).] 


PROFITS 


413 


break  up  theii’  establishments.  The  numerous  and  multifarious 
channels  of  credit,  through  which,  in  commercial  nations,  unem- 
ployed capital  diffuses  itself  over  the  field  of  employment,  flowing 
over  in  greater  abundance  to  the  lower  levels,  are  the  means  by 
which  the  equalization  is  accomplished.  The  process  consists 
in  a limitation  by  one  class  of  dealers  or  producers,  and  an  extension 
by  the  other,  of  that  portion  of  their  business  which  is  carried  on 
with  borrowed  capital.  There  is  scarcely  any  dealer  or  producer 
on  a considerable  scale,  who  confines  his  business  to  what  can 
be  carried  on  by  his  own  funds.  When  trade  is  good,  he  not  only 
uses  to  the  utmost  his  own  capital,  but  employs,  in  addition,  much 
ot  the  credit  which  that  capital  obtains  for  him.  When,  either 
from  over-supply  or  from  some  slackening  in  the  demand  for  his 
commodity,  he  finds  that  it  sells  more  slowly  or  obtains  a lower 
price,  he  contracts  his  operations,  and  does  not  apply  to  bankers 
or  other  money  dealers  for  a renewal  of  their  advances  to  the  same 
extent  as  before.  A business  which  is  increasing  holds  out,  on  the 
contrary,  a prospect  of  profitable  employment  for  a larger  amount 
of  this  floating  capital  than  previously,  and  those  engaged  in  it 
become  applicants  to  the  money  dealers  for  larger  advances,  which, 
from  their  improving  circumstances,  they  have  no  difficulty  in 
obtaining.  A different  distribution  of  floating  capital  between  two 
employments  has  as  much  effect  in  restoring  their  profits  to  an 
equilibrium,  as  if  the  owners  of  an  equal  amount  of  capital  were 
to  abandon  the  one  trade  and  carry  their  capital  into  the  other. 
This  easy,  and  as  it  were  spontaneous,  method  of  accommodating 
production  to  demand,  is  quite  sufficient  to  correct  any  inequalities 
arising  from  the  fluctuations  of  trade,  or  other  causes  of  ordinary 
occurrence.  In  the  case  of  an  altogether  declining  trade,  in  which 
it  is  necessary  that  the  production  should  be,  not  occasionally 
varied,  but  greatly  and  permanently  diminished,  or  perhaps  stopped 
altogether,  the  process  of  extricating  the  capital  is,  no  doubt,  tardy 
and  difficult,  and  almost  always  attended  with  considerable  loss  ; 
much  of  the  capital  fixed  in  machinery,  buildings,  permanent 
works,  &c.  being  either  not  applicable  to  any  other  purpose,  or  only 
applicable  after  expensive  alterations  ; and  time  being  seldom 
given  for  effecting  the  change  in  the  mode  in  which  it  would  be 
effected  with  least  loss,  namely,  by  not  replacing  the  fixed  capital 
as  it  wears  out.  There  is  besides,  in  totally  changing  the  destination 
of  a capital,  so  great  a sacrifice  of  established  connexion,  and  of 
acquired  skill  and  experience,  that  people  are  always  very  slow  in 


414 


BOOK  II.  CHAPTER  XV.  § 4 


resolving  upon  it,  and  hardly  ever  do  so  until  long  after  a change 
of  fortune  has  become  hopeless.  These,  however,  are  distinctly 
exceptional  cases,  and  even  in  these  the  equalization  is  at  last 
effected.  It  may  also  happen  that  the  return  to  equilibrium  is 
considerably  protracted,  when,  before  one  inequahty  has  been 
corrected,  another  cause  of  inequality  arises ; which  is  said  to 
have  been  continually  the  case,  during  a long  series  of  years,  with  the 
production  of  cotton  in  the  Southern  States  of  North  America ; 
the  commodity  having  been  upheld  at  what  was  virtually  a monopoly 
price,  because  the  increase  of  demand,  from  successive  improvements 
in  the  manufacture,  went  on  with  a rapidity  so  much  beyond 
expectation  that  for  many  years  the  supply  never  completely  over- 
took it.  But  it  is  not  often  that  a succession  of  disturbing  causes, 
all  acting  in  the  same  direction,  are  known  to  follow  one  another 
with  hardly  any  interval.  Where  there  is  no  monopoly,  the  profits 
of  a trade  are  likely  to  range  sometimes  above  and  sometimes  below 
the  general  level,  but  tending  always  to  return  to  it;  like  the 
oscillations  of  the  pendulum. 

In  general,  then,  although  profits  are  very  different  to  different 
individuals,  and  to  the  same  individual  in  different  years,  there 
cannot  be  much  diversity  at  the  same  time  and  place  in  the  average 
profits  of  different  employments,  (other  than  the  standing  differences 
necessary  to  compensate  for  difference  of  attractiveness,)  except  for 
short  periods,  or  when  some  great  permanent  revulsion  has  overtaken 
a particular  trade.  If  any  popular  impression  exists  that  some 
trades  are  more  profitable  than  others,  independently  of  monopoly,  or 
of  such  rare  accidents  as  have  been  noticed  in  regard  to  the  cotton 
trade,  the  impression  is  in  all  probability  fallacious,  since  if  it  were 
shared  by  those  who  have  greatest  means  of  knowledge  and  motives 
to  accurate  examination,  there  would  take  place  such  an  influx 
of  capital  as  would  soon  lower  the  profits  to  the  common  level.  It 
is  true  that,  to  persons  with  the  same  amount  of  original  means, 
there  is  more  chance  of  making  a large  fortune  in  some  employments 
than  in  others.  But  it  would  be  found  that  in  those  same  employ- 
ments, bankruptcies  also  are  more  frequent,  and  that  the  chance 
of  greater  success  is  balanced  by  a greater  probabihty  of  complete 
failure.  Very  often  it  is  more  than  balanced  : for,  as  was  remarked  in 
another  case,  the  chance  of  great  prizes  operates  with  a greater 
degree  of  strength  than  arithmetic  will  warrant,  in  attracting 
competitors  ; and  I doubt  not  that  the  average  gains,  in  a trade  in 
which  large  fortunes  may  be  made,  are  lower  than  in  those  in  which 


PROFITS 


415 


gains  are  slow,  though  comparatively  sure,  and  in  which  nothing 
is  to  be  ultimately  hoped  for  beyond  a competency.  The  timber 
trade  of  Canada  is  [1848]  one  example  of  an  employment  of  capital 
partaking  so  much  of  the  nature  of  a lottery,  as  to  make  it  an 
accredited  opinion  that,  taking  the  adventurers  in  the  aggregate, 
there  is  more  money  lost  by  the  trade  than  gained  by  it ; in  other 
words,  that  the  average  rate  of  profit  is  less  than  nothing.  In  such 
points  as  this,  much  depends  on  the  characters  of  nations,  according 
as  they  partake  more  or  less  of  the  adventurous,  or,  as  it  is  called 
when  the  intention  is  to  blame  it,  the  gambling  spirit.  This  spirit 
is  much  stronger  in  the  United  States  than  in  Great  Britain ; and 
in  Great  Britain  than  in  any  country  of  the  Continent.  In  some 
Continental  countries  the  tendency  is  so  much  the  reverse,  that 
safe  and  quiet  employments  probably  yield  a less  average  profit  to 
the  capital  engaged  in  them,  than  those  which  offer  greater  gains 
at  the  price  of  greater  hazards. 

It  must  not  however  be  forgotten,  that  even  in  the  countries 
of  most  active  competition,  custom  also  has  a considerable  share 
in  determining  the  profits  of  trade.  There  is  sometimes  an  idea 
afloat  as  to  what  the  profit  of  an  employment  should  be,  which 
though  not  adhered  to  by  all  the  dealers,  nor  perhaps  rigidly  by 
any,  still  exercises  a certain  influence  over  their  operations.  There 
has  been  in  England  a kind  of  notion,  how  widely  prevaihng  I know 
not,  that  fifty  per  cent  is  a proper  and  suitable  rate  of  profit  in 
retail  transactions  : understand,  not  fifty  per  cent  on  the  whole 
capital,  but  an  advance  of  fifty  per  cent  on  the  wholesale  prices  ; 
from  which  have  to  be  defrayed  bad  debts,  shop  rent,  the  pay  of 
clerks,  shopmen,  and  agents  of  all  descriptions,  in  short  all  the 
expenses  of  the  retail  business.  If  this  custom  were  universal,  and 
strictly  adhered  to,  competition  indeed  would  still  operate,  but 
the  consumer  would  not  derive  any  benefit  from  it,  at  least  as  to 
price  ; the  way  in  which  it  would  diminish  the  advantages  of  those 
engaged  in  the  retail  trade,  would  be  by  a greater  subdivision  of  the 
business.  In  some  parts  of  the  Continent  the  standard  is  as  high 
as  a hundred  per  cent.  The  increase  of  competition  however,  in 
England  at  least,  is  rapidly  tending  to  break  down  customs  of  this 
description.  In  the  majority  of  trades  (at  least  in  the  great  emporia 
of  trade),  there  are  now  numerous  dealers  whose  motto  is,  “ small 
gains  and  frequent  ” — a great  business  at  low  prices,  rather  than 
high  prices  and  few  transactions  ; and  by  turning  over  their  capital 
more  rapidly,  and  adding  to  it  by  borrowed  capital  when  needed, 


416 


BOOK  II.  CHAPTER  XV.  § 6 


the  dealers  often  obtain  individually  higher  profits ; though  they 
necessarily  lower  the  profits  of  those  among  their  competitors  who 
do  not  adopt  the  same  principle.  i Nevertheless,  competition,  as 
remarked  * in  a previous  chapter,  has,  as  yet,  but  a limited 
dominion  over  retail  prices  ; and  consequently  the  share  of  the 
whole  produce  of  land  and  labour  which  is  absorbed  in  the  remunera- 
tion of  mere  distributors,  continues  exorbitant ; and  there  is  no 
function  in  the  economy  of  society  which  supports  a number  of 
persons  so  disproportioned  to  the  amount  of  work  to  be  performed. 

§ 5.  The  preceding  remarks  have,  I hope,  sufficiently  elucidated 
what  is  meant  by  the  common  phrase,  “ the  ordinary  rate  of  profit ; ” 
and  the  sense  in  which,  and  the  limitations  under  which,  this 
ordinary  rate  has  a real  existence.  It  now  remains  to  consider, 
what  causes  determine  its  amount. 

2 To  popular  apprehension  it  seems  as  if  the  profits  of  business 
depended  upon  prices.  A producer  or  dealer  seems  to  obtain  his 
profits  by  selling  his  commodity  for  more  than  it  cost  him.  Profit 
altogether,  people  are  apt  to  think,  is  a consequence  of  purchase 
and  sale.  It  is  only  (they  suppose)  because  there  are  purchasers 
for  a commodity,  that  the  producer  of  it  is  able  to  make  any  profit. 
Demand — customers — a market  for  the  commodity,  are  the  cause 
of  the  gains  of  capitalists.  It  is  by  the  sale  of  their  goods,  that 
they  replace  their  capital,  and  add  to  its  amount. 

This,  however,  is  looking  only  at  the  outside  surface  of  the 
economical  machinery  of  society.  In  no  case,  we  find,  is  the  mere 
money  which  passes  from  one  person  to  another,  the  fundamental 
matter  in  any  economical  phenomenon.  If  we  look  more  narrowly 
into  the  operations  of  the  producer,  we  shall  perceive  that  the 
money  he  obtains  for  his  commodity  is  not  the  cause  of  his  having 
a profit,  but  only  the  mode  in  which  his  profit  is  paid  to  him. 

(Thp  cause  of  profit  is,  that  labmuLproducegLcaore  than  is  required 
for  its  support.  The  reason  why  agricultural  capital  yields  a profit, 
is  because  human  beings  can  grow  more  food  than  is  necessary  to 
feed  them  while  it  is  being  grown,  including  the  time  occupied  in 
constructing  the  tools,  and  making  all  other  needful  preparations  : 
from  which  it  is  a consequence,  that  if  a capitalist  undertakes  to 
feed  the  labourers  on  condition  of  receiving  the  produce,  he  has 

* [The  rest  of  this  paragraph  was  added  in  the  3rd  ed.  (1852).] 

* Vide  supra,  book  ii.  ch.  iv.  § 3. 

2 [The  remainder  of  this  section  was  added  in  the  4th  ed.  (1857).] 


PROFITS 


417 


some  of  it  remaining  for  himself  after  replacing  his  advances.  To 
vary  the  form  of  the  theorem  : the  reason  why  capital  yields  a profit, 
is  because  food,  clothing,  materials,  and  tools,  last  longer  than  the 
time  which  was  required  to  produce  them ; so  that  if  a capitalist 
supplies  a party  of  labourers  with  these  things,  on  condition  of 
receiving  all  they  produce,  they  will,  in  addition  to  reproducing  their 
own  necessaries  and  instruments,  have  a portion  of  their  time 
remaining,  to  work  for  the  capitalist.  We  thus  see  that  profit  arises, 
not  from  the  incident  of  exchange,  but  from  the  productive  power 
of  labour  ; and  the  general  profit  of  the  country  is  always  what  the 
productive  power  of  labour  makes  it,  whether  any  exchange  takes 
place  or  not.  If  there  were  no  division  of  employments,  there  would 
be  no  buying  or  selling,  but  there  would  still  be  profit.  If  the 
labourers  of  the  country  collectively  produce  twenty  per  cent  more 
than  their  wages,  profits  will  be  twenty  per  cent,  whatever  prices 
may  or  may  not  be.  The  accidents  of  price  may  for  a time  make 
one  set  of  producers  get  more  than  the  twenty  per  cent,  and  another 
less,  the  one  commodity  being  rated  above  its  natural  value  in 
relation  to  other  commodities,  and  the  other  below,  until  prices 
have  again  adjusted  themselves ; but  there  will  always  be  just 
twenty  per  cent  divided  among  them  all. 

I proceed,  in  expansion  of  the  considerations  thus  briefly 
indicated,  to  exhibit  more  minutely  the  mode  in  which  the  rate  of 
profit  is  determined. 

§ 6.  I assume,  throughout,  the  state  of  things,  which,  where 
the  labourers  and  capitalists  are  separate  classes,  prevails,  with 
few  exceptions,  universally ; namely,  that  the  capitalist  advances 
the  whole  expenses,  including  the  entire  remuneration  of  the  labourer. 
That  he  should  do  so,  is  not  a matter  of  inherent  necessity ; the 
labourer  might  wait  until  the  production  is  complete,  for  all  that 
part  of  his  wages  which  exceeds  mere  necessaries  ; and  even  for  the 
whole,  if  he  has  funds  in  hand,  sufficient  for  his  temporary  support. 
But  in  the  latter  case,  the  labourer  is  to  that  extent  really  a capitalist, 
investing  capital  in  the  concern,  by  supplying  a portion  of  the 
funds  necessary  for  carrying  it  on  ; and  even  in  the  former  case  he 
may  be  looked  upon  in  the  same  light,  since,  contributing  his  labour 
at  less  than  the  market  price,  he  may  be  regarded  as  lending  the 
difference  to  his  employer,  and  receiving  it  back  with  interest  (on 
whatever  principle  computed)  from  the  proceeds  of  the  enterprise. 

The  capitalist,  then,  may  be  assumed  to  make  all  the  advances, 


418 


BOOK  II.  CHAPTER  XV.  § 7 


OCunyUi 

ij 


C^jvcC^' 


and  receive  all  the  produce.  His  profit  consists  of  the  eyness  of 
the  produce  above  the  advances  i his^  rate  of  profit  is  the  ratio  which 
^at  excess  bears  to  the  amount,  advanced.  But  what  do  the 
advances  consist  of  ? 

It  is,  for  the  present,  necessary  to  suppose,  that  the  capitalist 
does  not  pay  any  rent ; has  not  to  purchase  the  use  of  any  appro- 
priated natural  agent.  This  indeed  is  scarcely  ever  the  exact  truth. 
The  agricultural  capitalist,  except  when  he  is  the  owner  of  the  soil 
he  cultivates,  always,  or  almost  always,  pays  rent : and  even  in 
manufactures,  (not  to  mention  ground-rent,)  the  materials  of  the 
manufacture  have  generally  paid  rent,  in  some  stage  of  their 
production.  The  nature  of  rent,  however,  we  have  not  yet  taken  into 
consideration ; and  it  will  hereafter  appear,  that  no  practical  error, 
on  the  question  we  are  now  examining,  is  produced  by  disregarding  it. 

If,  then,  leaving  rent  out  of  the  question,  we  inquire  in  what  it  is 
that  the  advances  of  the  capitalist,  for  purposes  of  production, 
consist,  we  shall  find  that  they  consist  of  wages  of  labour. 

A large  portion  of  the  expenditure  of  every  capitalist  consists 
in  the  direct  payment  of  wages.  What  does  not  consist  of  this,  is 
composed  of  materials  and  implements,  including  buildings.  But 
materials  and  implements  are  produced  by  labour;  and  as  our 
supposed  capitahst  is  not  meant  to  represent  a single  employment, 
but  to  be  a type  of  the  productive  industry  of  the  whole  country, 
we  may  suppose  that  he  makes  his  own  tools,  and  raises  his  own 
materials.  He  does  this  by  means  of  previous  advances,  which, 
again,  consist  wholly  of  wages.  If  we  suppose  him  to  buy  the 
materials  and  tools  instead  of  producing  them,  the  case  is  not 
altered : he  then  repays  to  a previous  producer  the  wages  which 
that  previous  producer  has  paid.  It  is  true,  he  repays  it  to  him  with 
a profit ; and  if  he  had  produced  the  things  himself,  he  himself  must 
have  had  that  profit,  on  this  part  of  his  outlay,  as  well  as  on  every 
other  part.  The  fact,  however,  remains,  thatdn^the  whole  process  of 
production,  beginning  with  the  materials  and  tools,  and  ending  with 
the  finished  product,  all  the  advances  have  consisted  of  nothing 
but  wages ; except  that  certain  of  the  capitalists  concerned  have, 
for  the  sake  of  general  convenience,  had  their  share  of  profit  paid 
to  them  before  the  operation  was  completed.  Whatever,  of  the 
ultimate  product,  is  not  profit,  is  repayment  of  wages. 


§ 7.  It  thus  appears  that  the  two  elements  on  which,  and  which 
alone,  the  gains  of  the  capitahsts  depend,  are,  first,  the  magnitude 
Cl  - ^ •=  C - 

c = a.'-  i>  ' 


PROFITS 


419 


of  the  produce,  in  other  words,  the  productive  power  of  labour ; 
and  secondly,  the ' proportion  of  that  produce  obtained  by  the 
labourers  themselves ; the  rajbio  jwhich  the  remuneration  of  the 
labourers  bears  to  the  amount  they  produce.  These  two  things 
form  the  data  for  determining  the  gross  amount  divided  as  profit 
among  all  the  capitalists  of  the  country  ; but  the  rale  of  profit,  the 
percentage  on  the  capital,  depends  only  on  the  second  of  the  two 
elements,  the  labourer’s  proportional  share,  and  not  on  the  amount 
to  be  shared.  If  the  produce  of  labour  were  doubled,  and  the 
labourers  obtained  the  same  proportional  share  as  before,  that  is, 
if  their  remuneration  was  also  doubled,  the  capitalists,  it  is  true, 
would  gain  twice  as  much ; but  as  they  would  also  have  had  to 
advance  twice  as  much,  the  rate  of  their  profit  would  be  only  the 
same  as  before. 

We  thus  arrive  at  the  conclusion  of  Ricardo  and  others,  that 
the  rate  of  profits  depends  on  wages ; rising  as  wages  fall,  and  falling 
as  wages  rise.  In  adopting,  however,  this  doctrine,  I must  insist 
upon  making  a most  necessary  alteration  in  its  wording.  Instead  ^ 
of  saying  that  profits  depend  on  wages,  let  us  say  (what  Ricardo  o ^ 

really  meant)  that  they  depend  on  the  cost  of  labour. 

Wages,  and  the  cost  of  labour ; what  labour  brings  in  to  the 
labourer,  and  what  it  costs  to  the  capitalist ; are  ideas  quite  distinct, 
and  which  it  is  of  the  utmost  importance  to  keep  so.  For  this 
purpose  it  is  essential  not  to  designate  them,  as  is  almost  always 
done,  by  the  same  name.  Wages,  in  public  discussions,  both  oral 
and  printed,  being  looked  upon  from  the  point  of  view  of  the  payers, 
much  oftener  than  from  that  of  the  receivers,  nothing  is  more 
common  than  to  say  that  wages  are  high  or  low,  meaning  only  that 
the  cost  of  labour  is  high  or  low.  The  reverse  of  this  would  be  oftener 
the  truth  : the  cost  of  labour  is  frequently  at  its  highest  where  wages 
are  lowest.  This  may  arise  from  two  causes.  In  the  first  place,  the 
labour,  though  cheap,  may  be  inefficient.  In  no  European  country 
are  wages  so  low  as  they  are  (or  at  least  were  in  Ireland : the 
remuneration  of  an  agricultural  labourer  in  the  west  of  Ireland  not 
being  more  than  half  the  wages  of  even  the  lowest-paid  Englishman, 
the  Dorsetshire  labourer.  But  if,  from  inferior  skill  and  industry, 
two  days’  labour  of  an  Irishman  accomplished  no  more  work  than 
an  English  labourer  performed  in  one,  the  Irishman’s  labour  cost 
as  much  as  the  Englishman’s,  though  it  brought  in  so  much  less  to 
himself.  The  capitalist’s  profit  is  determined  by  the  former  of  these 
^ [Added  in  the  4th  ed.  (1857).] 


420 


BOOK  II.  CHAPTER  XV.  § 7 


two  things,  not  by  the  latter.  That  a difference  to  this  extent  really 
existed  in  the  efficiency  of  the  labour,  is  proved  not  only  by  abundant 
testimony,  but  by  the  fact,  that  notwithstanding  the  lowness  of 
wages,  profits  of  capital  are  not  understood  to  have  been  higher  in 
Ireland  than  in  England. 

The  other  cause  which  renders  wages,  and  the  cost  of  labour,  no 
real  criteria  of  one  another,  is  the  varying  costliness  of  the  articles 
which  the  labourer  consumes.  If  these  are  cheap,  wages,  in  the 
sense  which  is  of  importance  to  the  labourer,  may  be  high,  and  yet 
the  cost  of  labour  may  be  low ; if  dear,  the  labourer  may  be 
wretchedly  ofi,  though  his  labour  may  cost  much  to  the  capitalist. 
This  last  is  the  condition  of  a country  over-peopled  in  relation  to 
its  land ; in  which,  food  being  dear,  the  poorness  of  the  labourer’s 
real  reward  does  not  prevent  labour  from  costing  much  to  the  pur- 
chaser, and  low  wages  and  low  profits  co-exist.  The  opposite  case 
is  exemplified  in  the  United  States  of  America.  The  labourer  there 
enjoys  a greater  abundance  of  comforts  than  in  any  other  country 
of  the  world,  except  some  of  the  newest  colonies  ; but  owing  to  the 
cheap  price  at  which  these  comforts  can  be  obtained  (combined 
with  the  great  efficiency  of  the  labour),  the  cost  of  labour  to  the 
capitalist  is  at  least  not  higher,  nor  the  rate  of  profit  lower,  than  in 
Europe.^ 

The  cost  of  labour,  then,  is,  in  the  language  of  mathematics,  a 
function  of  three  variables  the  efficiency  of  labour ; the  wages  of 
'^aBouF'(meamng  tEerdby  the  real  re\^fd  of  tEe^abourer)  ; and  the 
greyer  or  less  cos^  at  which  the  articles  composing  that  real  reward 
can  be  produced  or  procured.  It  is  plain  that  the  cost  of  labour  to 
the  capitalist  must  be  influenced  by  each  of  these  three  circumstances, 
and  by  no  others.  These,  therefore,  are  also  the  circumstances 
which  determine  the  rate  of  profit ; and  it  cannot  be  in  any  way 
affected  except  through  one  or  other  of  them.  If  labour  generally 
became  more  efficient,  without  being  more  highly  rewarded;  if, 
without  its  becoming  less  efficient,  its  remimeration  feU.  no  increase 
taking  place  in  the  cost  of  the  articles  composing  that  remuneration ; 
or  if  those  articles  became  less  costly,  without  the  labourer’s  obtain- 
ing more  of  them ; in  any  one  of  these  three  cases,  profits  would 
rise.  If,  on  the  contrary,  labour  became  less  efficient  (as  it  might 


^ [So  from  the  6th  ed.  (1865).  The  earlier  editions  ran  ; “ the  cost  of 
labour  to  the  capitalist  is  considerably  lower  than  in  Europe.  It  must  be  so, 
since  the  rate  of  profit  is  higher ; as  indicated  by  the  rate  of  interest,  which  is 
six  per  cent  at  New  York  when  it  is  three  or  three  and  a quarter  per  cent  in 
London.”] 


PROFITS 


421 


do  from  diminished  bodily  vigour  in  the  people,  destruction  of  fixed 
capital,  or  deteriorated  education)  ; or  if  the  labourer  obtained  a 
higher  remuneration,  without  any  increased  cheapness  in  the  things 
composing  it ; or  if,  without  his  obtaining  more,  that  which  he  did 
obtain  became  more  costly  ; profits,  in  all  these  cases,  would  suffer 
a diminution.  And  there  is  no  other  combination  of  circumstances, 
in  which  the  general  rate  of  profit  of  a country,  in  all  employments 
indifferently,  can  either  fall  or  rise. 

The  evidence  of  these  propositions  can  only  be  stated  generally, 
though,  it  is  hoped,  conclusively,  in  this  stage  of  our  subject. 
It  will  come  out  in  greater  fulness  and  force  when,  having  taken 
into  consideration  the  theory  of  Value  and  Price,  we  shall  be  enabled 
to  exhibit  the  law  of  profits  in  the  concrete — in  the  complex 
entanglement  of  circumstances  in  which  it  actually  works.  This  can 
only  be  done  in  the  ensuing  Book.  One  topic  still  remains  to  be 
discussed  in  the  present  one,  so  far  as  it  admits  of  being  treated 
independently  of  considerations  of  Value  ; the  subject  of  Bent;  to 
which  we  now  proceed.^ 


* iSee  Appendix  Q.  ProfUs.'l 


-i- 


CHAPTER  XVI 


OF  RENT 

§ 1.  The  requisites  of  production  being  labour,  capital,  and 
natural  agents ; the  only  person,  besides  the  labourer  and  the 
capitalist,  whose  consent  is  necessary  to  production,  and  who  can 
claim  a share  of  the  produce  as  the  price  of  that  consent,  is  the 
person  who,  by  the  arrangements  of  society,  possesses  exclusive 
power  over  some  natural  agent.  The  land  is  the  principal  of  the 
natural  agents  which  are  capable  of  being  appropriated,  and  the 
consideration  paid  for  its  use  is  called  rent.  Landed  proprietors  are 
the  only  class,  of  any  numbers  or  importance,  who  have  a claim  to  a 
share  in  the  distribution  of  the  produce,  through  their  ownership  of 
something  which  neither  they  nor  any  one  else  have  produced.  If 
there  be  any  other  cases  of  a similar  nature,  they  will  be  easily 
understood,  when  the  nature  and  laws  of  rent  are  comprehended. 

It  is  at  once  evident,  that  rent  is  the  effect  of  a monopoly ; 
though  the  monopoly  is  a natural  one,  which  may - be  regulated, 
which  may  even  be  held  as  a trust  for  the  community  generally,  but 
which  cannot  be  prevented  from  existing.  The  reason  why  land- 
owners  are  able  to  require  rent  for  their  land,  is  that  it  is  a commodity 
which  many  want,  and  which  no  one  can  obtain  but  from  them. 
If  all  the  land  of  the  country  belonged  to  one  person,  he  could  fix 
the  rent  at  his  pleasure.  The  whole  people  would  be  dependent  on 
his  will  for  the  necessaries  of  life,  and  he  might  make  what  con- 
ditions he  chose.  This  is  the  actual  state  of  things  in  those  Oriental 
kingdoms  in  which  the  land  is  considered  the  property  of  the  state. 
Rent  is  then  confounded  with  taxation,  and  the  despot  may  exact 
the  utmost  which  the  unfortunate  cultivators  have  to  give.  Indeed, 
the  exclusive  possessor  of  the  land  of  a country  could  not  well  be 
other  than  despot  of  it.  The  effect  would  be  much  the  same  if  the  land 
belonged  to  so  few  people,  that  they  could,  and  did,  act  together 
as  one  man,  and  fix  the  rent  by  agreement  among  themselves. 
This  case,  however,  is  nowhere  known  to  exist : and  the  only 


RENT 


423 


remaining  supposition  is  that  of  free  competition ; the  landowners 
being  supposed  to  be,  as  in  fact  they  are,  too  numerous  to  combine. 

§ 2.  A thing  which  is  limited  in  quantity,  even  though  its 
possessors  do  not  act  in  concert,  is  still  a monopohzed  article.  But 
even  when  monopolized,  a thing  which  is  the  gift  of  nature,  and 
requires  no  labour  or  outlay  as  the  condition  of  its  existence,  will,  if 
there  be  competition  among  the  holders  of  it,  command  a price,  only 
if  it  exists  in  less  quantity  than  the  demand.  If  the  whole  land  of  a 
country  were  required  for  cultivation,  all  of  it  might  yield  a rent. 
But  in  no  country  of  any  extent  do  the  wants  of  the  population 
require  that  all  the  land,  which  is  capable  of  cultivation,  should  be 
cultivated.  The  food  and  other  agricultural  produce  which  the 
people  need,  and  which  they  are  wilHng  and  able  to  pay  for  at  a 
price  which  remunerates  the  grower,  may  always  be  obtained 
without  cultivating  all  the  land ; sometimes  without  cultivating 
more  than  a small  part  of  it ; the  lands  most  easily  cultivated  being 
preferred  in  a very  early  stage  of  society  ; ^ the  most  fertile,  or  those 
in  the  most  convenient  situations,  in  a more  advanced  state.  There 
is  always,  therefore,  some  land  which  cannot,  in  existing  circum- 
stances, pay  any  rent ; and  no  land  ever  pays  rent,  unless,  in  point 
of  fertihty  or  situation,  it  belongs  to  those  superior  kinds  which 
exist  in  less  quantity  than  the  demand — which  cannot  be  made  to 
yield  all  the  produce  required  for  the  community,  unless  on  terms 
still  less  advantageous  than  the  resort  to  less  favoured  soils. 

There  is  land,  such  as  the  deserts  of  Arabia,  which  will  yield 
nothing  to  any  amount  of  labour ; and  there  is  land,  like  some  of 
our  hard  sandy  heaths,  which  would  produce  something,  but,  in 
the  present  state  of  the  soil,  not  enough  to  defray  the  expenses  of 
production.  Such  lands,  unless  by  some  application  of  chemistry 
to  agriculture  still  remaining  to  be  invented,  cannot  be  cultivated 
for  profit,  unless  some  one  actually  creates  a soil,  by  spreading  new 
ingredients  over  the  surface,  or  mixing  them  with  the  existing 
materials.  If  ingredients  fitted  for  this  purpose  exist  in  the  subsoil, 
or  close  at  hand,  the  improvement  even  of  the  most  unpromising 
spots  may  answer  as  a speculation : but  if  those  ingredients  are 
costly,  and  must  be  brought  from  a distance,  it  will  seldom  answer 
to  do  this  for  the  sake  of  profit,  though  the  “ magic  of  property  ” 
will  sometimes  effect  it.  Land  which  cannot  possibly  yield  a profit, 
is  sometimes  cultivated  at  a loss,  the  cultivators  having  their  wants 
^ [This  clause  was  inserted  in  the  6th  ed.  (1866).] 


424 


BOOK  II.  CHAPTER  XVI.  § 2 


partially  supplied  from  other  sources  ; as  in  the  case  of  paupers,  and 
some  monasteries  or  charitable  institutions,  among  which  may  be 
reckoned  the  Poor  Colonies  of  Belgium.  The  worst  land  which  can 
de  cultivated  as  a means  of  subsistence,  is  that  which  will  just 
replace  the  seed,  and  the  food  of  the  labourers  employed  on  it, 
together  with  what  Dr.  Chalmers  calls  their  secondaries ; that  is, 
the  labourers  required  for  supplying  them  with  tools,  and  with  the 
remaining  necessaries  of  life.  Whether  any  given  land  is  capable 
of  doing  more  than  this,  is  not  a question  of  pohtical  economy,  but 
of  physical  fact.  The  supposition  leaves  nothing  for  profits,  nor 
anything  for  the  labourers  except  necessaries  : the  land,  therefore, 
can  only  be  cultivated  by  the  labourers  themselves,  or  else  at  a 
pecuniary  loss  : and  a fortiori^  cannot  in  any  contingency  afford  a 
rent.  The  worse  land  which  can  be  cultivated  as  an  investment  for 
capital,  is  that  which,  after  replacing  the  seed,  not  only  feeds  the 
agricultural  labourers  and  their  secondaries,  but  affords  them  the 
current  rate  of  wages,  which  may  extend  to  much  more  than  mere 
necessaries ; and  leaves  for  those  who  have  advanced  the  wages  of 
these  two  classes  of  labourers,  a surplus  equal  to  the  profit  they 
could  have  expected  from  any  other  employment  of  their  capital. 
Whether  any  given  land  can  do  more  than  this,  is  not  merely  a 
physical  question,  but  depends  partly  on  the  market  value  of 
agricultural  produce.  What  the  land  can  do  for  the  labourers  and 
for  the  capitahst,  beyond  feeding  all  whom  it  directly  or  indirectly 
employs,  of  course  depends  upon  what  the  remainder  of  the  produce 
can  be  sold  for.  The  higher  the  market  value  of  produce,  the 
lower  are  the  soils  to  which  cultivation  can  descend,  consistently 
with  affording  to  the  capital  employed  the  ordinary  rate  of  profit. 

As,  however,  differences  of  fertihty  shde  into  one  another  by 
insensible  gradations ; and  differences  of  accessibihty,  that  is,  of 
distance  from  markets,  do  the  same ; and  since  there  is  land  so 
barren  that  it  could  not  pay  for  its  cultivation  at  any  price ; it  is 
evident  that,  whatever  the  price  may  be,  there  must  in  any  extensive 
region  be  some  land  which  at  that  price  will  just  pay  the  wages  of 
the  cultivators,  and  yield  to  the  capital  employed  the  ordinary 
profit,  and  no  more.  Until,  therefore,  the  price  rises  higher,  or 
until  some  improvement  raises  that  particular  land  to  a higher  place 
in  the  scale  of  fertility,  it  cannot  pay  any  rent.  It  is  evident, 
however,  that  the  community  needs  the  produce  of  this  quahty  of 
land  ; since  if  the  lands  more  fertile  or  better  situated  than  it,  could 
have  sufficed  to  supply  the  wants  of  society,  the  price  would  not  have 


RENT 


425 


risen  so  high  as  to  render  its  cultivation  profitable.  This  land, 
therefore,  will  be  cultivated  ; and  we  may  lay  it  down  as  a principle, 
that  so  long  as  any  of  the  land  of  a country  which  is  fit  for  cultiva- 
tion, and  not  withheld  from  it  by  legal  or  other  factitious  obstacles, 
is  not  cultivated,  the  worst  land  in  actual  cultivation  (in  point 
of  fertility  and  situation  together)  pays  no  rent. 

§ 3.  If,  then,  of  the  land  in  cultivation,  the  part  which  yields 
least  return  to  the  labour  and  capital  employed  on  it  gives  only  the 
ordinary  profit  of  capital,  without  leaving  anything  for  rent ; a 
standard  is  afforded  for  estimating  the  amount  of  rent  which  will 
be  yielded  by  all  other  land.  Any  land  yields  just  as  much  more 
than  the  ordinary  profits  of  stock,  as  it  yields  more  than  what  is 
returned  by  the  worst  land  in  cultivation.  The  surplus  is  what  the 
farmer  can  afford  to  pay  as  rent  to  the  landlord ; and  since,  if  he 
did  not  so  pay  it,  he  would  receive  more  than  the  ordinary  rate  of 
profit,  the  competition  of  other  capitalists,  that  competition  which 
equalizes  the  profits  of  different  capitals,  will  enable  the  landlord 
to  appropriate  it.  The  rent,  therefore,  which  any  land  will  yield, 
is  the  excess  of  its  produce  beyond  what  would  be  returned  to  the 
same  capital  if  employed  on  the  worst  land  in  cultivation.  This 
is  not,  and  never  was  pretended  to  be,  the  limit  of  metayer  rents, 
or  of  cottier  rents ; but  it  is  the  limit  of  farmers’  rents.  No  land 
rented  to  a capitalist  farmer  will  permanently  yield  more  than  this  ; 
and  when  it  yields  less,  it  is  because  the  landlord  foregoes  a part 
of  what,  if  he  chose,  he  could  obtain. 

This  is  the  theory  of  rent,  first  propounded  at  the  end  of  the  last 
century  by  Dr.  Anderson,  and  which,  neglected  at  the  time,  was 
almost  simultaneously  rediscovered,  twenty  years  later,  by  Sir 
Edward  West,  Mr.  Malthus,  and  Mr.  Ricardo.  It  is  one  of  the 
cardinal  doctrines  of  political  economy ; and  until  it  was  understood, 
no  consistent  explanation  could  be  given  of  many  of  the  more  compli- 
cated industrial  phenomena.  The  evidence  of  its  truth  will  be 
manifested  with  a great  increase  of  clearness,  when  we  come  to  trace 
the  laws  of  the  phenomena  of  Value  and  Price.  Until  that  is  done, 
it  is  not  possible  to  free  the  doctrine  from  every  difficulty  which 
may  present  itself,  nor  perhaps  to  convey,  to  those  previously 
unacquainted  with  the  subject,  more  than  a general  apprehension  of 
the  reasoning  by  which  the  theorem  is  arrived  at.  Some,  however, 
of  the  objections  commonly  made  to  it,  admit  of  a complete  answer 
even  in  the  present  stage  of  our  inquiries. 


426 


BOOK  II.  CHAPTER  XVI.  § 4 


It  has  been  denied  that  there  can  be  any  land  in  cultivation 
which  pays  no  rent ; because  landlords  (it  is  contended)  would  not 
allow  their  lands  to  be  occupied  without  payment.  Those  who 
lay  any  stress  on  this  as  an  objection,  must  think  that  land  of  the 
quality  which  can  but  just  pay  for  its  cultivation,  lies  together  in 
large  masses,  detached  from  any  land  of  better  quahty.  If  an 
estate  consisted  wholly  of  this  land,  or  of  this  and  still  worse,  it  is 
hkely  enough  that  the  owner  would  not  give  the  use  of  it  for  nothing  ; 
he  would  probably  (if  a rich  man)  prefer  keeping  it  for  other  pur- 
poses, as  for  exercise,  or  ornament,  or  perhaps  as  a game  preserve. 
No  farmer  could  afiord  to  offer  him  anything  for  it,  for  purposes 
of  culture ; though  something  would  probably  be  obtained  for  the 
use  of  its  natural  pasture,  or  other  spontaneous  produce.  Even  such 
land,  however,  would  not  necessarily  remain  uncultivated.  It 
might  be  farmed  by  the  proprietor;  no  unfrequent  case  even  in 
England.  Portions  of  it  might  be  granted  as  temporary  allotments 
to  labouring  families,  either  from  philanthropic  motives,  or  to  save 
the  poor-rate ; or  occupation  might  be  allowed  to  squatters,  free 
of  rent,  in  the  hope  that  their  labour  might  give  it  value  at  some 
future  period.  Both  these  cases  are  of  quite  ordinary  occurrence. 
So  that  even  if  an  estate  were  wholly  composed  of  the  worst  land 
capable  of  profitable  cultivation,  it  would  not  necessarily  he 
uncultivated  because  it  could  pay  no  rent.  Inferior  land,  however, 
does  not  usuaUy  occupy,  without  interruption,  many  square  miles  of 
ground  ; it  is  dispersed  here  and  there,  with  patches  of  better  land 
intermixed,  and  the  same  person  who  rents  the  better  land,  obtains 
along  with  it  the  inferior  soils  which  alternate  with  it.  He  pays  a 
rent,  nominally  for  the  whole  farm,  but  calculated  on  the  produce 
of  those  parts  alone  (however  small  a portion  of  the  whole)  which 
are  capable  of  returning  more  than  the  common  rate  of  profit.  It 
is  thus  scientifically  true,  that  the  remaining  parts  pay  no  rent. 

§ 4.  Let  us,  however,  suppose  that  there  were  a validity  in 
this  objection,  which  can  by  no  means  be  conceded  to  it;  that 
when  the  demand  of  the  community  had  forced  up  food  to  such  a 
price  as  would  remunerate  the  expense  of  producing  it  from  a 
certain  quahty  of  sod,  it  happened  nevertheless  that  all  the  soil  of 
that  quahty  was  withheld  from  cultivation,  by  the  obstinacy  of  the 
owners  in  demanding  a rent  for  it,  not  nominal,  nor  trifling,  but 
sufficiently  onerous  to  be  a material  item  in  the  calculations  of  a 
farmer.  What  would  then  happen  ? Merely  that  the  increase  of 


RENT 


427 


produce,  which  the  wants  of  society  required,  would  for  the  time 
be  obtained  wholly  (as  it  always  is  partially),  not  by  an  extension 
of  cultivation,  but  by  an  increased  application  of  labour  and  capital 
to  land  already  cultivated. 

Now  we  have  already  seen  that  this  increased  application  of 
capital,  other  things  being  unaltered,  is  always  attended  with  a 
smaller  proportional  return.  We  are  not  to  suppose  some  new 
agricultural  invention  made  precisely  at  this  juncture ; nor  a 
sudden  extension  of  agricultural  skill  and  knowledge,  bringing 
into  more  general  practice,  just  then,  inventions  already  in  partial 
use.  We  are  to  suppose  no  change,  except  a demand  for  more  corn, 
and  a consequent  rise  of  its  price.  The  rise  of  price  enables  measures 
to  be  taken  for  increasing  the  produce,  which  could  not  have  been 
taken  with  profit  at  the  previous  price.  The  farmer  uses  more 
expensive  manures ; or  manures  land  which  he  formerly  left  to 
nature ; or  procures  lime  or  marl  from  a distance,  as  a dressing 
for  the  soil ; or  pulverizes  or  weeds  it  more  thoroughly  ; or  drains, 
irrigates,  or  subsoils  portions  of  it,  which  at  former  prices  would  not 
have  paid  the  cost  of  the  operation ; and  so  forth.  These  things, 
or  some  of  them,  are  done,  when,  more  food  being  wanted,  cultivation 
has  no  means  of  expanding  itself  upon  new  lands.  And  when 
the  impulse  is  given  to  extract  an  increased  amount  of  produce  from 
the  soil,  the  farmer  or  improver  will  only  consider  whether  the 
outlay  he  makes  for  the  purpose  will  be  returned  to  him  with  the 
ordinary  profit,  and  not  whether  any  surplus  will  remain  for  rent. 
Even,  therefore,  if  it  were  the  fact,  that  there  is  never  any  land 
taken  into  cultivation,  for  which  rent,  and  that  too  of  an  amount 
worth  taking  into  consideration,  was  not  paid ; it  would  be  true, 
nevertheless,  that  there  is  always  some  agricultural  capital  which 
pays  no  rent,  because  it  returns  nothing  beyond  the  ordinary  rate 
of  profit : this  capital  being  the  portion  of  capital  last  applied 
— that  to  which  the  last  addition  to  the  produce  was  due  : or  (to 
express  the  essentials  of  the  case  in  one  phrase),  that  which  is 
applied  in  the  least  favourable  circumstances.  But  the  same 
amount  of  demand,  and  the  same  price,  which  enable  this  least 
productive  portion  of  capital  barely  to  replace  itself  with  the  ordinary 
profit,  enable  every  other  portion  to  yield  a surplus  proportioned 
to  the  advantage  it  possesses.  And  this  surplus  it  is,  which  competi- 
tion enables  the  landlord  to  appropriate.  The  rent  of  all  land  is 
measured  by  the  excess  of  the  return  to  the  whole  capital  employed 
on  it,  above  what  is  necessary  to  replace  the  capital  with  the  ordinary 


428 


BOOS  II.  CHAPTER  XVI.  § 4 


rate  of  profit,  or  in  other  words,  above  what  the  same  capital  would 
yield  if  it  were  all  employed  in  as  disadvantageous  circumstances 
as  the  least  productive  portion  of  it ; whether  that  least  productive 
portion  of  capital  is  rendered  so  by  being  employed  on  the  worst 
soil,  or  by  being  expended  in  extorting  more  produce  from  land 
which  already  yielded  as  much  as  it  could  be  made  to  part  with  on 
easier  terms. 

It  is  not  pretended  that  the  facts  of  any  concrete  case  conform 
with  absolute  precision  to  this  or  any  other  scientific  principle. 
We  must  never  forget  that  the  truths  of  political  economy  are 
truths  only  in  the  rough : they  have  the  certainty,  but  not  the 
precision,  of  exact  science.^  It  is  not,  for  example,  strictly  true 
that  a farmer  will  cultivate  no  land,  and  apply  no  capital,  which 
returns  less  than  the  ordinary  profit.  He  will  expect  the  ordinary 
profit  on  the  bulk  of  his  capital.  But  when  he  has  cast  in  his  lot 
with  his  farm,  and  bartered  his  skill  and  exertions,  once  for  all, 
against  what  the  farm  will  yield  to  him,  he  will  probably  be  willing 
to  expend  capital  on  it  (for  an  immediate  return)  in  any  manner 
which  will  afford  him  a surplus  profit,  however  small,  beyond 
the  value  of  the  risk,  and  the  interest  which  he  must  pay  for  the 
capital  if  borrowed,  or  can  get  for  it  elsewhere  if  it  is  his  own.  But 
A new  farmer,  entering  on  the  land,  would  make  his  calculations 
differently,  and  would  not  commence  unless  he  could  expect  the  full 
rate  of  ordinary  profit  on  all  the  capital  which  he  intended  embarking 
in  the  enterprise.  Again,  prices  may  range  higher  or  lower  during  the 
currency  of  a lease,  than  was  expected  when  the  contract  was 
made,  and  the  land,  therefore,  may  be  over  or  under-rented : and 
even  when  the  lease  expires,  the  landlord  may  be  unwilling  to  grant 
a necessary  diminution  of  rent,  and  the  farmer,  rather  than  relinquish 
his  occupation,  or  seek  a farm  elsewhere  when  all  are  occupied, 
may  consent  to  go  on  paying  too  high  a rent.  Irregularities  like 
these  we  must  always  expect ; it  is  impossible  in  political  economy 
to  obtain  general  theorems  embracing  the  complication  of  circum- 
stances which  may  affect  the  result  in  an  individual  case.  When, 
too,2  the  farmer  class,  having  but  little  capital,  cultivate  for  subsis- 
tence rather  than  for  profit,  and  do  not  think  of  quitting  their  farm 
while  they  are  able  to  live  by  it,  their  rents  approximate  to  the 
character  of  cottier  rents,  and  may  be  forced  up  by  competition 
(if  the  number  of  competitors  exceeds  the  number  of  farms)  beyond 

* [This  explanatory  phrase  was  added  in  the  6th  ed.  (1865).] 

* [This  sentence  was  inserted  in  the  3rd  ed.  (1852).] 


RENT 


429 


the  amount  which  will  leave  to  the  farmer  the  ordinary  rate  of 
profit.  The  laws  which  we  are  enabled  to  lay  down  respecting  rents, 
profits,  wages,  prices,  are  only  true  in  so  far  as  the  persons  concerned 
are  free  from  the  influence  of  any  other  motives  than  those  arising 
from  the  general  circumstances  of  the  case,  and  are  guided,  as  to 
those,  by  the  ordinary  mercantile  estimate  of  profit  and  loss. 
Applying  this  twofold  supposition  to  the  case  of  farmers  and  land- 
lords, it  will  be  true  that  the  farmer  requires  the  ordinary  rate  of 
profit  on  the  whole  of  his  capital ; that  whatever  it  returns  to  him 
beyond  this  he  is  obliged  to  pay  to  the  landlord,  but  will  not  consent 
to  pay  more  ; that  there  is  a portion  of  capital  applied  to  agriculture 
in  such  circumstances  of  productiveness  as  to  yield  only  the  ordinary 
profits ; and  that  the  difference  between  the  produce  of  this,  and 
of  any  other  capital  of  similar  amount,  is  the  measure  of  the  tribute 
which  that  other  capital  can  and  will  pay,  under  the  name  of  rent, 
to  the  landlord.  This  constitutes  a law  of  rent,  as  near  the  truth  as 
such  a law  can  possibly  be  : though  of  course  modified  or  disturbed  in 
individual  cases,  by  pending  contracts,  individual  miscalculations, 
the  influence  of  habit,  and  even  the  particular  feelings  and  dispositions 
of  the  persons  concerned. 

§ 5.  A remark  is  often  made,  which  must  not  here  be  omitted, 
though,  I think,  more  importance  has  been  attached  to  it  than  it 
merits.  Under  the  name  of  rent,  many  payments  are  commonly 
included  which  are  not  a remuneration  for  the  original  powers  of 
the  land  itself,  but  for  capital  expended  on  it.  The  additional  rent 
which  land  yields  in  consequence  of  this  outlay  of  capital,  should, 
in  the  opinion  of  some  writers,  be  regarded  as  profit,  not  rent. 
But  before  this  can  be  admitted,  a distinction  must  be  made.  The 
annual  payment  by  a tenant  almost  always  includes  a consideration 
for  the  use  of  the  buildings  on  the  farm ; not  only  barns,  stables, 
and  other  outhouses,  but  a house  to  live  in,  not  to  speak  of  fences 
and  the  like.  The  landlord  will  ask,  and  the  tenant  give,  for  these, 
whatever  is  considered  sufficient  to  yield  the  ordinary  profit,  or 
rather  (risk  and  trouble  being  here  out  of  the  question)  the  ordinary 
interest,  on  the  value  of  the  buildings  : that  is,  not  on  what  it  has 
cost  to  erect  them,  but  on  what  it  would  now  cost  to  erect  others 
as  good  : the  tenant  being  bound,  in  addition,  to  leave  them  in  as 
good  repair  as  he  found  them,  for  otherwise  a much  larger  payment 
than  simple  interest  would  of  course  be  required  from  him.  These 
buildings  are  as  distinct  a thing  from  the  farm  as  the  stock  or  the 


430 


BOOK  II.  CHAPTER  XVI.  § 5 


timber  on  it ; and  wbat  is  paid  for  them  can  no  more  be  called  rent 
of  land,  than  a payment  for  cattle  would  be,  if  it  were  the  custom 
that  the  landlord  should  stock  the  farm  for  the  tenant.  The  buildings, 
like  the  cattle,  are  not  land,  but  capital,  regularly  consumed  and 
reproduced ; and  all  payments  made  in  consideration  for  them  are 
properly  interest. 

But  with  regard  to  capital  actually  sunk  in  improvements,  and 
not  requiring  periodical  renewal,  but  spent  once  for  all  in  giving 
the  land  a permanent  increase  of  productiveness,  it  appears  to  me 
that  the  return  made  to  such  capital  loses  altogether  the  character  of 
profits,  and  is  governed  by  the  principles  of  rent.  It  is  true  that  a 
landlord  will  not  expend  capital  in  improving  his  estate,  unless  he 
expects  from  the  improvement  an  increase  of  income  surpassing  the 
interest  of  his  outlay.  Prospectively,  this  increase  of  income  may  be 
regarded  as  profit ; but  when  the  expense  has  been  incurred,  and 
the  improvement  made,  the  rent  of  the  improved  land  is  governed 
by  the  same  rules  as  that  of  the  unimproved.  Equally  fertile  land 
commands  an  equal  rent,  whether  its  fertility  is  natural  or  acquired  ; 
and  I cannot  think  that  the  incomes  of  those  who  own  the  Bedford 
Level  or  the  Lincolnshire  Wolds  ought  to  be  called  profit  and  not 
rent  because  those  lands  would  have  been  worth  next  to  nothing 
unless  capital  had  been  expended  on  them.  The  owners  are  not 
capitalists,  but  landlords ; they  have  parted  with  their  capital ; 
it  is  consumed,  destroyed ; and  neither  is,  nor  is  to  be,  returned  to 
them,  like  the  capital  of  a farmer  or  manufacturer,  from  what  it 
produces.  In  lieu  of  it  they  now  have  land  of  a certain  richness, 
which  yields  the  same  rent,  and  by  the  operation  of  the  same  causes, 
as  if  it  had  possessed  from  the  beginning  the  degree  of  fertihty  which 
has  been  artificially  given  to  it. 

Some  writers,  in  particular  Mr.  H.  C.  Carey,  take  away,  still 
more  completely  than  I have  attempted  to  do,  the  distinction 
between  these  two  sources  of  rent,  by  rejecting  one  of  them  altogether, 
and  considering  aU  rent  as  the  effect  of  capital  expended.  In 
proof  of  this,  Mr.  Carey  contends  that  the  whole  pecuniary  value  of 
all  the  land  in  any  country,  in  England  for  instance,  or  in  the 
United  States,  does  not  amount  to  anything  approaching  to  the 
sum  which  has  been  laid  out,  or  which  it  would  even  now  be  necessary 
to  lay  out,  in  order  to  bring  the  country  to  its  present  condition 
from  a state  of  primaeval  forest.  This  startling  statement  has  been 
seized  on  by  M.  Bastiat  ^ and  others,  as  a means  of  making  out  a 

^ [The  reference  to  Bastiat  was  inserted  in  the  3rd  ed.  (1852).  The 


RENT 


431 


stronger  case  than  could  otherwise  be  made  in  defence  of  property 
in  land.  Mr.  Carey’s  proposition,  in  its  most  obvious  meaning, 
is  equivalent  to  saying,  that  if  there  were  suddenly  added  to  the 
lands  of  England  an  unreclaimed  territory  of  equal  natural  fertility, 
it  would  not  be  worth  the  while  of  the  inhabitants  of  England  to 
reclaim  it : because  the  profits  of  the  operation  would  not  be  equal 
to  the  ordinary  interest  on  the  capital  expended.  To  which  as- 
sertion, if  any  answer  could  be  supposed  to  be  required,  it  would 
suffice  to  remark,  that  land  not  of  equal  but  of  greatly  inferior  quality 
to  that  previously  cultivated,  is  continually  reclaimed  in  England, 
at  an  expense  which  the  subsequently  accruing  rent  is  sufficient  to 
replace  completely  in  a small  number  of  years.  The  doctrine, 
moreover,  is  totally  opposed  to  Mr.  Carey’s  own  economical  opinions. 
No  one  maintains  more  strenuously  than  Mr.  Carey  the  undoubted 
truth,  that  as  society  advances  in  population,  wealth,  and  com- 
bination of  labour,  land  constantly  rises  in  value  and  price.  This, 
however,  could  not  possibly  be  true,  if  the  present  value  of  land 
were  less  than  the  expense  of  clearing  it  and  making  it  fit  for  cultiva- 
tion ; for  it  must  have  been  worth  this  immediately  after  it  was 
cleared ; and  according  to  Mr.  Carey  it  has  been  rising  in  value 
ever  since. 

When,  however,  Mr.  Carey  asserts  that  the  whole  land  of  any 
country  is  not  now  worth  the  capital  which  has  been  expended  on  it, 
he  does  not  mean  that  each  particular  estate  is  worth  less  than 
what  has  been  laid  out  in  improving  it,  and  that,  to  the  proprietors, 
the  improvement  of  the  land  has  been,  in  the  final  result,  a mis- 
calculation. He  means,  not  that  the  land  of  Great  Britain  would 
not  now  sell  for  what  has  been  laid  out  upon  it,  but  that  it  would 
not  sell  for  that  amount  plus  the  expense  of  making  aU  the  roads, 
canals,  and  railways.  This  is  probably  true,  but  is  no  more  to  the 
purpose,  and  no  more  important  in  political  economy,  than  if  the 
statement  had  been,  that  it  would  not  sell  for  the  sums  laid  out  on 
it  plus  the  national  debt,  or  plus  the  cost  of  the  French  Revolutionary 
war,  or  any  other  expense  incurred  for  a real  or  imaginary  public 
advantage.  The  roads,  railways,  and  canals  were  not  constructed 
to  give  value  to  land  : on  the  contrary,  their  natural  effect  was  to 
lower  its  value,  by  rendering  other  and  rival  lands  accessible  : and 
the  landlords  of  the  southern  counties  actually  petitioned  Parlia* 
ment  against  the  turnpike  roads  on  this  very  account. 

remainder  of  this  paragraph,  together  with  the  following  paragraph,  took  theit 
present  form  finally  in  the  6th  ed.  (1865).] 


432 


BOOK  IL  CHAPTER  XVL  § 6 


The  tendency  of  improved  communications  is  to  lower  existirg 
lents,  by  trenching  on  the  monopoly  of  the  land  nearest  to  the 
places  where  large  numbers  of  consumers  are  assembled.  Roads 
and  canals  are  not  intended  to  raise  the  value  of  the  land  which 
already  supplies  the  markets,  but  (among  other  purposes)  to  cheapen 
the  supply,  by  letting  in  the  produce  of  other  and  more  distant 
lands  ; and  the  more  effectually  this  purpose  is  attained,  the  lower 
rent  will  be.  If  we  could  imagine  that  the  railways  and  canals  of 
the  United  States,  instead  of  only  cheapening  communication,  did 
their  business  so  effectually  as  to  annihilate  cost  of  carriage  alto- 
gether, and  enable  the  produce  of  Michigan  to  reach  the  market  of 
New  York  as  quickly  and  as  cheaply  as  the  produce  of  Long  Island — 
the  whole  value  of  all  the  land  of  the  United  States  (except  such  as 
lies  convenient  for  building)  would  be  annihilated ; or  rather,  the 
best  would  only  sell  for  the  expense  of  clearing,  and  the  government 
tax  of  a dollar  and  a quarter  per  acre ; since  land  in  Michigan, 
equal  to  the  best  in  the  United  States,  may  be  had  in  unlimited 
abundance  by  that  amount  of  outlay.  But  it  is  strange  that  Mr. 
Carey  should  think  this  fact  inconsistent  with  the  Ricardo  theory 
of  rent.  Admitting  all  that  he  asserts,  it  is  still  true  that  as  long 
as  there  is  land  which  yields  no  rent,  the  land  which  does  yield  rent, 
does  so  in  consequence  of  some  advantage  which  it  enjoys,  in  fertility 
or  vicinity  to  markets,  over  the  other ; and  the  measure  of  its 
advantage  is  also  the  measure  of  its  rent.  And  the  cause  of  its 
yielding  rent  is  that  it  possesses  a natural  monopoly  ; the  quantity 
of  land,  as  favourably  circumstanced  as  itself,  not  being  sufficient 
to  supply  the  market.  These  propositions  constitute  the  theory 
of  rent  laid  down  by  Ricardo  ; and  if  they  are  true,  I cannot  see 
that  it  signifies  much  whether  the  rent  which  the  land  yields  at 
the  present  time,  is  greater  or  less  than  the  interest  of  the  capital 
which  has  been  laid  out  to  raise  its  value,  together  with  the  interest 
of  the  capital  which  has  been  laid  out  to  lower  its  value. 

Mr.  Carey’s  objection,  however,  has  somewhat  more  of  ingenuity 
than  the  arguments  commonly  met  with  against  the  theory  of  rent ; 
a theorem  which  may  be  called  the  j)ons  asinorum  of  political 
economy,  for  there  are,  I am  inclined  to  think,  few  persons  who  have 
refused  their  assent  to  it  except  from  not  having  thoroughly  under- 
stood it.  The  loose  and  inaccurate  way  in  which  it  is  often 
apprehended  by  those  who  affect  to  refute  it,  is  very  remarkable. 
Many,  for  instance,  have  imputed  absurdity  to  Mr.  Ricardo’s 
theory,  because  it  is  absurd  to  say  that  the  cultivation  of  inferior 


RENT 


433 


land  is  the  cause  of  rent  on  the  superior.  Mr.  Ricardo  does  not  say 
that  it  is  the  cultivation  of  inferior  land,  but  the  necessity  of  cultivate 
ing  it,  from  the  insufficiency  of  the  superior  land  to  feed  a growing 
population  : between  which  and  the  proposition  imputed  to  him 
there  is  no  less  a difference  than  that  between  demand  and  supply. 
Others  again  allege  as  an  objection  against  Ricardo,  that  if  all 
land  were  of  equal  fertility,  it  might  still  yield  a rent.  But 
Ricardo  says  precisely  the  same.  He  says  that  if  all  lands  were 
equally  fertile,  those  which  are  nearer  to  their  market  than  others, 
and  are  therefore  less  burthened  with  cost  of  carriage,  would  yield 
a rent  equivalent  to  the  advantage ; and  that  the  land  yielding 
no  rent  would  then  be,  not  the  least  fertile,  but  the  least  advantage- 
ously situated,  which  the  wants  of  the  community  required  to  be 
brought  into  cultivation.  It  is  also  distinctly  a portion  of  Ricardo’s 
doctrine,  that  even  apart  from  differences  of  situation,  the  land  of 
a country  supposed  to  be  of  uniform  fertility  would,  all  of  it,  on  a 
certain  supposition,  pay  rent : namely,  if  the  demand  of  the  com- 
munity required  that  it  should  all  be  cultivated,  and  cultivated 
beyond  the  point  at  which  a further  application  of  capital  begins 
to  be  attended  with  a smaller  proportional  return.  It  would  be 
impossible  to  show  that,  except  by  forcible  exaction,  the  whole 
land  of  a country  can  yield  a rent  on  any  other  supposition.^ 

§ 6.  After  this  view  of  the  nature  and  causes  of  rent,  let  , us 
turn  back  to  the  subject  of  profits,  and  bring  up  for  reconsideration 
one  of  the  propositions  laid  down  in  the  last  chapter.  We  there 
stated,  that  the  advances  of  the  capitalist,  or  in  other  words,  the 
expenses  of  production,  consist  solely  in  wages  of  labour ; that 
whatever  portion  of  the  outlay  is  not  wages,  is  previous  profit,  and 
whatever  is  not  previous  profit,  is  wages.  Rent,  however,  being 
an  element  which  it  is  impossible  to  resolve  into  either  profits  or 
wages,  we  were  obliged,  for  the  moment,  to  assume  that  the  capitalist 
is  not  required  to  pay  rent — to  give  an  equivalent  for  the  use  of  an 
appropriated  natural  agent : and  I undertook  to  show  in  the  proper 
place,  that  this  is  an  allowable  supposition,  and  that  rent  does  not 
really  form  any  part  of  the  expenses  of  production,  or  of  the  advances 
of  the  capitalist.  The  grounds  on  which  this  assertion  was  made 
are  now  apparent.  It  is  true  that  all  tenant  farmers,  and  many 

^ [So  from  the  6th  ed.  (1862).  Until  then  the  concluding  sentence  of  the 
paragraph  had  been  ; “ It  would  be  difficult  to  show  that  the  whole  land  of  the 
country  can  yield  a rent  on  any  other  supposition.”] 


434 


BOOK  II.  CHAPTER  XVI.  § 6 


other  classes  of  producers,  pay  rent.  But  we  have  now  seen,  that 
whoever  cultivates  land,  paying  a rent  for  it,  gets  in  return  for  his 
rent  an  instrument  of  superior  power  to  other  instruments  of  the 
same  kind  for  which  no  rent  is  paid.  The  superiority  of  the  instru- 
ment is  in  exact  proportion  to  the  rent  paid  for  it.  If  a few  persons 
had  steam-engines  of  superior  power  to  all  others  in  existence,  but 
limited  by  physical  laws  to  a number  short  of  the  demand,  the  rent 
which  a manufacturer  would  be  willing  to  pay  for  one  of  these 
steam-engines  could  not  be  looked  upon  as  an  addition  to  his  outlay, 
because  by  the  use  of  it  he  would  save  in  his  other  expenses  the 
equivalent  of  what  it  cost  him : without  it  he  could  not  do  the 
same  quantity  of  work,  unless  at  an  additional  expense  equal  to 
the  rent.  The  same  thing  is  true  of  land.  The  real  expenses  of 
production  are  those  incurred  on  the  worst  land,  or  by  the  capital 
employed  in  the  least  favourable  circumstances.  This  land  or 
capital  pays,  as  we  have  seen,  no  rent ; but  the  expenses  to  which 
it  is  subject  cause  all  other  land  or  agricultural  capital  to  be  sub- 
jected to  an  equivalent  expense  in  the  form  of  rent.  Whoever 
does  pay  rent  gets  back  its  full  value  in  extra  advantages,  and  the 
rent  which  be  pays  does  not  place  him  in  a worse  position  than,  but 
only  in  the  same  position  as,  his  fellow-producer  who  pays  no  rent, 
but  whose  instrument  is  one  of  inferior  efficiency. 

We  have  now  completed  the  exposition  of  the  laws  which  regulate 
the  distribution  of  the  produce  of  land,  labour,  and  capital,  as  far 
as  it  is  possible  to  discuss  those  laws  independently  of  the  instru- 
mentality by  which  in  a civilized  society  the  distribution  is  effected  ; 
the  machinery  of  Exchange  and  Price.  The  more  complete  elucida- 
tion and  final  confirmation  of  the  laws  which  we  have  laid  down, 
and  the  deduction  of  their  most  important  consequences,  must  be 
preceded  by  an  explanation  of  the  nature  and  working  of  that 
machinery — a subject  so  extensive  and  complicated  as  to  require  a 
separate  Book.^ 


[See  Appendix  R.  Beni.\ 


BOOK  III 


EXCHANGE 


CHAPTER  I 

OP  VALUE 

§ 1.  The  subject  on  which  we  are  now  about  to  enter  fills  so 
important  and  conspicuous  a position  in  political  economy,  that  in 
the  apprehension  of  some  thinkers  its  boundaries  confound  them- 
selves with  those  of  the  science  itself.  One  eminent  writer  has 
proposed  as  a name  for  Political  Economy,  “ Catallactics,”  or  the 
science  of  exchanges  : by  others  it  has  been  called  the  Science  of 
Values.  If  these  denominations  had  appeared  to  me  logically 
correct,  I must  have  placed  the  discussion  of  the  elementary  laws 
of  value  at  the  commencement  of  our  inquiry,  instead  of  postponing 
it  to  the  Third  Part ; and  the  possibility  of  so  long  deferring  it  is 
alone  a sufficient  proof  that  this  view  of  the  nature  of  Political 
Economy  is  too  confined.  It  is  true  that  in  the  preceding  Books  we 
have  not  escaped  the  necessity  of  anticipating  some  small  portion  of 
the  theory  of  Value,  especially  as  to  the  value  of  labour  and  of  land. 
It  is  nevertheless  evident,  that  of  the  two  great  departments  of 
Political  Economy,  the  production  of  wealth  and  its  distribution, 
the  consideration  of  Value  has  to  do  with  the  latter  alone  ; and  with 
that,  only  so  far  as  competition,  and  not  usage  or  custom,  is  the 
distributing  agency.  The  conditions  and  laws  of  Production  would 
be  the  same  as  they  are,  if  the  arrangements  of  society  did  not 
depend  on  Exchange,  or  did  not  admit  of  it.  Even  in  the  present 
system  of  industrial  life,  in  which  employments  are  minutely  sub- 
divided, and  all  concerned  in  production  depend  for  their  remunera- 
tion on  the  price  of  a particular  commodity,  exchange  is  not  the 


m 


BOOK  III.  CHAPTER  T.  § 2 


fundamental  law  of  tlie  distribution  of  the  produce,  no  more  than 
roads  and  carriages  are  the  essential  laws  of  motion,  but  merely  a 
part  of  the  machinery  for  effecting  it.  To  confound  these  ideas 
seems  to  me  not  only  a logical,  but  a practical  blunder.  It  is  a 
case  of  the  error  too  common  in  political  economy,  of  not  distinguish- 
ing between  necessities  arising  from  the  nature  of  things,  and  those 
created  by  social  arrangements : an  error  which  appears  to  me  to 
be  at  all  times  producing  two  opposite  mischiefs  ; on  the  one  hand, 
causing  political  economists  to  class  the  merely  temporary  truths 
of  their  subject  among  its  permanent  and  universal  laws  ; and  on 
the  other,  leading  many  persons  to  mistake  the  permanent  laws  of 
Production  (such  as  those  on  which  the  necessity  is  grounded  of 
restraining  population)  for  temporary  accidents  arising  from  the 
existing  constitution  of  society — which  those  who  would  frame  a 
new  system  of  social  arrangements  are  at  liberty  to  disregard. 

In  a state  of  society,  however,  in  which  the  industrial  system  is 
entirely  founded  on  purchase  and  sale,  each  individual,  for  the  most 
part,  living  not  on  things  in  the  production  of  which  he  himself  bears 
a part,  but  on  things  obtained  by  a double  exchange,  a sale  followed 
by  a purchase — the  question  of  Value  is  fundamental.  Almost 
every  speculation  respecting  the  economical  interests  of  a society 
thus  constituted  implies  some  theory  of  Value : the  smallest  error 
on  that  subject  infects  with  corresponding  error  all  our  other  con- 
clusions ; and  anything  vague  or  misty  in  our  conception  of  it 
creates  confusion  and  uncertainty  in  everything  else.  Happily, 
there  is  nothing  in  the  laws  of  value  which  remains  [1848]  for  the 
present  or  any  future  writer  to  clear  up  ; the  theory  of  the  subject 
is  complete : the  only  difficulty  to  be  overcome  is  that  of  so  stating 
it  as  to  solve  by  anticipation  the  chief  perplexities  which  occur  in 
applying  it:  and  to  do  this,  some  minuteness  of  exposition,  and 
considerable  demands  on  the  patience  of  the  reader,  are  unavoid- 
able. He  will  be  amply  repaid  however  (if  a stranger  to  these 
inquiries),  by  the  ease  and  rapidity  with  which  a thorough  under- 
standing of  this  subject  will  enable  him  to  fathom  most  of  the 
remaining  questions  of  political  economy. 

§ 2.  We  must  begin  by  settling  our  phraseology.  Adam  Smith, 
in  a passage  often  quoted,  has  touched  upon  the  most  obvious 
ambiguity  of  the  word  value ; which,  in  one  of  its  senses,  signifies 
usefulness,  in  another,  power  of  purchasing ; in  his  own  language, 
value  in  use  and  value  in  exchange.  But  (as  Mr.  De  Quincey  has 


VALUE 


437 


remarked)  in  illustrating  this  double  meaning  Adam  Smith  has 
himself  fallen  into  another  ambiguity.  Things  (he  says)  which  have 
the  greatest  value  in  use  have  often  little  or  no  value  in  exchange ; 
which  is  true,  since  that  which  can  be  obtained  without  labour  or 
sacrifice  will  command  no  price,  however  useful  or  needful  it  may  be. 
But  he  proceeds  to  add,  that  things  which  have  the  greatest  value 
in  exchange,  as  a diamond  for  example,  may  have  little  or  no  value 
in  use.  This  is  employing  the  word  use,  not  in  the  sense  in  which 
political  economy  is  concerned  with  it,  but  in  that  other  sense  in 
which  use  is  opposed  to  pleasure.  Political  economy  has  nothing  to 
do  with  the  comparative  estimation  of  different  uses  in  the  judgment 
of  a philosopher  or  of  a moralist.  The  use  of  a thing,  in  political 
economy,  means  its  capacity  to  satisfy  a desire  or  serve  a purpose. 
Diamonds  have  this  capacity  in  a high  degree,  and  unless  they  had 
it,  would  not  bear  any  price.  Value  in  use,  or  as  Mr.  De  Quincey 
calls  it,  teleologic  value,  is  the  extreme  limit  of  value  in  exchange. 
The  exchange  value  of  a thing  may  fall  short,  to  any  amount,  of  its 
value  in  use  ; but  that  it  can  ever  exceed  the  value  in  use  implies  a 
contradiction  ; it  supposes  that  persons  will  give,  to  possess  a thing, 
more  than  the  utmost  value  which  they  themselves  put  upon  it  as  a 
means  of  gratifying  their  inclinations. 

The  word  Value,  when  used  without  adjunct,  always  means,  in 
political  economy,  value  in  exchange ; or  as  it  has  been  called  by 
Adam  Smith  and  his  successors,  exchangeable  value,  a phrase  which 
no  amount  of  authority  that  can  be  quoted  for  it  can  make  other 
than  bad  English.  Mr.  De  Quincey  substitutes  the  term  Exchange 
Value,  which  is  unexceptionable. 

Exchange  value  requires  to  be  distinguished  from  Price.  The 
words  Value  and  Price  were  used  as  synonymous  by  the  early 
political  economists,  and  are  not  always  discriminated  even  by 
Ricardo.  But  the  most  accurate  modern  writers,  to  avoid  the 
wasteful  expenditure  of  two  good  scientific  terms  on  a single  idea, 
have  employed  Price  to  express  the  value  of  a thing  in  relation  to 
money ; the  quantity  of  money  for  which  it  will  exchange.  By 
the  price  of  a thing,  therefore,  we  shall  henceforth  understand  its 
value  in  money ; by  the  value,  or  exchange  value  of  a thing,  ita 
general  power  of  purchasing ; the  command  which  its  possession 
gives  over  purchaseable  commodities  in  general. 

§ 3.  But  here  a fresh  demand  for  explanation  presents  itself. 
What  is  meant  by  command  over  commodities  in  general  ? The 


♦38 


BOOK  m.  CHAPTER  I.  § 3 


same  thing  exchanges  for  a great  quantity  of  some  commodities, 
and  for  a very  small  quantity  of  others.  A suit  of  clothes  exchanges 
for  a great  quantity  of  bread,  and  for  a very  small  quantity  of 
precious  stones.  The  value  of  a thing  in  exchange  for  some  com- 
modities may  be  rising,  for  others  falling.  A coat  may  exchange  for 
less  bread  this  year  than  last,  if  the  harvest  has  been  bad,  but  for 
more  glass  or  iron,  if  a tax  has  been  taken  off  those  commodities,  or 
an  improvement  made  in  their  manufacture.  Has  the  value  of  the 
coat,  under  these  circumstances,  fallen  or  risen  ? It  is  impossible 
to  say  : all  that  can  be  said  is,  that  it  has  fallen  in  relation  to  one 
thing,  and  risen  in  respect  to  another.  But  there  is  another  case, 
in  which  no  one  would  have  any  hesitation  in  saying  what  sort  of 
change  had  taken  place  in  the  value  of  the  coat : namely,  if  the 
cause  in  which  the  disturbance  of  exchange  values  originated  was 
something  directly  affecting  the  coat  itself,  and  not  the  bread  or  the 
glass.  Suppose,  for  example,  that  an  invention  had  been  made  in 
machinery  by  which  broadcloth  could  be  woven  at  half  the  former 
cost.  The  effect  of  this  would  be  to  lower  the  value  of  a coat,  and 
if  lowered  by  this  cause,  it  would  be  lowered  not  in  relation  to  bread 
only  or  to  glass  only,  but  to  all  purchaseable  things,  except  such  as 
happened  to  be  affected  at  the  very  time  by  a similar  depressing 
cause.  We  should  therefore  say  that  there  had  been  a fall  in  the 
exchange  value  or  general  purchasing  power  of  a coat.  The  idea  of 
general  exchange  value  originates  in  the  fact,  that  there  really  are 
causes  which  tend  to  alter  the  value  of  a thing  in  exchange  for 
things  generally,  that  is,  for  all  things  which  are  not  themselves 
acted  upon  by  causes  of  similar  tendency. 

In  considering  exchange  value  scientifically,  it  is  expedient 
to  obstract  from  it  all  causes  except  those  which  originate  in  the 
very  commodity  imder  consideration.  Those  which  originate  in  the 
commodities  with  which  we  compare  it,  affect  its  value  in  relation 
to  those  commodities  ; but  those  which  originate  in  itself  affect  its 
value  in  relation  to  all  commodities.  In  order  the  more  completely 
to  confine  our  attention  to  these  last,  it  is  convenient  to  assume  that 
all  commodities  but  the  one  in  question  remain  invariable  in  their 
relative  values.  When  we  are  considering  the  causes  which  raise  or 
lower  the  value  of  com,  we  suppose  that  woollens,  sUks,  cutlery, 
sugar,  timber,  &c.,  while  varying  in  their  power  of  purchasing  corn, 
remain  constant  in  the  proportions  in  which  they  exchange  for  one 
another.  On  this  assumption,  any  one  of  them  may  be  taken  as  a 
representative  of  all  the  rest ; since  in  whatever  manner  corn  varies 


VALUE 


439 


in  value  with  respect  to  any  one  commodity,  it  varies  in  the  same 
manner  and  degree  with  respect  to  every  other  ; and  the  upward  or 
downward  movement  of  its  value  estimated  in  some  one  thing  is 
all  that  need  be  considered.  Its  money  value,  therefore,  or  price, 
will  represent  as  well  as  anything  else  its  general  exchange  value, 
or  purchasing  power  ; and  from  an  obvious  convenience  will  often 
be  employed  by  us  in  that  representative  character ; with  the  pro- 
viso that  money  itself  do  not  vary  in  its  general  purchasing  power, 
but  that  the  prices  of  all  things,  other  than  that  which  we  happen 
to  be  considering,  remain  unaltered. 

§ 4.  The  distinction  between  Value  and  Price,  as  we  have  now 
defined  them,  is  so  obvious,  as  scarcely  to  seem  in  need  of  any 
illustration.  But  in  political  economy  the  greatest  errors  arise 
from  overlooking  the  most  ob\dous  truths.  Simple  as  this  dis- 
tinction is,  it  has  consequences  with  which  a reader  unacquainted 
with  the  subject  would  do  weU  to  begin  early  by  making  himself 
thoroughly  familiar.  The  following  is  one  of  the  principal.  There 
is  such  a thing  as  a general  rise  of  prices.  All  commodities  may 
rise  in  their  money  price.  But  there  cannot  be  a general  rise  of 
values.  It  is  a contradiction  in  terms.  A can  only  rise  in  value  by 
exchanging  for  a greater  quantity  of  B and  C ; in  which  case  these 
must  exchange  for  a smaller  quantity  of  A.  All  things  cannot  rise 
relatively  to  one  another.  If  one-half  of  the  commodities  in  the 
market  rise  in  exchange  value,  the  very  terms  imply  a fall  of  the 
other  half  ; and  reciprocally,  the  fall  implies  a rise.  Things  which 
are  exchanged  for  one  another  can  no  more  all  fall,  or  all  rise,  than 
a dozen  runners  can  each  outrun  aU  the  rest,  or  a hundred  trees  all 
overtop  one  another.  Simple  as  this  truth  is,  we  shall  presently  see 
that  it  is  lost  sight  of  in  some  of  the  most  accredited  doctrines  both 
of  theorists  and  of  what  are  called  practical  men.  And  as  a first 
specimen  we  may  instance  the  great  importance  attached  in  the 
imagination  of  most  people  to  a rise  or  fall  of  general  prices.  Because 
when  the  price  of  any  oue  commodity  rises,  the  circumstance  usually 
indicates  a rise  of  its  value,  people  have  an  indistinct  feeling  when 
all  prices  rise,  as  if  all  things  simultaneously  had  risen  in  value,  and 
all  the  possessors  had  become  enriched.  That  the  money  prices  of 
aU  things  should  rise  or  fall,  provided  they  aU  rise  or  fall  equally,  is 
in  itself,  and  apart  from  existing  contracts,  of  no  consequence.  It 
affects  nobody’s  wages,  profits,  or  rent.  Every  one  gets  more  money 
in  the  one  case  and  less  in  the  other  ; but  of  all  that  is  to  be  bought 


410 


BOOK  III.  CHAPTER  I.  § 6 


with  money  they  get  neither  more  nor  less  than  before.  It  makes 
no  other  difference  than  that  of  using  more  or  fewer  counters  to 
reckon  by.  The  only  thing  which  in  this  case  is  really  altered  in 
value  is  money ; and  the  only  persons  who  either  gain  or  lose  are 
the  holders  of  money,  or  those  who  have  to  receive  or  to  pay  fixed 
sums  of  it.  There  is  a difference  to  annuitants  and  to  creditors  the 
one  way,  and  to  those  who  are  burthened  with  annuities,  or  with 
debts,  the  contrary  way.  There  is  a disturbance,  in  short,  of  fixed 
money  contracts  ; and  this  is  an  evil,  whether  it  takes  place  in  the 
debtor’s  favour  or  in  the  creditor’s.  But  as  to  future  transactions 
there  is  no  difference  to  any  one.  Let  it  therefore  be  remembered 
(and  occasions  will  often  arise  for  calling  it  to  mind)  that  a general 
rise  or  a general  fall  of  values  is  a contradiction  ; and  that  a general 
rise  or  a general  fall  of  prices  is  merely  tantamount  to  an  alteration 
in  the  value  of  money,  and  is  a matter  of  complete  indifference,  save 
in  so  far  as  it  affects  existing  contracts  for  receiving  and  paying 
fixed  pecuniary  amounts,  ^ and  (it  must  be  added)  as  it  affects  the 
interests  of  the  producers  of  money. 

§ 5.  Before  commencing  the  inquiry  into  the  laws  of  value  and 
price,  I have  one  further  observation  to  make.  I must  give  warning, 
once  for  all,  that  the  cases  I contemplate  are  those  in  which  values 
and  prices  are  determined  byi.competitiou^alone.  In  so  far  only  as 
they  are  thus  determined  can  they  be  reduced  to  any  assignable 
law.  The  buyers  must  be  supposed  as  studious  to  buy  cheap,  as 
the  sellers  to  sell  dear.  The  values  and  prices,  therefore,  to  which 
our  conclusions  apply,  are  mercantile  values  and  prices ; such 
prices  as  are  quoted  in  price-currents ; prices  in  the  wholesale  markets, 
in  which  buying  as  well  as  selling  is  a matter  of  business  ; in  which 
the  buyers  take  pains  to  know,  and  generally  do  know,  the  lowest 
price  at  which  an  article  of  a given  quahty  can  be  obtained ; and 
in  which,  therefore,  the  axiom  is  true,  that  there  cannot  be  for  the 
same  article,  of  the  same  quality,  two  prices  in  the  same  market. 
Our  propositions  will  be  true  in  a much  more  quahfied  sense  of 
retail  prices ; the  prices  paid  in  shops  for  articles  of  personal  con- 
sumption. For  such  things  there  often  are  not  merely  two,  but 
many  prices,  in  different  shops,  or  even  in  the  same  shop  ; habit  and 
accident  having  as  much  to  do  in  the  matter  as  general  causes. 
Purchases  for  private  use,  even  by  people-  in  business,  are  not 


[The  remainirg  words  of  the  sentence  were  added  in  the  6th  ed.  (1865).] 


VALUE 


441 


ttlways  made  on  business  principles  : the  feelings  which  come  into 
play  in  the  operation  of  getting,  and  in  that  of  spending  their  income, 
are  often  extremely  different.  Either  from  indolence,  or  careless- 
ness, or  because  people  think  it  fine  to  pay  and  ask  no  questions, 
three-fourths  of  those  who  can  afford  it  give  much  higher  prices 
than  necessary  for  the  things  they  consume ; while  the  poor  often 
do  the  same  from  ignorance  and  defect  of  judgment,  want  of  time 
for  searching  and  making  inquiry,  and  not  unfrequently  from 
coercion,  open  or  disguised.  For  these  reasons,  retail  prices  do  not 
follow  with  all  the  regularity  which  might  be  expected  the  action 
of  the  causes  which  determine  wholesale  prices.  The  influence  of 
those  causes  is  ultimately  felt  in  the  retail  markets,  and  is  the  real 
source  of  such  variations  in  retail  prices  as  are  of  a general  and 
permanent  character.  But  there  is  no  regular  or  exact  correspond- 
ence. Shoes  of  equally  good  quality  are  sold  in  different  shops  at 
prices  which  differ  considerably ; and  the  price  of  leather  may  fall 
without  causing  the  richer  class  of  buyers  to  pay  less  for  shoes. 
Nevertheless,  shoes  do  sometimes  fall  in  price ; and  when  they  do, 
the  cause  is  always  some  such  general  circumstance  as  the  cheapen- 
ing of  leather  : and  when  leather  is  cheapened,  even  if  no  difference 
shows  itself  in  shops  frequented  by  rich  people,  the  artizan  and  the 
labourer  generally  get  their  shoes  cheaper,  and  there  is  a visible 
diminution  in  the  contract  prices  at  which  shoes  are  delivered  for 
the  supply  of  a workhouse  or  of  a regiment.  In  all  reasoning 
about  prices,  the  proviso  must  be  understood,  “ supposing  all 
parties  to  take  care  of  their  own  interest.”  Inattention  to  these 
distinctions  has  led  to  improper  appHcations  of  the  abstract  prin- 
ciples of  political  economy,  and  still  oftener  to  an  undue  discrediting 
of  those  principles,  through  their  being  compared  with  a different 
sort  of  facts  from  those  which  they  contemplate,  or  which  can  fairly 
be  expected  to  accord  with  them* 


CHAPTER  II 


OF  DEMAND  AND  SUPPLY,  IN  THEIR  RELATION  TO  VALUE 

§ 1.  That  a tliiiig  may  have  any  value  in  exchange,  two  con- 
ditions are  necessary.  It  mush  be  of  some  use  ; that  is  (as  already 
explained),  it  must  conduce  to  some  purpose,  satisfy  some  deshe. 
No  one  will  pay  a price,  or  part  with  anything  which  serves  some  of 
his  purposes,  to  obtain  a thing  which  serves  none  of  them.  But, 
secondly,  the  thing  must  not  only  have  some  utility,  there  must  also 
be  some  difficulty  in  its  attainment.  “ Any  article  whatever,”  says 
Mr.  De  Quincey,*  “ to  obtain  that  artificial  sort  of  value  which  is 
meant  by  exchange  value,  must  begin  by  offering  itself  as  a means 
to  some  desirable  purpose ; and  secondly,  even  though  possessing 
incontestably  this  preliminary  advantage,  it  will  never  ascend  to  an 
exchange  value  in  cases  where  it  can  be  obtained  gratuitously  and 
without  effort ; of  which  last  terms  both  are  necessary  as  limitations. 
For  often  it  will  happen  that  some  desirable  object  may  be  obtained 
gratuitously;  stoop,  and  you  gather  it  at  your  feet;  but  still, 
because  the  continued  iteration  of  this  stooping  exacts  a laborious 
effort,  very  soon  it  is  found  that  to  gather  for  yourself  virtually  is 
not  gratuitous.  In  the  vast  forests  of  the  Canadas,  at  intervals, 
wild  strawberries  may  be  gratuitously  gathered  by  shiploads  : yet 
such  is  the  exhaustion  of  a stooping  posture,  and  of  a labour  so 
monotonous,  that  everybody  is  soon  glad  to  resign  the  service  into 
mercenary  hands.” 

As  was  pointed  out  in  the  last  chapter,  the  utility  of  a thing  in 
the  estimation  of  the  purchaser  is  the  extreme  limit  of  its  exchange 
value : higher  the  value  cannot  ascend ; peculiar  circumstances 
are  required  to  raise  it  so  high.  This  topic  is  happily  illustrated  by 
Mr.  De  Quincey.  “ Walk  into  almost  any  possible  shop,  buy  the 


Logic  of  Political  Economy,  p.  13. 


DEMAND  AND  SUPPLY 


443 


first  article  you  see  ; what  will  determine  its  price  ? In  the  ninety- 
nine  cases  out  of  a hundred,  simply  the  element  D — difficulty  of 
attainmexit.  The  other  element  U,  or  intrinsic  utility,  will  be 
perfectly  inoperative.  Let  the  thing  (measured  by  its  uses)  be,  for 
your  purposes,  worth  ten  guineas,  so  that  you  would  rather  give  ten 
guineas  than  lose  it ; yet,  if  the  difficulty  of  producing  it  be  only 
worth  one  guinea,  one  guinea  is  the  price  which  it  will  bear.  But 
still  not  the  less,  though  U is  inoperative,  can  U be  supposed  absent  ? 
By  no  possibility ; for,  if  it  had,  been  absent,  assuredly  you  would 
not  have  bought  the  article  even  at  the  lowest  price.  U acts  upon 
you,  though  it  does  not  act  upon  the  price.  On  the  other  hand,  in 
the  hundredth  case,  we  will  suppose  the  circumstances  reversed : 
you  are  on  Lake  Superior  in  a steam-boat,  making  your  way  to  an 
unsettled  region  800  miles  a-head  of  civilization,  and  consciously 
with  no  chance  at  all  of  purchasing  any  luxury  whatsoever,  little 
luxury  or  big  luxury,  for  the  space  of  ten  years  to  come.  One 
fellow-passenger,  whom  you  will  part  with  before  sunset,  has  a 
powerful  musical  snufi-box ; knowing  by  experience  the  power  of 
such  a toy  over  your  own  feelings,  the  magic  with  which  at  times  it 
lulls  your  agitations  of  mind,  you  are  vehemently  desirous  to  pur- 
chase it.  In  the  hour  of  leaving  London  you  had  forgot  to  do  so  ; 
here  is  a final  chance.  But  the  owner,  aware  of  your  situation  not 
less  than  yourself,  is  determined  to  operate  by  a strain  pushed  to 
the  very  uttermost  upon  U,  upon  the  intrinsic  worth  of  the  article 
in  your  individual  estimate  for  your  individual  purposes.  He  will 
not  hear  of  D as  any  controlling  power  or  mitigating  agency  in  the 
case ; and  finally,  although  at  six  guineas  a-piece  in  London  or 
Paris  you  might  have  loaded  a waggon  with  such  boxes,  you  pay 
sixty  rather  than  lose  it  when  the  last  knell  of  the  clock  has  sounded» 
which  summons  you  to  buy  now  or  to  forfeit  for  ever.  Here,  as 
before,  only  one  element  is  operative  ; before  it  was  D,  now  it  is  U. 
But  after  all,  D was  not  absent,  though  inoperative.  The  inertness 
of  D allowed  U to  put  forth  its  total  effect.  The  practical  com- 
pression of  D being  withdrawn,  U springs  up  like  water  in  a pump 
when  released  from  the  pressure  of  air.  Yet  still  that  D was  present 
to  your  thoughts,  though  the  price  was  otherwise  regulated,  is 
evident ; both  because  U and  D must  coexist  in  order  to  found  any 
case  of  exchange  value  whatever,  and  because  undeniably  you  take 
into  very  particular  consideration  this  D,  the  extreme  difficulty  of 
attainment  (which  here  is  the  greatest  possible,  viz.  an  impossibility) 
before  you  consent  to  have  the  price  racked  up  to  U.  The  special 


444 


BOOK  III.  CHAPTER  II.  § 2 


D has  vanished ; but  it  is  replaced  in  your  thoughts  by  an  un- 
limited D.  Undoubtedly  you  have  submitted  to  U in  extremity 
as  the  regulating  force  of  the  price  ; but  it  was  under  a sense  of  D’s 
latent  presence.  Yet  D is  so  far  from  exerting  any  positive  force, 
that  the  retirement  of  D from  all  agency  whatever  on  the  price — 
this  it  is  which  creates  as  it  were  a perfect  vacuum,  and  through 
that  vacuum  U rushes  up  to  its  highest  and  ultimate  gradation.” 
This  case,  in  which  the  value  is  wholly  regulated  by  the  necessities 
or  desires  of  the  purchaser,  is  the  case  of  strict  and  absolute  monopoly ; 
in  which,  the  article  desired  being  only  obtainable  from  one  person, 
he  can  exact  any  equivalent,  short  of  the  point  at  which  no  pur- 
chaser could  be  found.  But  it  is  not  a necessary  consequence,  even 
of  complete  monopoly,  that  the  value  should  be  forced  up  to  this 
ultimate  hmit ; as  will  be  seen  when  we  have  considered  the  law 
of  value  in  so  far  as  depending  on  the  other  element,  difficulty  of 
attainment. 


§ 2.  The  difficulty  of  attainment  which  determines  value  is 
not  always  the  same  kind  of  difficulty.  It  sometimes  consists  in  an 
absolute  limitation  of  the  supply.  There  are  things  of  which  it  is 
physically  impossible  to  increase  the  quantity  beyond  certain  narrow 
limits.  Such  are  those  wines  which  can  be  grown  only  in  pecuhar 
circumstances  of  soil,  climate,  and  exposure.  Such  also  are  ancient 
sculptures  ; pictures  by  old  masters  ; rare  books  or  coins,  or  other 
articles  of  antiquarian  curiosity.  Among  such  may  also  be  reckoned 
houses  and  building-ground  in  a town  of  definite  extent  (such  as 
Venice,  or  any  fortified  town  where  fortifications  are  necessary  to 
I most  desirable  sites  in  any  town  whatever;  houses 

* ■ ^ H ' and  parks  peculiarly  favoured  by  natural  beauty,  in  places  where 
that  advantage  is  uncommon.  Potentially,  all  land  whatever  is  a 
( commodity  of  this  class  ; and  might  be  practically  so  in  countries 

fully  occupied  and  cultivated. 

But  there  is  another  category  (embracing  the  majority  of  all 
things  that  are  bought  and  sold),  in  which  the  obstacle  to  attain- 
, ^ ^ ment  co^ists  only  in  the  labour  and  expense  requisite  to  produce 
Without  a certain  labour  and~expense  it  cannot 
be  had  : but  when  any  one  is  willing  to  incur  these,  there  needs  be 
no  Hmit  to  the  multipHcation  of  the  product.  If  there  were  labourers 
enough  and  machinery  enough,  cottons,  woollens,  or  Hnens  might 
be  produced  by  thousands  of  yards  for  every  single  yard  now  manu- 
factured. There  would  be  a point,  no  doubt,  where  further  increase 


e<’-  Y' 


DEMAND  AND  SUPPLY 


445 


would  be  stopped  by  the  incapacity  of  the  earth  to  afford  more  of 
the  material.  But  there  is  no  need,  for  any  purpose  of  political 
economy,  to  contemplate  a time  when  this  ideal  limit  could  become 
a practical  one. 

There  is  a third  case,  intermediate  between  the  two  preceding, 
and  rather  more  complex,  which  I shall  at  present  merely  indicate, 
but  the  importance  of  which  in  political  economy  is  extremely 
great.  There  are  commodities  which  can  be  multiplied  to  an  in- 
dehnite  extent  by  labour  and  expendituro,  but  not  by  a.  fixed  a.Tnonnt  3.  ; 

of  labour  and  expenditure.  Only  a limited  quantity  can-be-produced  ^ ^ ' 

cost*^^o  this  class,  as  has  been  often  repeated,  agricultural  pro-  \ 

duce  belongs ; and  generally  all  the  rude  produce  of  the  earth ; 
and  this  peculiarity  is  a source  of  very  important  consequences ; j 
one  of  which  is  the  necessity  of  a limit  to  population  ; and  another,  ^ 
the  payment  of  rent. 


§ 3.  These  being  the  three  classes,  in  one  or  other  of  which 
all  things  that  are  bought  and  sold  must  take  their  place,  we  shall 
consider  them  in  their  order.  And  first,  of  things  absolutely  limited 
in  quantity,  such  as  ancient  sculptures  or  pictures. 

"”l5f~such  things  it  is  commonly  said,  that  their  value  depends 
upon  their  scarcity : but  the  expression  is  not  sufficiently  definite 
to  serve  our  purpose.  Others  say,  with  somewhat  greater  precision, 
that  the  value  depends  on  the  demand  and  the  supply.  But  even 
this  statement  requires  much  explanation,  to  make  it  a clear  exponent 
of  the  relation  between  the  value  of  a thing,  and  the  causes  of  which 
that  value  is  an  efiect. 

The  supply  of  a commodity  is  an  inteUigible  expression  : it  means 
the  quantity  offered  for  sale ; the  quantity  that  is  to  be  had,  at  a 
given  time  and  place^  by  those  who  wish  to  purchase  it.  But  what 
is  meant  by  the  demand  ? Not  the  mere  desire  for  the  commodity. 
A beggar  may  desire  a diamond  ; but  his  desire,  however  great,  will 
have  no  infiuence  on  the  price.  Writers  have  therefore  given  a more 
hmited  sense  to  demand,  and  have  defined  it,  the  wish  to  possess, 
combined  with  the  power  of  purchasing.  To  distinguish  demand 
in  this  technical  sense,  from  the  demand  which  is  synonymous 
with  desire,  they  call  the  former  effedual  demand.*  After  this 

* Adam  Smith,  who  introduced  the  expression  ‘‘effectual  demand,”  em- 
ployed it  to  denote  the  demand  of  those  who  are  willing  and  able  to  give  for 
the  commodity  what  he  calls  its  natural  price,  that  is  the  price  which  will 


446 


BOOK  III.  CHAPTER  II.  § 4 


explanation,  it  is  usually  supposed  that  there  remains  no  further 
difficulty,  and  that  the  value  depends  upon  the  ratio  between  the 
fiflectual  demand,  as  thus  defined,  and  the  supply, 

^ These'phrSes,  however,  fail  to  satisfy  any  one  who  requires 
clear  ideas,  and  a perfectly  precise  expression  of  them.  Some 
confusion  must  always  attach  to  a phrase  so  inappropriate  as  that 
of  a ratio  between  two  things  not  of  the  same  denomination.  What 
ratio  can  there  be  between  a quantity  and  a desire,  or  even  a desire 
combined  with  a power  ? A ratio  between  demand  and  supply  is 
only  intelligible  if  byjem^we  mean  the  quantity  demanded,  and 
“ ta^atio  intended  is  that  bntweea^the  quantity  demanded  and 
the  quantity  supplied,  But  again,  the. quantity  demfl.Tirqp.q  a 
^^Qjj:Ptity^ey.en  at  the^fiamfijtjme  and  place  ; it  varies  according 
tQjhej^e ; if  the  thing  is  cheap,  there  is  usually  a demand  for 
more  of  it  than  when  it  is  dear.  Tha=^ancL  thereW^  p.rfly 
Bj^  it  was  before  laid  down  thnf. 

gepends  on  the  demand.  From  this  contradiction  how  shall  we 
extricate  ourselves?  solve  the  paradox,  of  two  things  each 
depending  upon  the  other  ? ' 


solution  of  these  difficulties  is  obvious  enough  the 
thfficulties  themselves  are  not  fanciful ; and  I bring  them  forward 
thus  prominently,  because  I am  certain  that  they  obscurely  haunt 
every  inquirer  into  the  subject  who  has  not  openly  faced  and 
toinctly  reahzed  them.  Undoubtedly  the  true  solution  must 
have  been  frequently  given,  though  I cannot  call  to  mind  any  one 
who  had  pven  it  before  myself,  except  the  eminently  clear  tbinW 
and  shlful  expositor,  3.  B.  Say.  I should  have  imagined,  however 
that  It  must  be  familiar  to  all  political  economists,  if  the  writings  of 
several  did  not  give  evidence  of  some  want  of  clearness  on  the 
point  and  if  the  mstance  of  Mr.  De  Quincey  did  not  prove  that  the 
complete  non-recognition  and  implied  denial  of  it  are  compatible 
with  great  intellectual  ingenuity,  and  close  intimacy  with  the  subiect 
matter. 


5*;  Meamngjixthe worddemand, the quantitv demanHeH 
temembsrmgjtoj^  is  not  a fixed  quantity,  but  in  general  varies 
accOTdipg_te_%_ya^et  us  su^^SsTEEarthe.  dlS^TSFioine 
partici^r  time  exceeds  the  supply,  that  is.  there  are  persons  re^y  to 
buy.  at  the  market  value,  a greater  quantity  than  is  ofiered  for  sale. 

-rket.-Soe  hia  chapter 


DEMAND  AND  SUPPLY 


447 


Competition  takes  place  on  tlie  side  of  the  buyers,,  and  the  value 
rises  : but  how  much  ? In  the  ratio  (some  may  suppose)  of  the 
deficiency  : if  the  demand  exceeds  the  supply  by  one-third,  the  value 
rises  one-third.  By  no  means : for  when  the  value  has  risen 
one-third,  the  demand  may  still  exceed  the  supply ; there  macy, 
even  at  that  higher  value,  be  a greater  quantity  wanted  than  is  to 
be  had ; and  the  competition  of  buyers  may  still  continue.]  If 
the  article  is  a necessary  of  life,  which,  rather  than  resign,  people 
are  willing  to  pay  for  at  any  price,  a deficiency  of  one-third  may 
raise  the  price  to  double,  triple,  or  quadruple.*  Or,  on  the  contrary, 
the  competition  may  cease  before  the  value  has  risen  in  even  the 
proportion  of  the  deficiency.  A rise,  short  of  one-third,  may  place  the 
article  beyond  the  means,  or  beyond  the  inclinations,  of  purchasers 
to  the  full  amount.  At  what  point,  then,  will  the  rise  be  arrested  ? 

o^brmgi~Idfwa^d~ additionaI^5lfrs  su^^ent^^^ 
in  eithe7~dnhese  ways,  or  by  a i 
be£Qm£g^  equal  and  no  more  than  equal  to 
value  will  stop. 

The  converse  case  is  equally  simple.  Instead  of  a demand 
beyond  the  supply,  let  us  suppose  a supply  exceeding  the  demand. 
The  competition  will  now  be  on  the  side  of  the  sellers : the  extra 
quantity  can  only  find  a market  by  calling  forth  an  additional  demand 
equal  to  itself.  This  is  accomplished  by  means  of  cheapness  ; the 
value  falls,  and  brings  the  article  within  the  reach  of  more  numerous 
customers,  or  induces  those  who  were  already  consumers  to  make 
increased  purchases.  The  fall  of  value  required  to  re-establish 
equality  is  different  in  different  cases.  The  kinds  of  things  in  which 
it  is  commonly  greatest  are  at  the  two  extremities  of  the  scale ; 
absolute  necessaries,  or  those  peculiar  luxuries,  the  taste  for  which 
is  confined  to  a small  class.  In  the  case  of  food,  as  those  who  have 
already  enough  do  not  require  more  on  account  of  its  cheapness,  but 
rather  expend  in  other  things  what  they  save  in  food,  the  increased 
consumption  occasioned  by  cheapness  carries  ofi,  as  experience 


* “ The  price  of  corn  in  this  country  has  risen  from  100  to  200  per  cent  and 
upwards,  when  the  utmost  computed  deficiency  of  the  crops  has  not  been  more 
than  between  one-sixth  and  one- third  below  an  average,  and  when  that  deficiency 
has  been  relieved  by  foreign  supplies.  If  there  should  be  a deficiency  of  the 
crops  amounting  to  one-third,  without  any  surplus  from  a former  year,  and 
without  any  chance  of  relief  by  importation,  the  price  might  rise  five,  six,  or 
even  tenfold.” — Tooke’s  History  of  Prices,  vol.  i.  pp.  13-5. 


448 


BOOK  TTT.  CHAPTER  H.  f 5 


abundact 

“ practically  arrested  only  when  the  farmers 
withdraw  their  corn,  and  hold  it  back  in  hopes  of  a higher  price  • 
or  by  the  operations  of  speculators  who  buy  com  when  it  is  dieap’ 

meth^^,dfiiaaa^ajd^^  equa!ize.d.bv  an  increased 

emand,_ae^idt_pf  cheapnesa,_or  by  withdrawipg_apart  of  the 
are  in  either  case. 

Wus  we  see  that  the  idea  of  a ratio,  as  between  demand  and 
supply,  IS  out  of  place,  and  has  no  concern  in  the  matter  • the 
P’~°^^^^gga^ggl-aa5lagzJaJhaL  an  eauatim..  Demand  aSd 
supply,  the  quantity  demanded  andthi  quCT^supplied,  will  be 
made  equal.  I|_im£qaaJ  .at  any  moment,  competition  eqnalwe. 
th^and  the  manner  in  which  this  is  done  is  by  an  adjustment 
demand  increases,  the  valne  ; if  the  demand 
dummies  the  va|ig^falls  : again,  if  the  supply  falls  off,  the  value 
nses;  and  falls  if  the  supply  is  increased.  The  rise_or Jie^ll 
contoues  unffl  the.  demand  and  supply  are  again  equal  to  one 
another:  and  the  value  which  a commodity  will  bring  in  any 
market  is  no  other  than  the  value  which,  in  that  market,  gives  a 
deinand  just  si^cmnt  to  carry  off  the  existing  or  expected  supply. 

This,  then  is  t^  Law  of  Value^with  respect,  fn  all  ^^mmeditin 
not  susceptible  of  bein^multjplied  at  pleasurj.  Such  commodities 
n^oubt,  are  eiSj^ns.  There  is  another  law  for  that  much 
larpr  class  of  things,  which  admit  of  indefinite  multipUcation.  But 
It  13  not  the  less  necessary  to  conceive  distinctly  and  grasp  firmly 
the  theory  of  this  exceptional  case.  In  the  first  place,  it  will  be 
found  to  be  of  great  assistance  in  rendering  the  more  common  case 
intelhgible.  And  in  the  next  place,  the  principle  of  the  exception 
stretches  wider,  and  embraces  more  cases,  than  might  at  first  be 


§ 5.  There  are  but  few  commodities  which  are  naturally  and 
necessary  limited  in  supply.  But  any  commodity  whatever  may 
be  artificially  so.  Any  commodity  may  be  the  subject  of  a mono- 
poly : hke  tea,  in  this  country,  up  to  1834;  tobacco  in  France 
opium  in  British  India,  at  present  [1848].  The  price  of  a monopoHzed 
commodity  IS  commonly  supposed  to  be  arbitrary;  depending  on 
the  will  of  the  monopolist,  and  limited  only  (as  in  Mr.  De  Quincey’a 


See  Tooke,  and  the  Beport  of  the  Agricnltural  Committee  of  1821. 


DEMAND  AND  SUPPLY 


449 


case  of  the  musical  box  in  the  wilds  of  America)  by  the  buyer’s  extreme 
estimate  of  its  worth  to  himself.  This  is  in  one  sense  true,  but  forms 
no  exception,  nevertheless,  to  the  dependence  of  the  value  on 
supply  and  demand.  The  monopolist  can  fix  the  value  as  high  as 
he  pleases,  short  of  what  the  consumer  either  could  not  or  would 
not  pay ; but  he  can  only  do  so  by  limiting  the  supply.  The  Dutch 
East  India  Company  obtained  a monopoly  price  for  the  produce 
of  the  Spice  Islands,  but  to  do  so  they  were  obliged,  in  good  seasons, 
to  destroy  a portion  of  the  crop.  Had  they  persisted  in  selling  all 
that  they  produced,  they  must  have  forced  a market  by  reducing  the 
price,  so  low,  perhaps,  that  they  would  have  received  for  the  larger 
quantity  a less  total  return  than  for  the  smaller  : at  least  they 
showed  that  such  was  their  opinion  by  destroying  the  surplus. 
Even  on  Lake  Superior,  Mr.  De  Quincey’s  huckster  could  not  have 
sold  his  box  for  sixty  guineas,  if  he  had  possessed  two  musical 
boxes  and  desired  to  sell  them  both.  Supposing  the  cost  price  of 
each  to  be  six  guineas,  he  would  have  taken  seventy  for  the  two  in 
preference  to  sixty  for  one ; that  is,  although  his  monopoly  was 
the  closest  possible,  he  would  have  sold  the  boxes  at  thirty-five 
guineas  each,  notwithstanding  that  sixty  was  not  beyond  the  buyer’s 
estimate  of  the  article  for  his  purposes.  Monopoly  value,  therefore, 
does  not  depend  on  any  peculiar  principle,  but  is  a mere  variety  of  the 
ordinary  case  of  demand  and  supply. 

Again,  though  there  are  few  commodities  which  are  at  all  times 
and  for  ever  unsusceptible  of  increase  of  supply,  any  commodity 
whatever  may  be  temporarily  so  ; and  with  some  commodities  this 
is  habitually  the  case.  Agricultural  produce,  for  example,  cannot 
be  increased  in  quantity  before  the  next  harvest ; the  quantity  of 
com  already  existing  in  the  world  is  all  that  can  be  had  for  some- 
times a year  to  come.  During  that  interval  corn  is  practically 
assimilated  to  things  of  which  the  quantity  cannot  be  increased. 
In  the  case  of  most  commodities,  it  requires  a certain  time  to  increase 
their  quantity;  and  if  the  demand  increases,  then,  until  a correspond- 
ing supply  can  be  brought  forward,  that  is,  until  the  supply  can 
accommodate  itself  to  the  demand,  the  value  will  so  rise  as  to 
accommodate  the  demand  to  the  supply. 

There  is  another  case,  the  exact  converse  of  this.  Thei|^re 
Bome_articles  of  which  the  supply  may  be  indefinitely  increased, 
but  nanunthft  rapidly  diminished.  There  are  things  so  durable 
that  the  quantity  in  existence  is  at  all  times  very  great  in  com- 
parison with  the  annual  produce.  Gold,  and  the  more  durable 


450 


BOOK  IIL  CHAPTER  IL  § 5 


metals,  are  tilings  of  this  sort;  and  also  houses.  The  supply  of 
such  things  might  be  at  once  diminished  by  destroying  them ; 
but  to  do  this  could  only  be  the  interest  of  the  possessor  if  he  had 
a monopoly  of  the  article,  and  could  repay  himself  for  the  destruction 
of  a part  by  the  increased  value  of  the  remainder.  The  value,  there- 
fore, of  such  things  may  continue  for  a long  time  so  low,  either  from 
excess  of  supply  or  falling  off  in  the  demand,  as  to  put  a complete 
stop  to  further  production ; the  diminution  of  supply  by  wearing 
out  being  so  slow  a process,  that  a long  time  is  requisite,  even  under 
a total  suspension  of  production,  to  restore  the  original  value. 
During  that  interval  the  value  will  be  regulated  solely  by  supply  and 
demand,  and  will  rise  very  gradually  as  the  existing  stock  wears  out, 
until  there  is  again  a remunerating  value,  and  production  resumes 
its  course. 

Finally,  there  are  commodities  of  which,  though  capable  of 
being  increased  or  diminished  to  a great,  and  even  an  unlimited 
extent,  the  value  never  depends  upon  anything  but  demand  and 
supply.  This  is  the  case,  in  particular,  with  the  commodity  Labour  ; 
of  the  value  of  which  we  have  treated  copiously  in  the  preceding  Book : 
and  there  are  many  cases  besides,  in  which  we  shall  find  it  necessary  to 
call  in  this  principle  to  solve  difficult  questions  of  exchange  value. 
This  will  be  particularly  exemplified  when  we  treat  of  International 
Values  ; that  is,  of  the  terms  of  interchange  between  things  produced 
in  different  countries,  or,  to  speak  more  generally,  in  distant  places. 
But  into  these  questions  we  cannot  enter,  until  we  shall  have 
examined  the  case  of  commodities  which  can  be  increased  in  quantity 
indefinitely  and  at  pleasure ; and  shall  have  determined  by  what 
law,  other  than  that  of  Demand  and  Supply the  permanent  or 
average  values  of  such  commodities  are  regulated.  This  we  shall 
do  in  the  next  chapter. 


CHAPTER  III 


OP  COST  OP  PRODUCTION,  IN  ITS  RELATION  TO  VALUE 


§ 1.  When  the  production  of  a commodity  is  the  effect  of 
labour  and  expenditure,  whether  the  commodity  is  susceptible 
of  unlimited  multiplication  or  not,  there  is  a minimum  value  which 
is  the  essential  condition  of  its  being  permanently,  produced.  ^The 
value  at  any  particular  time  is  the  result  of  sup_ply:  and  demand; 
and  is  always  that  which  is  necessary  to  create  a market  for  the 
existing  supply.  But  unless  that  value  is  sufficient  to  repay 
the  Cost  of  Production,  and  to  afford,  besides,  the  ordinary  expecta- 
tion of  profit,  the  commodity  will  not  continue  to  be  produced. 
Capitahsts  will  not  go  on  permanently  producing  at  a loss.  They 
will  not  even  go  on  producing  at  a profit  less  than  they  can  live  on. 
Persons  whose  capital  is  already  embarked,  and  cannot  be  easily 
extricated,  will  persevere  for  a considerable  time  without  profit,  and 
have  been  known  to  persevere  even  at  a loss,  in  hope  of  better  times. 
But  they  will  not  do  so  indefinitely,  or  when  there  is  nothing  to  indicate 
that  times  are  hkely  to  improve.  No  new  capital  will  be  invested 
in  an  employment,  unless  there  be  an  expectation  not  only  of  some 
profit,  but  of  a profit  as  great  (regard  being  had  to  the  degree  of 
eligibility  of  the  employment  in  other  respects)  as  can  be  hoped 
for  in  any  other  occupation  at  that  time  and  place.  When  such 
profit  is  evidently  not  to  be  had,  if  people  do  not  actually  withdraw 
their  capital,  they  at  least  abstain  from  replacing  it  when  consumed. 
The  cost  of  1 


fore  be  called  the  necessary  price,  or  value,  of  all  things  made  by 
l^our  and  capital.  Nobody  willingly  produces  in  the  prospect 
of  loss.  Whoever  does  so,  does  it  under  a miscalculation,  which 
he  corrects  as  fast  as  he  is  able. 

When  a commodity  is  not  only  made  by  labour  and  capital, 
but  can  be  made  by  them  iu  indefinite  quantity,  this  Necessary 
Value,  the  minimum  with  which  the  producers  will  be  content,  is 


452 


BOOK  III.  CHAPTER  III.  § 1 


also,  if  competition  is  free  and  active,  the  maximum  which  they 
can  expect.  If  the  value  of  a commodity  is  such  that  it  repays  the 
cost  of  production  not  only  with  the  customary,  but  with  a higher 
rate  of  profit,  capital  rushes  to  share  in  this  extra  gain,  and  by 
increasing  the  supply  of  the  article,  reduces  its  value.  This  is  not 
a mere  supposition  or  surmise,  but  a fact  familiar  to  those  conversant 
with  commercial  operations.  Whenever  a new  line  of  business 
presents  itself,  offering  a hope  of  unusual  profits,  and  whenever 
any  established  trade  or  manufacture  is  believed  to  be  yielding  a 
greater  profit  than  customary,  there  is  sure  to  be  in  a short  time  so 
large  a production  or  importation  of  the  commodity,  as  not  only 
destroys  the  extra  profit,  but  generally  goes  beyond  the  mark, 
and  sinks  the  value  as  much  too  low  as  it  had  before  been  raised 
too  high ; until  the  over-supply  is  corrected  by  a total  or  partial 
suspension  of  further  production.  As  already  intimated,*  these 
variations  in  the  quantity  produced  do  not  presuppose  or  require 
that  any  person  should  change  his  employment.  Those  whose 
business  is  thriving,  increase  their  produce  by  availing  themselves 
more  largely  of  their  credit,  while  those  who  are  not  making  the 
ordinary  profit,  restrict  their  operations,  and  (in  manufacturing 
phrase)  work  short  time.  In  this  mode  is  surely  and  speedily 
effected  the  equalization,  not  of  profits  perhaps,  but  of  the  expecta- 
tions of  profit,  in  different  occupations. 

As  a general  rule,  then,  things  tend  to  exchange  for  one  another  at 
such  values  as  will  enable  each  producer  to  be  repaid  the  cost  of 
production  with  the  ordinary  profit ; in  other  words,  jggt_M^ill 
give  to  all  producers  thp.  rgte  of-prnfit  on  their  outlay.  But 
in  order  that  the  profit  may  be  equal  where  the  outlay,  that  is,  the 
cost  of  production,  is  equal,  things  must  on  the  average  exchange 
for  one  another  in  the  ratio  of  their  cost  of  production : things 
of  which  the  cost  of  production  is  the  same,  must  be  of  the  same 
value.  For  only  thus  will  an  equal  outlay  yield  an  equal  return. 
If  a farmer  with  a capital  equal  to  1000  quarters  of  corn,  can  produce 
1200  quarters,  yielding  him  a profit  of  20  per  cent ; whatever 
else  can  be  produced  in  the  same  time  by  a capital  of  1000  quarters 
must  be  worth,  that  is,  must  exchange  for,  1200  quarters,  otherwise 
the  producer  would  gain  either  more  or  less  than  20  per  cent. 

Adam  Smith  and  Ricardo  have  called  that  value  of  a thing 
whiclnis  proportional  to  its  cost  of  production,  its  ^Natural  Value 


Supra,  p.  412. 


COST  OF  PRODUCTION 


453 


(or  its  Natural  Price).  They  meant  by  this,  the  point  about  which 
the  value  oscillates,  and  to  which  it  always  tends  to  return  ; the 
centre  value,  towards  which,  as  Adam  Smith  expresses  it,  the  market 
value  of  a thing  is  constantly  gravitating ; and  any  deviation 
from  which  is  but  a temporary  irregularity,  which,  the  moment 
it  exists,  sets  forces  in  motion  tending  to  correct  it.  On  an  average 
of  years  sufficient  to  enable  the  oscillations  on  one  side  of  the  central 
hne  to  be  compensated  by  those  on  the  other,  the  market  value 
agrees  with  the  natural  value  ; but  it  very  seldom  coincides  exactly 
with  it  at  any  particular  time.  The  sea  everywhere  tends  to  a level ; 
but  it  never  is  at  an  exact  level ; its  surface  is  always  ruffled  by 
waves,  and  often  agitated  by  storms.  It  is  enough  that  no  point, 
at  least  in  the  open  sea,  is  permanently  higher  than  another.  Each 
place  is  alternately  elevated  and  depressed  ; but  the  ocean  preserves 
its  level. 


§ 2.  The  latent  influence  by  which  the  values  of  things  are 
made  to  conform  in  the  long  run  to  the  cost  of  production  is  the 
variation  that  would  otherwise  take  place  in  the  supply  of  the 
commodity.  The  supply  would  be  increased  if  the  thing  continued 
to  sell  above  the  ratio  of  its  cost  of  production,  and  would  be 
diminished  if  it  fell  below  that  ratio.  But  we  must  not  therefore 
suppose  it  to  be  necessary  that  the  supply  should  actually  be  either 
diminished  or  increased.  Suppose  that  the  cost  of  production  of 
a thing  is  cheapened  by  some  mechanical  invention,  or  increased 
bj  a tax.  The  value  of  the  thing  would  in  a little  time,  if  not ) 
immediately,  fall  in  the  one  case,  and  rise  in  the  other ; and  it  j 
would  do  so,  because,  if  it  did  not,  the  supply  would  in  the  one' 
case  be  increased,  until  the  price  fell,  in  the  other  diminished,  until  \ 
it  rose.  For  this  reason,  and  from  the  erroneous  notion  that  value  i 
depends  on  the  proportion  between  the  demand  and  the  supply,  t 
many  persons  suppose  that  this  proportion  must  be  altered  whenever  | 
there  is  any  change  in  the  value  of  the  commodity  ; that  the  value  1 
cannot  falLthrough  a diminution  of  the  cost  of  production,  unless  j 
the  supply  is  permanently  in  creased  ; nor  rise,  unless  the  su^rplyjs  | 
pergaanently  diminished.  But  this  is  not  the  fact : there  is  no  ! 
need  that  thereshoum.  be  any  actual  alteration  of  supply ; and  ; 
when  there  is,  the  alteration,  if  permanent,  is  not  the  cause,  but  | 
the  consequence  of  the  alteration  in  value.  If,  indeed,  the  supply  j 
could^  not  _be  increased,  no  diminution  in  the  cost  of  production  i 
would  lower  tho  value %ut  there  is  by  no  means  any  necessity' 


454 


BOOK  m.  CHAPTER  IH.  § 2 


that  it  should.  The  mere  possibility  often  suffices ; the  dealers 
are  aware  of  what  would  happen,  and  their  mutual  competition 
makes  them  anticipate  the  result  by  lowering  the  price.  T^ether 
there  will  be  a greater  permanent  supply  of  the  commodity  after  its 
production  has  been  cheapened,  depends  on  quite  another  question, 
namely,  on  whether  a greater  quantity  is  wanted  at  the  reduced 
value.  Most  commonly  a greater  quantity  is  wanted,  but  not 
necessarily.  **  A man,”  says  Mr.  De  Quincey,*  “ buys  an  article  of 
instant  applicability  to  his  own  purposes  the  more  readily  and  the 
more  largely  as  it  happens  to  be  cheaper.  Silk  handkerchiefs  having 
fallen  to  half-price,  he  will  buy,  perhaps,  in  threefold  quantity  ; but 
he  does  not  buy  more  steam-engines  because  the  price  is  lowered. 
His  demand  for  steam-engines  is  almost  always  predetermined  by 
the  circumstances  ofliis  situation.  So  far  as  he  considers  the  cost 
at  all,  it  is  much  more  the  cost  of  working  this  engine  than  the  cost 
upon  its  purchase.  But  there  are  many  articles  for  which  the 
market  is  absolutely  and  merely  limited  by  a pre-existing  system^ 
to  which  those  articles  are  attached  as  subordinate  parts  or  members. 
How  could  we  force  the  dials  or  faces  of  timepieces  by  artificial 
cheapness  to  sell  more  plentifully  than  the  inner  works  or  movements 
of  such  timepieces  ? Could  the  sale  of  wine-vaults  be  increased 
without  increasing  the  sale  of  wine  ? Or  the  tools  of  shipwrights  find 
an  enlarged  market  whilst  shipbuilding  was  stationary  ? . . . . Offer 
to  a town  of  3000  inhabitants  a stock  of  hearses,  no  cheapness  wiU 
tempt  that  town  into  buying  more  than  one.  Offer  a stock  of 
yachts,  the  chief  cost  lies  in  manning,  victualling,  repairing;  no 
diminution  upon  the  mere  price  to  a purchaser  will  tempt  into  the 
market  any  man  whose  habits  and  propensities  had  not  already 
disposed  him  to  such  a purchase.  So  of  professional  costume  for 
bishops,  lawyers,  students  at  Oxford.”  Nobody  doubts,  however, 
that  the  price  and  value  of  all  these  things  would  be  eventually 
lowered  by  any  diminution  of  their  cost  of  production  ; and  lowered 
through  the  apprehension  entertained  of  new  competitors,  and  an 
increased  supply  ; though  the  great  hazard  to  which  a new  com- 
petitor would  expose  himself,  in  an  article  not  susceptible  of  any 
considerable  extension  of  its  market,  would  enable  the  established 
dealers  to  maintain  their  original  prices  much  longer  than  they 
could  do  in  an  article  offering  more  encouragement  to  competition. 

Again,  reverse  the  case,  and  suppose  the  cost  of  production 


Logic  of  Political  Economy,  pp.  230-1. 


COST  OF  PRODUCTION 


455 


increased,  as  for  example  by  laying  a tax  on  the  commodity.  The 
value  would  rise  ; and  that,  probably,  immediately.  Would  the 
supply  be  diminished  ? Only  if  the  increase  of  value  diminished 
the  demand.  Whether  this  effect  followed,  would  soon  appear,  and 
if  it  did,  the  value  would  recede  somewhat,  from  excess  of  supply, 
until  the  production  was  reduced,  and  would  then  rise  again. 
There  are  many  articles  for  which  it  requires  a very  considerable 
rise  of  price  materially  to  reduce  the  demand ; in  particular, 
articles  of  necessity,  such  as  the  habitual  food  of  the  people  in  England, 
wheaten  bread : of  which  there  is  probably  almost  as  much  consumed, 
at  the  present  cost  price,  as  there  would  be  with  the  present  popula- 
tion at  a price  considerably  lower.  Yet  it  is  especially  in  such  things 
that  dearness  or  high  price  is  popularly  confounded  with  scarcity. 
Food  may  be  dear  from  scarcity,  as  after  a bad  harvest ; but  the 
dearness  (for  example)  which  is  the  effect  of  taxation,  or  of  corn 
laws,  has  nothing  whatever  to  do  with  insufficient  supply  : such 
causes  do  not  much  diminish  the  quantity  of  food  in  a country  : it  is 
other  things  rather  than  food  that  are  diminished  in  quantity  by 
them,  since,  those  who  pay  more  for  food  not  having  so  much  to 
expend  otherwise,  the  production  of  other  things  contracts  itself 
to  the  limits  of  a smaller  demand. 

It  is,  therefore!  strictly  correct  to  sav.  that  the  value  of  things 
which  can  be  increased  in  quantity  at  pleasure,  does  not  depend 
(except  accidentally,  and  during  the  time  necessary  for  production 
to  adjust  itself,)  upon  dem^d  and  supply  ; on  the  contrary  "der^nd 
flnd—Aupply  dftpp.Tul  upon  it.  There  is  a demand  for  a certain 
quantity  of  the  commodity  at  its  natural  or  cost  value,  and  to 
that  the  supply  in  the  long  run  endeavours  to  conform.  When  at 
any  time  it  fails  of  so  conforming,  it  is  either  from  miscalculation, 
or  from  a change  in  some  of  the  elements  of  the  problem : either 
in  the  natural  value,  that  is,  in  the  cost  of  production  ; or  in  the 
demand,  from  an  alteration  in  public  taste  or  in  the  number  or 
wealth  of  the  consumers.  These  causes  of  disturbance  are  very 
liable  to  occur,  and  when  any  one  of  them  does  occur,  the  market 
value  of  the  article  ceases  to  agree  with  the  natural  value.  The  real 
law  of_^mand  and  supply^  the  equation  between^^tibem,  still-holda 
good : if  a ^alue  different  froin  the  natural  value  be  necessary  to( 
make  the  demand  equal  to  the  supply,  the  market  value  will  deviate  ] 
from  the  natural  value  ; but  only  for  a time  ; ^r-^ie_p^manent  j 
tendency  of  supply  is  to  conform  itself  to  the  demand  which  is  foimd 
by"^xpcrienccT<rc58t~fbf^£hej3flm^^  when  seltin^at  its  n^ui al / 


456 


\fcJLuJL(/^ 

-2.^  IcUxl 


BOOK  m.  CHAPTER  in.  § 2 

value.  If  the  supply  is  either  more  or  less  than  this,  it  is  so 
accidentally,  and  affords  either  more  or  less  than  the  ordinary  rate 
of  profit ; which,  under  free  and  active  competition,  cannot  long 
continue  to  be  the  case. 

To  recapitulate:  depmnii_and_s]ipplyi^go^  of  all 

increased;  except  that  even 
for  them,  when  produced  by  industry,  thernJa_a-jniiiimum^alue, 
det^nuned  by  the  cost  of^production.  But  in  all  things 
admit  of  indefinite  multiplication,  demand  and  supply  onlv 
^^^^^Mihejpertufbationror^^  which^nnot 

exceect^the  length  of  time  necessary  for  alterinsr  the  supply.  While 
thus  ruling  the  oscillations  of  value,  they  themselves  obey,nu^jiperior 
foroe,^  which^jiakea.  value  gravitate  tnwflrds  float  nf 
and  which  would  settle  it  and  keep  itthere” if  frek  distur^g  in- 
fluences were  not  continually  arising  to  make  it  again  deviate.  To 
pursue  the  same  strain  of  metaphor,  demand  and  supply  always 
rush  to  an  equilibrium,  but  the  condition  of  stable  equilibrium  is 
when  togs  exchange  for  each  other'  according  to  their  cost  of 
production,  or,  in  the  expression  we  have  used,  when  things  are  at 
their  Natural  Value. 


CHAPTER  IV 


ULTIMATE  ANALYSIS  OP  COST  OF  PRODUCTION 

§ 1.  The  component  elements  of  Cost  of  Production  have 
been  set  forth  in  the  First  Part  of  this  enquiry.*  The  principal  ol 
them,  and  so  much  the  principal  as  to  be  nearly  the  sole,  we  found 
to  be  Labour.  What  the  production  of  a thing  costs  to  its  producer, 
or  its  series  of  producers,  is  the  labour  expended  in  producing  it 
If  we  consider  as  the  producer  the  capitalist  who  makes  the  advances, 
the  word  Labour  may  be  replaced  by  the  word  Wages : what  the 
produce  costs  to  him,  is  the  wages  which  he  has  had  to  pay.  At  the 
first  glance  indeed  this  seems  to  be  only  a part  of  his  outlay,  since 
he  has  not  only  paid  wages  to  labourers,  but  has  likewise  provided 
them  with  tools,  materials,  and  perhaps  buildings.  These  tools, 
materials,  and  buildings,  however,  were  produced  by  labour  and 
capital ; and  their  value,  like  that  of  the  article  to  the  production 
of  which  they  are  subservient,  depends  on  cost  of  production,  which 
again  is  resolvable  into  labour.  The  cost  of  production  of  broad- 
cloth does  not  wholly  consist  in  the  wages  of  weavers  ; which  alone 
are  directly  paid  by  the  cloth  manufacturer.  It  consists  also  of 
the  wages  of  spinners  and  woolcombers,  and,  it  may  be  added, 
of  shepherds,  all  of  which  the  clothier  has  paid  for  in  the  price  of 
yarn.  It  consists  too  of  the  wages  of  builders  and  brickmakers, 
which  he  has  reimbursed  in  the  contract  price  of  erecting  his  factory. 
It  partly  consists  of  the  wages  of  machine-makers,  iron-founders, 
and  miners.  And  to  these  must  be  added  the  wages  of  the  carriers 
who  transported  any  of  the  means  and  apphances  of  the  production 
to  the  place  where  they  were  to  be  used,  and  the  product  itself  to 
the  place  where  it  is  to  be  sold. 

The  value  of  commodities,  therefore,  depends  principally  (we 
shall  presently  see  whether  it  depends  solely)  on  the  quantity  of 


Supra,  pp.  29-31. 


458 


BOOK  IIL  CHAPTER  IV.  § 1 


labour  regnirpH  for  their  production^  including  in  the  idea  of 
production,  that  of  conveyance  to  the  market]  ^n  estimating,”  says 
Ricardo,*  “ the  exchangeable  value  of  stockings,  for  example,  we  shall 
find  that  their  value,  comparatively  with  other  things,  depends  on 
the  total  quantity  of  labour  necessary  to  manufacture  them  and 
bring  them  to  market.  First,  there  is  the  labour  necessary  to 
cultivate  the  land  on  which  the  raw  cotton  is  grown  ; secondly,  the 
labour  of  conveying  the  cotton  to  the  country  where  the  stockings 
are  to  be  manufactured,  which  includes  a portion  of  the  labour 
bestowed  in  building  the  ship  in  which  it  is  conveyed,  and  which  is 
charged  in  the  freight  of  the  goods ; thirdly,  the  labour  of  the 
spinner  and  weaver ; fourthly,  a portion  of  the  labour  of  the  engineer, 
smith,  and  carpenter,  who  erected  the  buildings  and  machinery  by 
the  help  of  which  they  are  made ; fifthly,  the  labour  of  the  retail 
dealer  and  of  many  others,  whom  it  is  unnecessary  further  to 
2)articularize.  The  aggregate  sum  of  these  various  kinds  of  labour 
determines  the  quantity  of  other  things  for  which  these  stockings 
will  exchange,  while  the  same  consideration  of  the  various  quantities 
of  labour  which  have  been  bestowed  on  those  other  things,  will 
equally  govern  the  portion  of  them  which  will  be  given  for  the 
stockings. 

“ To  convince  ourselves  that  this  is  the  real  foundation  of 
exchangeable  value,  let  us  suppose  any  improvement  to  be  made 
in  the  means  of  abridging  labour  in  any  one  of  the  various  processes 
through  which  the  raw  cotton  must  pass  before  the  manufactured 
stockings  come  to  the  market  to  be  exchanged  for  other  things ; 
and  observe  the  efiects  which  will  follow.  If  fewer  men  were 
required  to  cultivate  the  raw  cotton,  or  if  fewer  sailors  were  employed 
in  navigating,  or  shipwrights  in  constructing,  the  ship  in  which 
it  was  conveyed  to  us ; if  fewer  hands  were  employed  in  raising 
the  buildings  and  machinery,  or  if  these,  when  raised,  were  rendered 
more  efficient ; the  stockings  would  inevitably  fall  in  value,  and 
command  less  of  other  things.  They  would  fall,  because  a less 
quantity  of  labour  was  necessary  to  their  production,  and  would 
therefore  exchange  for  a smaller  quantity  of  those  things  in  which 
no  such  abridgement  of  labour  had  been  made. 

“ Eoonomj  in  the  use  of  labour  never  fails  jo  Reduce  the  relative 
valufi^f  j^^ommddity,  whether  th^aving  b^n  tbe  labour  necessary 
to  the  manufactum  of_the  commodity  itself,  or  in  that  necessary  to 


Principles  of  Political  Economy  and  Taxation^  ch.  i.  sect.  3. 


ULTIMATE  ANALYSIS  OF  COST  OF  PRODUCTION  4§9 


theJormation  of^the  capital,  by  tbe  aid  of  wMch  it  is  produced.  In 
either  case  the  price  of  stockings  would  fall,  whether  there  were  fewer 
men  employed  as  bleachers,  spinners,  and  weavers,  persons  im- 
mediately necessary  to  their  manufacture  : or  as  sailors,  carriers, 
engineers,  and  smiths,  persons  more  indirectly  concerned.  In  the 
one  case,  the  whole  saving  of  labour  would  fall  on  the  stockings, 
because  that  portion  of  labour  was  wholly  confined  to  the  stockings  ; 
in  the  other,  a portion  only  would  fall  on  the  stockings,  the  remainder 
being  applied  to  all  those  other  commodities,  to  the  production  of 
which  the  buildings,  machinery,  and  carriage,  were  subservient.” 

§ 2.  It  will  have  been  observed  that  Eicardo  expresses  himself 
as  if  the  quantity  of  labour  which  it  costs  to  produce  a commodity 
and  bring  it  to  market,  were  the  only  thing  on  which  its  value 
depended.  But  since  the  cost  of  production  to  the  capitalist  is  not 
labour  but  wages,  and  since  wages  may  be  either  greater  or  less, 
the  quantity  of  labour  being  the  same ; it  would  seem  that  the 
yalue  of  the  product  cannot  be  determined  solely  by  the  quantity 
of  labour,  but  by  the  quantity  together  with  the  remuneration  ; and 
that  values  must  partly  depend  on  wages. 

In  order  to  decide  this  point,  it  must  be  considered,  that  vaju^ 
is  a jielative  term  : that  iJiCLJvahie,  commodity  is  not  a name  for 
an  inherent  and  substantive  quahty  of  the  thing  itself,  but  means 
the  q]igjitityjo£other  things  which  can  be  obtained  in  exchange  for 
it.  The  value  of  one  thing  must  always  be^nderstood  relatively  to 
some  other  thing,  or  to  things  in  general.  Now  the  relation  of  one 
thing  to  another  cannot  be  altered  by  any  cause  which  affects  them 
both  ahke.  A rise  or  fall  of  general  wages  is  a fact  which  affects  all 
commodities  in  the  same  manner,  and  therefore  affords  no  reason 
why  they  should  exchange  for  each  other  in  one  rather  than  in 
another  proportion.  To  suppose  that  high  wages  make  high 
values,  is  to  suppose  that  there  can  be  such  a thing  as  general  high 
values.  But  this  is  a contradiction  in  terms  : the  high  value  of 
some  things  is  synonymous  with  the  low  value  of  others.  The 
mistake  arises  from  not  attending  to  values,  but  only  to  prices. 
Though  there  is  no  such  thing  as  a general  rise  of  values,  there 
is  such  a thing  as  a general  rise  of  prices.  As  soon  as  we  form 
distinctly  the  idea  of  values,  we  see  that  high  or  low  wages_can 
have  nothing  to  do  with  them ; but  that  high  wages  make  high 
prices,  is  a popular  and  widely-spread  opinion.  The  whole  amount 
of  error  involved  in  this  proposition  can  only  be  seen  thoroughly 


BOOK  in.  CHAPTER  IV.  § 3 


when  we  come  to  the  theory  of  money  ; at  present  we  need  only  say 
that,  if  it  he  true,  there  can  be  no  such  thing  as  a real  rise  of  wages ; 
for  if  wages  could  not  rise  without  a proportional  rise  of  the  price 
of  everything,  they  could  not,  for  any  substantial  purpose,  rise  at  all. 
This  surely  is  a sufficient  redtictio  ad  ahsurdum,  and  shows  the 
amazing  folly  of  the  propositions  which  may  and  do  become,  and 
long  remain,  accredited  doctrines  of  popular  political  economy. 
It  must  be  remembered  too  that  general  high  prices,  even  supposing 
them  to  exist,  can  be  of  no  use  to  a producer  or  dealer,  considered 
as  such  ; for  if  they  increase  his  money  returns,  they  increase  in  the 
same  degree  all  his  expenses.  There  is  no  mode  in  which  capitalists 
can  compensate  themselves  for  a high  cost  of  labour,  through  any 
action  on  values  or  prices.  It  cannot  be  prevented  from  taking  its 
effect  on  low  profits.  If  the  labourers  really  get  more,  that-is,  get 
the  produce  of  more  labour,  a smaller  percentage  must  remaiji  for 
profit.  From  this  Law  of  Distribution,  resting  as  it  does  on  a law 
of  arithmetic,  there  is  no  escape.  The  mechanism  of  Exchange  and 
Price  may  hide  it  from  us,  but  is  quite  powerless  to  alter  it. 

§ 3.  Although,  however,  general  wages,  whether  high  or  low, 
do  not  affect  values,  yet  if  wages  are  higher  in  one  employment  than 
another,  or  if  they  rise  and  fall  permanently  in  one  employment 
without  doing  so  in  others,  these  inequahties  do  reaUy  operate  upon 
values.  The  causes  which  make  wages  vary  from  one  employment 
to  another,  have  been  considered  in  a former  chapter.  When  the 
wages  of  an  employment  permanently  exceed  the  average  rate,  the 
value  of  the  thing  produced  will,  in  the  same  degree,  exceed  the 
standard  determined  by  mere  quantity  of  labour.  Things,  for 
example,  which  are  made  by  skilled  labour,  exchange  for  the  produce 
of  a much  greater  quantity  of  unskilled  laDour ; for  no  reason  but 
because  the  labour  is  more  highly  paid.  If,  through  the  extension  of 
education,  the  labourers  competent  to  skilled  employments  were  so 
increased  in  number  as  to  diminish  the  difference  between  their 
wages  and  those  of  common  labour,  all  things  produced  by  labour 
of  the  superior  kind  would  fall  in  value,  compared  with  things 
produced  by  common  labour,  and  these  might  be  said  therefore 
to  rise  in  value.  We  have  before  remarked  that  the  difficulty  of 
passing  from  one  class  of  employments  to  a class  greatly  superior, 
has  hitherto  caused  the  wages  of  all  those  classes  of  labourers  who 
are  separated  from  one  another  by  any  very  marked  barrier,  to 
depend  more  than  might  be  supposed  upon  the  increase  of  the 


ULTIMATE  ANALYSIS  OF  COST  OF  PRODUCTION 


461 


population  of  each  class  considered  separately ; and  that  the  in- 
equalities in  the  remuneration  of  labour  are  much  greater  than 
could  exist  if  the  competition  of  the  labouring  people  generally 
could  be  brought  practically  to  bear  on  each  particular  employment. 
It  follows  from  this  that  wages  in  different  employments  do  not  rise 
or  fall  simultaneously,  but  are,  for  short  and  sometimes  even  for 
long  periods,  nearly  independent  of  one  another.  All  such  disparities 
evidently  alter  the  relative  costs  of  production  of  different  com- 
modities, and  will  therefore  be  completely  represented  in  their 
natural  or  average  value. 

It  thus  appears  that  the  maxim  laid  down  by  some  of  the  best 
political  economists,  that  wages  do  not  enter  into  value,  is  expressed 
with  greater  latitude  than  the  truth  warrants,  or  than  accords  with 
their  own  meaning.  Wages  do  enter  into  value.  The  relative 
wages  of  the  labour  necessary  for  producing  different  commodities, 
affect  their  value  just  as  much  as  the  relative  quantities  of  labour. 
It  is  true,  the  absolute  wages  paid  have  no  effect  upon  values  ; but 
neither  has  the  absolute  quantity  of  labour.  If  that  were  to  vary 
simultaneously  and  equally  in  all  commodities,  values  would  not 
be  affected.  If,  for  instance,  the  general  efficiency  of  all  labour 
were  increased,  so  that  all  things  without  exception  could  be  pro- 
duced in  the  same  quantity  as  before  with  a smaller  amount  of 
labour,  no  trace  of  this  general  diminution  of  cost  of  production 
would  show  itself  in  the  values  of  commodities.  Any  change 
which  might  take  place  in  them  would  only  represent  the  unequal 
degrees  in  which  the  improvement  affected  different  things ; and 
would  consist  in  cheapening  those  in  which  the  saving  of  labour  had 
been  the  greatest,  while  those  in  which  there  had  been  some,  but 
a less  saving  of  labour,  would  actually  rise  in  value.  In  strictness, 
therefore,  wages  of  labour  have  as  much  to  do  with  value  as  quantity 
of  labour : and  neither  Ricardo  nor  any  one  else  has  denied  the 
fact.  In  considering,  however,  the  causes  of  variations  in  value, 
quantity  of  labour  is  the  thing  of  chief  importance  ; for  when  that 
varies,  it  is  generally  in  one  or  a few  commodities  at  a time,  but  the 
variations  of  wages  (except  passing  fluctuations)  are  usually  general, 
and  have  no  considerable  effect  on  value. 

§ 4.  Thus  far  of  labour,  or  wages,  as  an  element  in  cost  of 
production.  But  in  our  analysis,  in  the  First  Book,  of  the  requisites 
of  production,  we  found  that  there  is  another  necessary  element  in 
it  besides  labour.  There  is  also  capital ; and  this  being  the  result 


462 


BOOK  IIL  CHAPTER  IV.  § 4 


of  abstinence,  tbe  produce,  or  its  value,  must  be  sufficient  to  re- 
munerate, not  only  all  tbe  labour  required,  but  the  abstinence  of 
all  the  persons  by  whom  the  remuneration  of  the  different  classes 
of  labourers  was  advanced.  The  return  for  abstinence  is  Profit. 
And  profit,  we  have  also  seen,  is  not  exclusively  the  surplus  remain- 
ing to  the  capitalist  after  he  has  been  compensated  for  his  outlay, 
but  forms,  in  most  cases,  no  unimportant  part  of  the  outlay  itself. 
The  flax-spinner,  part  of  whose  expenses  consists  of  the  purchase 
of  flax  and  of  machinery,  has  had  to  pay,  in  their  price,  not  only  the 
wages  of  the  labour  by  which  the  flax  was  grown  and  the  machinery 
made,  but  the  profits  of  the  grower,  the  flax-dresser,  the  miner,  the 
iron-founder,  and  the  machine-maker.  All  these  profits,  together 
with  those  of  the  spinner  himself,  were  again  advanced  by  the 
weaver,  in  the  price  of  his  material,  linen  yarn : and  along  with 
them  the  profits  of  a fresh  set  of  machine-makers,  and  of  the  miners 
and  iron-workers  who  supplied  them  with  their  metallic  material. 
All  these  advances  form  part  of  the  cost  of  production  of  linen. 
Profits,  therefore,  as  well  as  wages,  enter  into  the  cost  of  production 
which  determines  the  value  of  the  produce. 

Value,  however,  being  purely  relative,  cannot  depend  upon 
absolute  profit,  no  more  than  upon  absolute  wages,  but  upon 
relative  profits  only.  High  general  profits  cannot,  any  more  than 
high  general  wages,  be  a cause  of  high  values,  because  high  general 
values  are  an  absurdity  and  a contradiction.  In  so  far  as  profits 
enter  into  the  cost  of  production  of  all  things,  they  cannot  affect  the 
value  of  any.  It  is  only  by  entering  in  a greater  degree  into  the 
cost  of  production  of  some  things  than  of  others,  that  they  can  have 
any  influence  on  value. 

For  example,  we  have  seen  that  there  are  causes  which  necessitate 
a permanently  higher  rate  of  profit  in  certain  employments  than  in 
others.  There  must  be  a compensation  for  superior  risk,  trouble, 
and  disagreeableness.  This  can  only  be  obtained  by  selling  the 
commodity  at  a value  above  that  which  is  due  to  the  quantity  of 
labour  necessary  for  its  production.  If  gunpowder  exchanged  for 
other  things  in  no  higher  ratio  than  that  of  the  labour  required  from 
first  to  last  for  producing  it,  no  one  would  set  up  a powder-mill. 
Butchers  are  certainly  a more  prosperous  class  than  bakers,  and  do 
not  seem  to  be  exposed  to  greater  risks,  since  it  is  not  remarked  that 
they  are  oftener  bankrupts.  They  seem,  therefore,  to  obtain  higher 
profits,  which  can  only  arise  from  the  more  limited  competition 
caused  by  the  unpleasantness,  and  to  a certain  degree,  the 


ULTIMATE  ANALYSIS  OP  COST  OF  PRODUCTION  463 

unpopularity,  of  their  trade.  But  this  higher  profit  implies  that 
they  sell  their  commodity  at  a higher  value  than  that  due  to 
their  labour  and  Outlay.  All  inequalities  of  profit  which  are 
necessary  and  permanent,  are  represented  in  the  relative  values  of 
the  commodities. 

§ 6.  Profits,  however,  may  enter  more  largely  into  the  con- 
ditions of  production  of  one  commodity  than  of  another,  even 
though  there  be  no  difference  in  the  rate  of  profit  between  the  two 
employments.  The  one  commodity  may  be  called  upon  to  yield 
profit  during  a longer  period  of  time  than  the  other.  The  example 
by  which  this  case  is  usually  illustrated  is  that  of  wine.  Suppose 
a quantity  of  wine,  and  a quantity  of  cloth,  made  by  equal  amounts 
of  labour,  and  that  labour  paid  at  the  same  rate.  The  cloth  does 
not  improve  by  keeping  ; the  wine  does.  Suppose  that,  to  attain 
the  desired  quality,  the  wine  requires  to  be  kept  five  years.  The 
producer  or  dealer  will  not  keep  it,  unless  at  the  end  of  five  years  he 
can  sell  it  for  as  much  more  than  the  cloth  as  amounts  to  five  years’ 
profit,  accumulated  at  compound  interest.  The  wine  and  the  cloth 
were  made  by  the  same  original  outlay.  Here  then  is  a case  in 
which  the  natural  values,  relatively  to  one  another,  of  two  com- 
modities, do  not  conform  to  their  cost  of  production  alone,  but  to 
their  cost  of  production  'plus  something  else.  Unless,  indeed,  for 
the  sake  of  generality  in  the  expression,  we  include  the  profit  which 
the  wine-merchant  foregoes  during  the  five  years,  in  the  cost  of 
production  of  the  wine : looking  upon  it  as  a kind  of  additional 
outlay,  over  and  above  his  other  advances,  for  which  outlay  he 
must  be  indemnified  at  last. 

All  commodities  made  by  machinery  are  assimilated,  at  least 
approximately,  to  the  wine  in  the  preceding  example.  In  com- 
parison with  things  made  wholly  by  immediate  labour,  profits 
enter  more  largely  into  their  cost  of  production.  Suppose  two 
commodities,  A and  B,  each  requiring  a year  for  its  production, 
by  means  of  a capital  which  we  will  on  this  occasion  denote  by 
money,  and  suppose  to  be  lOOOL  A is  made  wholly  by  immediate 
labour,  the  whole  lOOOl.  being  expended  directly  in  wages.  B is  made 
by  means  of  labour  which  costs  500Z.  and  a machine  which  cost  500Z., 
and  the  machine  is  worn  out  by  one  year’s  use.  The  two  com- 
modities will  be  exactly  of  the  same  value ; which,  if  computed  in 
money,  and  if  profits  are  20  per  cent  per  annum,  will  be  12001.  But 
of  this  1200^.,  in  the  case  of  A,  only  200?.,  or  one-sixth,  is  profit ; 


464 


BOOK  HL  CHAPTER  IV.  § 5 


wliile  in  tlie  case  of  B there  is  not  only  the  200Z.,  hat  as  much  of 
500/.  (the  price  of  the  machine)  as  consisted  of  the  profits  of  the 
machine-maker ; which,  if  we  suppose  the  machine  also  to  have 
taken  a year  for  its  production,  is  again  one-sixth.  So  that  in  the 
case  of  A only  one-sixth  of  the  entire  return  is  profit,  whilst  in  B the 
element  of  profit  comprises  not  only  a sixth  of  the  whole,  but  an 
additional  sixth  of  a large  part. 

The  greater  the  proportion  of  the  whole  capital  which  consists 
of  machinery,  or  buildings,  or  material,  or  anything  else  which  must 
be  provided  before  the  immediate  labour  can  commence,  the  more 
largely  will  profits  enter  into  the  cost  of  production.  It  is  equally 
true,  though  not  so  obvious  at  first  sight,  that  greater  durability 
in  the  portion  of  capital  which  consists  of  machinery  or  buildings, 
has  precisely  the  same  effect  as  a greater  amount  of  it.  As  we 
just  supposed  one  extreme  case,  of  a machine  entirely  worn  out  by 
a year’s  use,  let  us  now  suppose  the  opposite  and  still  more  extreme 
case  of  a machine  which  lasts  for  ever,  and  requires  no  repairs.  In 
this  case,  which  is  as  well  suited  for  the  purpose  of  illustration  as 
if  it  were  a possible  one,  it  will  be  unnecessary  that  the  manufacturer 
should  ever  be  repaid  the  500/.  which  he  gave  for  the  machine, 
since  he  has  always  the  machine  itself,  worth  500/. ; but  he  must  be 
paid,  as  before,  a profit  on  it.  The  commodity  B,  therefore,  which 
in  the  case  previously  supposed  was  sold  for  1200/.  of  which  sum 
1000/.  were  to  replace  the  capital  and  200/.  were  profit,  can  now  be 
sold  for  700/.,  being  500/  to  replace  wages,  and  200/.  profit  on  the 
entire  capital.  Profit,  therefore,  enters  into  the  value  of  B in  the 
ratio  of  200/.  out  of  700/.,  being  two-sevenths  of  the  whole,  or 
28f  per  cent,  while  in  the  case  of  A,  as  before,  it  enters  only  in  the 
ratio  of  one-sixth,  or  16J  per  cent.  The  case  is  of  course  purely 
ideal,  since  no  machinery  or  other  fixed  capital  lasts  for  ever ; but 
the  more  durable  it  is,  the  nearer  it  approaches  to  this  ideal  case, 
and  the  more  largely  does  profit  enter  into  the  return.  If,  for 
instance,  a machine  worth  500/.  loses  one-fifth  of  its  value  by  each 
year’s  use,  100/.  must  be  added  to  the  return  to  make  up  this  loss, 
and  the  price  of  the  commodity  will  be  800/.  Profit  therefore  will 
enter  into  it  in  the  ratio  of  200/.  to  800/.,  or  one-fourth,  which  is 
still  a much  higher  proportion  than  one-sixth,  or  200/.  in  1200/.,  as 
in  case  A. 

From  the  unequal  proportion  in  which,  in  different  employments, 
profits  enter  into  the  advances  of  the  capitalist,  and  therefore  into 
the  returns  required  by  him,  two  consequences  follow  in  regard  to 


ULTIMATE  ANALYSIS  OF  COST  OF  PRODUCTION 


465 


value.  One  is,  that  commodities  do  not  exchange  in  the  ratio 
simply  of  the  quantities  of  labour  required  to  produce  them ; not 
even  if  we  allow  for  the  unequal  rates  at  which  different  kinds  of 
labour  are  permanently  remunerated.  We  have  already  illustrated 
this  by  the  example  of  wine : we  shall  now  further  exemplify  it  by 
the  case  of  commodities  made  by  machinery.  Suppose,  as  before, 
an  article  A made  by  a thousand  pounds’  worth  of  immediate 
labour.  But  instead  of  B,  made  by  500/.  worth  of  immediate 
labour  and  a machine  worth  500/.,  let  us  suppose  C,  made  by  500/. 
worth  of  immediate  labour  with  the  aid  of  a machine  which  has  been 
produced  by  another  500/.  worth  of  immediate  labour  : the  machine 
requiring  a year  for  making,  and  worn  out  by  a year’s  use ; profits 
being  as  before  20  per  cent.  A and  C are  made  by  equal  quantities 
of  labour,  paid  at  the  same  rate  : A costs  1000/.  worth  of  direct 
labour ; C,  only  500/.  worth,  which  however  is  made  up  to  1000/. 
by  the  labour  expended  in  the  construction  of  the  machine.  If 
labour,  or  its  remuneration,  were  the  sole  ingredient  of  cost  of  pro- 
duction, these  two  things  would  exchange  for  one  another.  But 
will  they  do  so  ? Certainly  not.  The  machine  having  been  made 
in  a year  by  an  outlay  of  500/.,  and  profits  being  20  per  cent,  the 
natural  price  of  the  machine  is  600/.  : making  an  additional  100/. 
which  must  be  advanced,  over  and  above  his  other  expenses,  by  the 
manufacturer  of  C,  and  repaid  to  him  wdth  a profit  of  20  per  cent. 
While,  therefore,  the  commodity  A is  sold  for  1200/.,  C cannot  be 
permanently  sold  for  less  than  1320/. 

A second  consequence  is,  that  every  rise  or  fall  of  general  profits 
will  have  an  effect  on  values.  Not  indeed  by  raising  or  lowering 
them  generally,  (which,  as  we  have  so  often  said,  is  a contradiction 
and  an  impossibility)  : but  by  altering  the  proportion  in  which  the 
values  of  things  are  affected  by  the  unequal  lengths  of  time  for 
which  profit  is  due.  When  two  things,  though  made  by  equal 
labour,  are  of  unequal  value  because  the  one  is  called  upon  to  yield 
profit  for  a greater  number  of  years  or  months  than  the  other ; this 
difference  of  value  will  De  greater  when  profits  are  greater,  and  less 
when  they  are  less.  The  wine  which  has  to  yield  five  years’  profit 
more  than  the  cloth,  will  surpass  it  in  value  much  more  if  profits 
are  40  per  cent,  than  if  they  are  only  20.  The  commodities  A and  C, 
which,  though  made  by  equal  quantities  of  labour,  were  sold  for 
1200/.  and  1320/.,  a difference  of  10  per  cent,  would,  if  profits  had 
been  only  half  as  much,  have  been  sold  for  1100/.  and  1155/.,  a 
difference  of  only  5 per  cent. 


466 


BOOK  III.  CHAPTER  IV.  § 6 


It  follows  from  this,  that  even  a general  rise  of  wages,  when  it 
involves  a real  increase  in  the  cost  of  labour,  does  in  some  degree 
influence  values.  It  does  not  affect  them  in  the  manner  vulgarly 
supposed,  by  raising  them  universally.  But  an  increase,  in  the 
cost  of  labour  lowers  profits ; and  therefore  lowers  in  natural  value 
the  things  into  which  profits  enter  in  a greater  proportion  than  the 
average,  and  raises  those  into  which  they  enter  in  a less  proportion 
than  the  average.  All  commodities  in  the  production  of  which 
machinery  bears  a large  part,  especially  if  the  machinery  is  very 
durable,  are  lowered  in  their  relative  value  when  profits  fall ; or, 
what  is  equivalent,  other  things  are  raised  in  value  relatively  to 
them.  This  truth  is  sometimes  expressed  in  a phraseology  more 
plausible  than  sound,  by  saying  that  a rise  of  wages  raises  the  value 
of  things  made  by  labour,  in  comparison  with  those  made  by 
machinery.  But  things  made  by  machinery,  just  as  much  as  any 
other  things,  are  made  by  labour,  namely,  the  labour  which  made 
the  machinery  itself : the  only  difference  being  that  profits  enter 
somewhat  more  largely  into  the  production  of  things  for  which 
machinery  is  used,  though  the  principal  item  of  the  outlay  is  still 
labour.  It  is  better,  therefore,  to  associate  the  effect  with  fall  of 
profits  than  with  rise  of  wages ; especially  as  this  last  expression  is 
extremely  ambiguous,  suggesting  the  idea  of  an  increase  of  the 
labourer’s  real  remuneration,  rather  than  of  what  is  alone  to  the 
purpose  here,  namely,  the  cost  of  labour  to  its  employer. 

§ 6.  Besides  the  natural  and  necessary  elements  in  cost  of 
production — labour  and  profits — there  are  others  which  are  artificial 
and  casual,  as  for  instance  a tax.  The  tax  on  malt  is  as  much  a 
part  of  the  cost  of  production  of  that  article  as  the  wages  of  the 
labourers.  The  expenses  which  the  law  imposes,  as  well  as  those 
which  the  nature  of  things  imposes,  must  be  reimbursed  with  the 
ordinary  profit  from  the  value  of  the  produce,  or  the  things  will  not 
continue  to  be  produced.  But  the  influence  of  taxation  on  value 
is  subject  to  the  same  conditions  as  the  influence  of  wages  and  of 
profits.  It  is  not  general  taxation,  but  differential  taxation,  that 
produces  the  effect.  If  all  productions  were  taxed  so  as  to  take 
an  equal  percentage  from  all  profits,  relative  values  would  be  in 
no  way  disturbed.  If  only  a few  commodities  were  taxed,  their 
value  would  rise  : and  if  only  a few  were  left  un taxed,  their  value 
would  fall.  If  half  were  taxed  and  the  remainder  untaxed,  the 
first  half  would  rise  and  the  last  would  fall  relatively  to  each  other. 


ULTIMATE  ANALYSIS  OF  COST  OF  PRODUCTION 


467 


This  would  be  necessary  in  order  to  equalize  the  expectation  of 
profit  in  all  employments,  without  which  the  taxed  employments 
would  ultimately,  if  not  immediately,  be  abandoned.  But  general 
taxation,  when  equally  imposed,  and  not  disturbing  the  relations 
of  different  productions  to  one  another,  cannot  produce  any  effect 
on  values. 

We  have  thus  far  supposed  that  all  the  means  and  appliances 
which  enter  into  the  cost  of  production  of  commodities,  are  things 
whose  own  value  depends  on  their  cost  of  production.  Some  of 
them,  however,  may  belong  to  the  class  of  things  which  cannot  be 
increased  ad  libitum  in  quantity,  and  which  therefore,  if  the  demand 
goes  beyond  a certain  amount,  command  a.  scarcity  ,YaJue.  The 
materials  of  many  of  the  ornamental  articles  manufactured  in  Italy 
are  the  substances  called  rosso,  giallo,  and  verde  antico,  which, 
whether  truly  or  falsely  I know  not,  are  asserted  to  be  solely  derived 
from  the  destruction  of  ancient  columns  and  other  ornamental 
structures ; the  quarries  from  which  the  stone  was  originally  cut 
being  exhausted,  or  their  locality  forgotten.*  A material  of  such 
a nature,  if  in  much  demand,  must  be  at  a scarcity  value  ; and  this 
value  enters  into  the  cost  of  production,  and  consequently  into  the 
value,  of  the  finished  article.  The  time  seems  to  be  approaching 
when  the  more  valuable  furs  will  come  under  the  influence  of  a 
scarcity  value  of  the  material.  Hitherto  the  diminishing  number 
of  the  animals  which  produce  them,  in  the  wildernesses  of  Siberia, 
and  on  the  coasts  of  the  Esquimaux  Sea,  has  operated  on  the  value 
only  through  the  greater  labour  which  has  become  necessary  for 
securing  any  given  quantity  of  the  article,  since,  without  doubt, 
by  employing  labour  enough,  it  might  still  be  obtained  in  much 
greater  abundance  for  some  time  longer. 

But  the  case  in  which  scarcity  value  chiefly  operates  in  adding 
to  cost  of  production,  is  the  case  of  natural  agents.  These,  when 
unappropriated,  and  to  be  had  for  the  taking,  do  not  enter  into  cost 
of  production,  save  to  the  extent  of  the  labour  which  may  be  necessary 
to  fit  them  for  use.  Even  when  appropriated,  they  do  not  (as  we 
have  already  seen)  bear  a value  from  the  mere  fact  of  the  appro- 
priation, but  only  from  scarcity,  that  is,  from  limitation  of  supply. 
But  it  is  equally  certain  that  they  often  do  bear  a scarcity  value. 
Suppose  a fall  of  water,  in  a place  where  there  are  more  mills  wanted 
than  there  is  water-power  to  supply  them ; the  use  of  the  fall  of 

* [1862]  Some  of  these  quarries,  I believe,  have  been  rediscovered,  ^d 
^re  again  worked. 


m 


BOOK  III.  CHAPTER  IV.  § 6 


water  will  have  a scarcity  value,  sufficient  either  to  bring  the  demand 
down  to  the  supply,  or  to  pay  for  the  creation  of  an  artificial  power, 
by  steam  or  otherwise,  equal  in  efficiency  to  the  water-power. 

A natural  agent  being  a possession  in  perpetuity,  and  being 
only  serviceable  by  the  products  resulting  from  its  continued  employ- 
ment, the  ordinary  mode  of  deriving  benefit  from  its  ownership  is  by 
an  annual  equivalent,  paid  by  the  person  who  uses  it,  from  the 
proceeds  of  its  use.  This  equivalent  always  might  be,  and  generally 
is,  termed  rent.  The  question,  therefore,  respecting  the  influence 
which  the  appropriation  of  natural  agents  produces  on  values,  is 
often  stated  in  this  form  : Does  Rent  enter  into  Cost  of  Production  ? 
and  the  answer  of  the  best  political  economists  is  in  the  negative. 
The  temptation  is  strong  to  the  adoption  of  these  sweeping  expres- 
sions, even  by  those  who  are  aware  of  the  restrictions  with  which 
they  must  be  taken ; for  there  is  no  denying  that  they  stamp  a 
general  principle  more  firmly  on  the  mind,  than  if  it  were  hedged 
round  in  theory  with  all  its  practical  limitations.  But  they  also 
puzzle  and  mislead,  and  create  an  impression  unfavourable  to 
political  economy,  as  if  it  disregarded  the  evidence  of  facts.  No 
one  can  deny  that  rent  sometimes  enters  into  cost  of  production. 
If  I buy  or  rent  a piece  of  ground,  and  build  a cloth  manufactory 
on  it,  the  ground-rent  forms  legitimately  a part  of  my  expenses  of 
production,  which  must  be  repaid  by  the  product.  And  since  all 
factories  are  built  on  ground,  and  most  of  them  in  places  where 
ground  is  peculiarly  valuable,  the  rent  paid  for  it  must,  on  the 
average,  be  compensated  in  the  values  of  all  things  made  in  factories. 
In  what  sense  it  is  true  that  rent  does  not  enter  into  the  cost  of  pro- 
duction or  affect  the  value  of  agricultural  produce,  will  be  shown  in 
the  succeeding  chapter. 


CHAPTER  V 


OF  RENT,  IN  ITS  RELATION  TO  VALUE 

§ 1.  We  have  investigated  the  laws  which  determine  the  value 
of  two  classes  of  commodities  : the  small  class  which,  being  limited 
to  a definite  quantity,  have  their  value  entirely  determined  by 
demand  and  supply,  save  that  their  cost  of  production  (if  they  have 
any)  constitutes  a minimum  below  which  they  cannot  permanently 
fall ; and  the  large  class,  which  can  be  multiplied  ad  libitum  by  labour 
and  capital,  and  of  which  the  cost  of  production  fixes  the  maximum 
as  well  as  the  minimum  at  which  they  can  permanently  exchange. 
But  there  is  still  a third  kind  of  commodities  to  be  considered  : 
those  which  have,  not  one,  but  several  costs  of  production : which 
can  always  be  increased  in  quantity  by  labour  and  capital,  but  not 
by  the  same  amount  of  labour  and  capital ; of  which  so  much  may 
oe  produced  at  a given  cost,  but  a further  quantity  not  without  a. 
greater  cost.  These  commodities  form  an  intermediate  class,  par- 
taking of  the  character  of  ooth  the  others.  The  principal  of  them 
is  agricultural  produce.  We  have  already  made  abundant  reference 
to  the  fundamental  truth,  that  in  agriculture,  the  state  of  the  art 
being  given,  doubling  the  labour  does  not  double  the  produce ; 
that  if  an  increased  quantity  of  produce  is  reqmred,  the  additional 
supply  is  obtained  at  a greater  cost  than  the  first.  Where  a 
hundred  quarters  of  corn  are  all  that  is  at  present  required  from 
the  lands  of  a given  village,  if  the  growth  of  population  made  it 
necessary  to  raise  a hundred  more,  either  by  breaking  up  worse 
land  now  uncultivated,  or  oy  a more  elaborate  cultivation  of  the 
land  already  under  the  plough,  the  additiona  nundred,  or  some 
part  of  them  at  least,  might  cost  double  or  treble  as  much  per 
quarter  as  the  former  supply. 

If  the  first  hundred  quarters  were  all  raised  at  the  same  expense 
(only  the  oest  land  being  cidtivated)  ; and  if  that  expense  would  be 
remunerated  with  the  ordinary  profit  by  a price  of  20s.  the  quarter  ; 


470 


BOOK  in.  CHAPTER  V.  § I 


the  natural  price  of  wheat,  so  long  as  no  more  than  that  quantity 
was  required,  would  be  205. ; and  it  could  only  rise  above,  or  fall 
below  that  price,  from  vicissitudes  of  seasons,  or  other  casual 
variations  in  supply.  But  if  the  population  of  the  district  advanced, 
a time  would  arrive  when  more  than  a hundred  quarters  would  be 
necessary  to  feed  it.  We  must  suppose  that  there  is  no  access  to 
any  foreign  supply  By  the  hypothesis,  no  more  than  a hundred 
quarters  can  be  produced  in  the  district,  unless  by  either  bringing 
worse  land  into  cultivation,  or  altering  the  system  of  culture  to  a 
more  expensive  one.  Neither  of  these  things  will  be  done  without 
a rise  in  price.  This  rise  of  price  will  gradually  be  brought  about 
by  the  increasing  demand.  So  long  as  the  price  has  risen,  but  not 
risen  enough  to  repay  with  the  ordinary  profit  the  cost  of  producing 
an  additional  quantity,  the  increased  value  of  the  limited  supply 
partakes  of  the  nature  of  a scarcity  value.  Suppose  that  it  will  not 
answer  to  cultivate  the  second  best  land,  or  land  of  the  second  degree 
of  remoteness,  for  a less  return  than  255.  the  quarter ; and  that 
this  price  is  also  necessary  to  remunerate  the  expensive  operations 
by  which  an  increased  produce  might  be  raised  from  land  of  the  first 
quality.  If  so,  the  price  will  rise,  through  the  increased  demand, 
until  it  reaches  25s.  That  will  now  be  the  natural  price  ; being  the 
price  without  which  the  quantity,  for  which  society  has  a demand 
at  that  price,  will  not  be  produced.  At  that  price,  however,  society 
can  go  on  for  some  time  longer ; could  go  on  perhaps  for  ever,  if 
population  did  not  increase.  The  price,  having  attained  that 
point,  will  not  again  permanently  recede  (though  it  may  fall  tem- 
porarily from  accidental  abundance)  ; nor  will  it  advance  further, 
so  long  as  society  can  obtain  the  supply  it  requires  without  a second 
increase  of  the  cost  of  production. 

I have  made  use  of  Price  in  this  reasoning,  as  a convenient 
symbol  of  Value,  from  the  greater  familiarity  of  the  idea ; and  I 
shall  continue  to  do  so  as  far  as  may  appear  to  be  necessary. 

In  the  case  supposed,  different  portions  of  the  supply  of  corn 
have  different  costs  of  production.  Though  the  20,  or  50,  or  150 
quarters  additional  have  been  produced  at  a cost  proportional  to 
255.,  the  original  hundred  quarters  per  annum  are  still  produced  at 
a cost  only  proportional  to  205.  This  is  self-evident,  if  the  original 
and  the  additional  supply  are  produced  on  different  qualities  of 
land.  It  is  equally  true  if  they  are  produced  on  the  same  land. 
Suppose  that  land  of  the  best  quality,  which  produced  100  quarters 
at  20s.,  has  been  made  to  produce  150  by  an  expensive  process,  which 


BENT  IN  ITS  RELATION  TO  VALUE 


471 


it  would  not  answer  to  undertake  without  a price  of  25s.  The  cost 
which  requires  25s.  is  incurred  for  the  sake  of  50  quarters  alone  : 
the  first  hundred  might  have  continued  for  ever  to  be  produced  at 
the  original  cost,  and  with  the  benefit,  on  that  quantity,  of  the 
whole  rise  of  price  caused  by  the  increased  demand  : no  one,  there- 
fore, will  incur  the  additional  expense  for  the  sake  of  the  additional 
fifty,  unless  they  alone  will  pay  for  the  whole  of  it.  The  fifty, 
therefore,  will  be  produced  at  their  natural  price,  proportioned  to 
the  cost  of  their  production ; while  the  other  hundred  will  now 
bring  in  5s.  a quarter  more  than  their  natural  price — than  the  price 
corresponding  to,  and  sujficing  to  remunerate,  their  lower  cost  of 
production. 

If  the  production  of  any,  even  the  smallest,  portion  of  the  supply, 
requires  as  a necessary  condition  a certain  price,  that  price  will  be 
obtained  for  all  the  rest.  We  are  not  able  to  buy  one  loaf  cheaper 
than  another  because  the  corn  from  which  it  was  made,  being  grown 
on  a richer  soil,  has  cost  less  to  the  grower.  The  value,  therefore, 
of  an  artmle  (meaning  its  natural,  which  is  the  saD^_mthJts  average 
value)Js  deterniined  byithe  cost^otJdiatL^ltum.niJjie^aiipplyjw^ 
is  produced  and  brought  to  market.  alL  the  ^eateat  exp^ense.  This 
is  the  Law  of  Value^qf^hMbhird  of  the_three  classes  into  whi^h  aU 
comroodities  are  divided. 

§ 2.  If  the  portion  of  produce  raised  in  the  most  unfavourable 
circumstances  obtains  a value  proportioned  to  its  cost  of  produc- 
tion ; all  the  portions  raised  in  more  favourable  circumstances, 
selling  as  they  must  do  at  the  same  value,  obtain  a value  more  than 
proportioned  to  their  cost  of  production.  Their  value  is  not, 
correctly  speaking,  a scarcity  value,  for  it  is  determined  by  the 
circumstances  of  the  production  of  the  commodity,  and  not  by  the 
degree  of  dearness  necessary  for  keeping  down  the  demand  to  the 
level  of  a limited  supply.  The  owners,  however,  of  those  portions 
of  the  produce  enjoy  a privilege  ; they  obtain  a value  which  yields 
them  more  than  the  ordinary  profit.  If  this  advantage  depends 
upon  any  special  exemption,  such  as  being  free  from  a tax,  or  upon 
any  personal  advantages,  physical  or  mental,  or  any  peculiar  process 
only  known  to  themselves,  or  upon  the  possession  of  a greater  capital 
than  other  people,  or  upon  various  other  things  which  might  be 
enumerated,  they  retain  it  to  themselves  as  an  extra  gain,  over  and 
above  the  general  profits  of  capital,  of  the  nature,  in  some  sort,  of  a 
monopoly  profit.  But  when,  as  in  the  case  which  we  are  more 


472 


BOOK  m.  CHAPTER  V.  § 2 


particularly  considering,  the  advantage  depends  on  the  possession  of 
a natural  agent  of  peculiar  quality,  as  for  instance  of  more  fertile 
land  than  that  which  determines  the  general  value  of  the  com- 
modity ; and  when  this  natural  agent  is  not  owned  by  themselves  ; 
the  person  who  does  own  it,  is  able  to  exact  from  them,  in  the  form 
of  rent,  the  whole  extra  gain  derived  from  its  use.  We  are  thus 
brought  by  another  road  to  the  Law  of  Rent,  investigated  in  the 
concluding  chapter  of  the  Second  Book.  R_^t,  we  ^ain  see,  is 
diflerence  between  the  unequal  returns  to  diSSent  parts  of  the 
capital  employed  on  the  soil.  Whatever  surplus  any  portion  of 
' agricultural  capital  produces,  beyond  what  is  produced  by  the  same 
amount  of  capital  on  the  worst  soil,  or  under  the  most  expensive 
mode  of  cultivation,  which  the  existing  demands  of  society  compel 
a recourse  to  ; that  surplus  wiU  naturally  be  paid  as  rent  from  that 
capital,  to  the  owner  of  the  land  on  which  it  is  employed. 

It  was  long  thought  by  political  economists,  among  the  rest 
even  by  Adam  Smith,  that  the  produce  of  land  is  always  at  a mono- 
poly value,  because  (they  said)  in  addition  to  the  ordinary  rate  of 
profit,  it  always  yields  something  further  for  rent.  This  we  now 
see  to  be  erroneous.  A thing  cannot  be  at  a monopoly  value,  when 
its  supply  can  be  increased  to  an  indefinite  extent  if  we  are  only 
willing  to  incur  the  cost.  If  no  more  corn  than  the  existing  quantity 
is  grown,  it  is  because  the  value  has  not  risen  high  enough  to  re- 
munerate any  one  for  growing  it.  Any  land  (not  reserved  for  other 
uses,  or  for  pleasure)  which  at  the  existing  price,  and  by  the  exist- 
ing processes,  wiU  yield  the  ordinary  profit,  is  tolerably  certain, 
unless  some  artificial  hindrance  intervenes,  to  be  cultivated;  although 
nothing  may  be  left  for  rent.  As  long  as  there  is  any  land  fit  for 
cultivation,  which  at  the  existing  price  cannot  be  profitably  culti- 
vated at  all,  there  must  be  some  land  a little  better,  which  will 
yield  the  ordinary  profit,  but  allow  nothing  for  rent : and  that 
land,  if  within  the  boundary  of  a farm,  wiU  be  cultivated  by  the 
farmer ; if  not  so,  probably  by  the  proprietor,  or  by  some  other 
person  on  sufferance.  Some  such  land  at  least,  under  cultivation, 
there  can  scarcely  fail  to  be. 

Ren^^r^ore,^J(^^no  part  of  the  cost  of  production  wMch 
determines  the  value  of  a^icuItuSrprQ3u5e^r"^lH^  no 

doubtmayTbe  conceivedTn  which  it^Ught  do  so,  and  very  largely 
too.  We  can  imagine  a country  so  fuUy  peopled,  and  with  aU  its 
cultivable  soil  so  completely  occupied,  that  to  produce  any  additional 
quantity  would  require  more  labour  than  the  produce  would  feed  : 


RENT  IN  ITS  RELATION  TO  VALUE 


473 


and  if  we  suppose  this  to  be  the  condition  of  the  whole  world,  or  of 
a country  debarred  from  foreign  supply,  then,  if  population  con- 
tinued increasing,  both  the  land  and  its  produce  would  really  rise 
to  a monopoly  or  scarcity  price.  But  this  state  of  things  never  can 
have  really  existed  anywhere,  unless  possibly  in  some  small  island 
cut  off  from  the  rest  of  the  world ; nor  is  there  any  danger  what- 
ever that  it  should  exist.  It  certainly  exists  in  no  known  region  at 
present.  Monopoly^je  have-seen.  can  take  effect  on  value,  j)nly 
through  Im^ation  of  supply.  In  all  countries  of  any  extent  there 
is  more  cultivableTand  than  is  yet  cultivated ; and  while  there  is 
any  such  surplus,  it  is  the  same  thing,  so  far  as  that  quahty  of  land 
is  concerned,  as  if  there  were  an  infinite  quantity.  WhatJa._gra^- 
cally  limited  in  supply  is  only  the  better  qualities ; and  even  for 
those,  so  much  rent  cannot  be  demanded  as  would  bring  in  the 
competition  of  the  lands  not  yet  in  cultivation  ; the  rent  of  a piece 
of  land  must  be  somewhat  less  than  the  whole  excess  of  its  pro- 
ductiveness over  that  of  the  best  land  which  it  is  not  yet  profitable 
to  cultivate ; that  is,  it  must  be  about  equal  to  the  excess  above 
the  ^^st  land  which  it  is  profitable  to  cultivate.  The  land  or  the 
capita  most  unfavourably  circumstan^  among  those  actually 
employed,  pays  no  rent ; and  that  land  or  capital  determineaLthe 
cost,  of  production  which  regulates  the  value  of  the  whole  produce. 

Thus  rent  is.  as  we  have  alreajiy^een,  no  cause  of  value,  but  the 
price  of  the  prlvS^e  whichTthe  inequahty  of  the  returns  to  different  ^ 
portions  ^agricultural  produce  confers  on  all  except  the  least 
fayqurfid^poitiqns. 

Rent,  in  short,  merely  equalizes  the  profits  of  different  farming 
capitals,  by  enabling  the  landlord  to  appropriate  all  extra  gains 
occasioned  by  superiority  of  natural  advantages.  If  aU  landlords 
were  unanimously  to  forego  their  rent,  they  would  but  transfer  it 
to  the  farmers,  without  benefiting  the  consumer ; for  the  existing 
price  of  corn  would  still  be  an  indispensable  condition  of  the  pro- 
duction of  part  of  the  existing  supply,  and  if  a part  obtained  that 
price  the  whole  would  obtain  it.  Rent,  therefore,  unless  artificially 
l^y  ^<^*»^uctive  laws,  is  no  burthen  on  the  consumer  : it  does 
not  raise  the  price  of  corn,  and  is  no  otherwise  a detriment  to  the 
pubhc.  than  inasmuch  as  if  the  state  had  retained  it,  or  imposed  an 
equivalent  in  the  shape  of  a land-tax,  it  would  then  have  been  a 
fund  apphcable  to  general  instead  of  private  advantage. 


§ 3.  Agricultural  productions  are  not  the  only  commodities 


474 


BOOK  III.  CHAPTER  V.  § 3 


which  have  several  different  costs  of  production  at  once,  and  which 
in  consequence  of  that  difference,  and  in  proportion  to  it,  afford  a 
rent.  Mines  are  also  an  instance.  Almost  all  kinds  of  raw  material 
extracted  from  the  interior  of  the  earth — metal,  coals,  precious 
stones,  &c.,  are  obtained  from  mines  differing  considerably  in 
fertility,  that  is,  yielding  very  different  quantities  of  the  product  to 
the  same  quantity  of  labour  and  capital.  This  being  the  case,  it  is 
an  obvious  question,  why  are  not  the  most  fertile  mines  so  worked 
as  to  supply  the  whole  market  ? No  such  question  can  arise  as  to 
land ; it  being  self-evident,  that  the  most  fertile  lands  could  not 
possibly  be  made  to  supply  the  whole  demand  of  a fully-peopled 
country ; and  even  of  what  they  do  yield,  a part  is  extorted  from 
them  by  a labour  and  outlay  as  great  as  that  required  to  grow  the 
same  amount  on  worse  land.  But  it  is  not  so  with  mines  ; at  least, 
not  universally.  There  are,  perhaps,  cases  in  which  it  is  impossible 
to  extract  from  a particular  vein,  in  a given  time,  more  than  a 
certain  quantity  of  ore,  because  there  is  only  a limited  surface  of 
the  vein  exposed,  on  which  more  than  a certain  number  of  labourers 
cannot  be  simultaneously  employed.  But  this  is  not  true  of  all 
mines.  In  collieries,  for  example,  some  other  cause  of  limitation 
must  be  sought  for.  In  some  instances  the  owners  limit  the  quantity 
raised,  in  order  not  too  rapidly  to  exhaust  the  mine  : in  others  there 
are  said  to  be  combinations  of  owners,  to  keep  up  a monopoly  price 
by  limiting  the  production.  Whatever  be  the  causes,  it  is  a fact  that 
nunes  of  different  degrees  of  richness  are  in  operation,  and  since  the 
value  of  the  produce  must  be  proportional  to  the  cost  of  production 
at  the  worst  mine  (fertility  and  situation  taken  together),  it  is  more 
than  proportional  to  that  of  the  best.  All  mines  superior  in  produce 
to  the  worst  actually  worked,  will  yield,  therefore,  a rent  equal  to 
tEe~ex^s.  They  may  yield  more  ; and  the  worst  mine  may  itself 
yield  a rent.  Mines  being  comparatively  few,  their  qualities  do  not 
graduate  gently  into  one  another,  as  the  qualities  of  land  do ; and 
the  demand  may  be  such  as  to  keep  the  value  of  the  produce  con- 
siderably above  the  cost  of  production  at  the  worst  mine  now 
worked,  without  being  sufficient  to  bring  into  operation  a stiU  worse. 
During  the  interval,  the  produce  is  really  at  a scarcity  value. 

Fisheries  are  another  example.  Fisheries  in  the  open  sea  are 
not  appropriated,  but  fisheries  in  lakes  or^nvgia-^lmost  always  are 
s<v-an^  likewise  oyster-beds  or  other  particular  fishing  grounds  on 
coasts.  We  may  take  salmon  fisheries  as  an  example  of  the  whole 
class.  Some  rivers  are  far  more  productive  in  salmon  than  others 


RENT  IN  ITS  RELATION  TO  VALUE 


475 


None,  however,  without  being  exhausted,  can  supply  more  than  a 
very  limited  demand.  The  demand  of  a country  like  England  can 
only  be  supplied  by  taking  salmon  from  many  different  rivers  of 
unequal  productiveness,  and  the  value  must  be  sufficient  to  repay 
the  cost  of  obtaining  the  fish  from  the  least  productive  of  these.  All 
others,  therefore,  will  if  appropriated  afford  a rent  equal  to  the 
value  of  their  superiority.  Much  higher  than  this  it  cannot  be,  if 
there  are  salmon  rivers  accessible  which  from  distance  or  inferior 
productiveness  have  not  yet  contributed  to  supply  the  market. 
If  there  are  not,  the  value,  doubtless,  may  rise  to  a scarcity  rate,  and 
the  worst  fisheries  in  use  may  then  yield  a considerable  rent. 

Both  in  the  case  of  mines  and  of  fisheries,  the  natural  order  of 
events  is  liable  to  be  interrupted  by  the  opening  of  a new  mine,  or  a 
new  fishery,  of  superior  quality  to  some  of  those  already  in  use.  The 
first  effect  of  such  an  incident  is  an  increase  of  the  supply  ; which 
of  course  lowers  the  value  to  call  forth  an  increased  demand.  This 
reduced  value  may  be  no  longer  sufficient  to  remunerate  the  worst 
of  the  existing  mines  or  fisheries,  and  these  may  consequently  be 
abandoned.  If  the  superior  mines  or  fisheries,  with  the  addition  of 
the  one  newly  opened,  produce  as  much  of  the  commodity  as  is 
required  at  the  lower  value  corresponding  to  their  lower  cost  of 
production,  the  fall  of  value  will  be  permanent,  and  there  will  be  a 
corresponding  fall  in  the  rents  of  those  mines  or  fisheries  which  are 
not  abandoned.  In  this  case,  when  things  have  permanently  ad- 
justed themselves,  the  result  will  be,  that  the  scale  of  quahties 
which  supply  the  market  will  have  been  cut  short  at  the  lower  end, 
while  a new  insertion  will  have  been  made  in  the  scale  at  some  point 
higher  up  ; and  the  worst  mine  or  fishery  in  use — the  one  which 
regulates  the  rents  of  the  superior  quahties  and  the  value  of  the 
commodity — will  be  a mine  or  fishery  of  better  quahty  than  that  by 
which  they  were  previously  regulated. 

Land  is  used  for  other  purposes  than  agriculture,  especially  for 
residence ; and  when  so  used,  yields  a rent,  determined  by  prin- 
ciples similar  to  those  already  laid  down.  The  ground  rent  of  a 
builffin^  and  ^e  rent  of  a garden  or  park  attached  to  it,  will  not  be 
less  than  the  rent  which  the  same  land  would  afiord  in  agriculture  : 
but  may  be  greater  than  this  to  an  indefinite  amount ; the  surplus 


venience  often  consisting  in  superior  facihties  for  pecuniary  gain. 
Sitpa  of  remarkable  beauty: ..are  generally  hmited  in  supply,  and 


476 


BOOK  III.  CHAPTER  V.  § 4 


onlg-iiLjconvenience  are  goyerned  as  to  their  value  by  the  oHitiatv 
principles  of  rent.  The  ground  rent  of  a house  in  a small  village  is 
but  little  higher  than  the  rent  of  a similar  patch  of  ground  in  the 
open  fields  : but  that  of  a shop  in  Cheapside  will  exceed  these,  by 
the  whole  amount  at  which  people  estimate  the  superior  facihties 
of  money-making  in  the  more  crowded  place.  The  rents  of  wharfage, 
dock  and  harbour  room,  water-power,  and  many  other  privileges, 
may  be  analysed  on  similar  principles. 


§ 4.  Cases  of  extra  profit  analogous  to  rent,  are  more  frequent 
in  the  transactions  of  industry  than  is  sometimes  supposed.  Take 
the  case,  for  example,_ofj;^atent,  or  exclusive  privilege  for  the  use 
a jprocess  by  which  cost  of  production  is  lessened.  If  the  value  of 
the  product  continues  to  be  regulated  by  what  it  costs  to  those  who 
are  obliged  to  persist  in  the  old  process,  the  patentee  will  make,  an 
extra  profit  equal  to  the  advantage  which  his  process  possesses  over 
theixs- — This  extra  profit  is  essentially  similar  to  rent,  and  some- 
times even  assumes  the  form  of  it ; the  patentee  allowing  to  other 
producers  the  use  of  his  privilege,  in  consideration  of  an  annual 
payment.  So  long  as  he,  and  those  whom  he  associates  in  the 
privilege,  do  not  produce  enough  to  supply  the  whole  market,  so 
long  the  original  cost  of  production,  being  the  necessary  condition  of 
producing  a part,  will  regulate  the  value  of  the  whole ; and  the 
patentee  will  be  enabled  to  keep  up  his  rent  to  a full  equivalent  for 
the  advantage  which  his  process  gives  him.  In  the  commencement 
indeed  he  will  probably  forego  a part  of  this  advantage  for  the  sake 
of  underselling  others  : the  increased  supply  which  he  brings  forward 
will  lower  the  value,  and  make  the  trade  a bad  one  for  those  who  do 
not  share  in  the  privilege  : many  of  whom  therefore  will  gradually 
retire,  or  restrict  their  operations,  or  enter  into  arrangements  with 
the  patentee  : as  his  supply  increases  theirs  will  diminish,  the  value 
meanwhile  continuing  slightly  depressed.  But  if  he  stops  short  in 
his  operations  before  the  market  is  wholly  suppHed  by  the  new  process, 
things  will  again  adjust  themselves  to  what  was  the  natural  value 
before  the  invention  was  made,  and  the  benefit  of  the  improvement 
will  accrue  solely  to  the  patentee. 

The  extra  gains  wbich  any  producer  or  dealer  obtains  through 
superior  talents  for  business,  or  superior  business  arrangements, 
4 are  very  muck- of  a -similar  kind.  If  all  his  competitors  had  the 
same  advantages,  and  used  them,  the  benefit  would  be  transferred 
fAoj^tJ  to  their  customers,  through  the  diminished  value  of  the  article : 


RENT  IN  ITS  RELATION  TO  VALUE 


477 


he  only  retains  it  for  himself  because  he  is  able  to  bring  his  commodity 
to  market  at  a lower  cost,  while  its  value  is  determined  by  a higher. 

All  advantages,  in  fact,  which  one  competitor  has  over  another, 
whether  natural  or  acquired,  whether  personal  or  the  result  of  social 
arrangements,  bring  the  commodity,  so  far,  into  the  Third  Class,  and 
assimilate  the  possessor  of  the  advantage  to  a receiver  of  rent. 

in  production,  < 

and  "peculiar  : 

any  difference  in  favour  of  certain  producers,  or  in  favour  of  pro-" 

duction  in  certain  circumstances,  being  the  source  of  a gain,  which,  7 

though  not  called  rent  unless  paid  periodically  by  one  person  to 

another,  is  governed  by  laws  entirely  the  same  with  it.  The  price 

paid  for  a differential  advantage  in  producing  a commodity  cannot 

enter  into  the  general  cost  of  production  of  the  commodity. 

A commodity  may  no  doubt,  in  some  contingencies,  yield  a 
rent  even  under  the  most  disadvantageous  circumstances  of  its 
production  : but  only  when  it  is,  for  the  time,  in  the  condition 
of  those  commodities  which  are  absolutely  limited  in  supply,  and 
is  therefore  selling  at  a scarcity  value  ; which  never  is,  nor  has  been, 
nor  can  be,  a permanent  condition  of  any  of  the  great  rent-yielding 
commodities : unless  through  their  approaching  exhaustion,  if 
they  are  mineral  products  (coal  for  example),  or  through  an  increase 
of  population,  continuing  after  a further  increase  of  production 
becomes  impossible  : a contingency,  which  the  almost  inevitable 
progress  of  human  culture  and  improvement  in  the  long  interval 
which  has  first  to  elapse,  forbids  us  to  consider  as  probable. 


rcj^ftsfint  thft  universal  elements 
while  rent  may  be  taken  to  represent  the  differential 


CHAPTER  VI 


SUMMARY  OF  THE  THEORY  OP  VALUE 

§ 1.  We  have  now  attained  a favourable  point  for  looking 
back,  and  taking  a simultaneous  view  of  the  space  which  we  have 
traversed  since  the  commencement  of  the  present  Book.  The 
following  are  the  principles  of  the  theory  of  Value,  so  far  as  we 
have  yet  ascertained  them. 

I.  Value  is  a relative  term.  The  value  of  a thing  means  the 
quantity  of  some  other  thing,  or  of  things  in  general,  which  it 
exchanges  for.  The  values  of  all  things  can  never,  therefore,  rise 
or  fall  simultaneously.  There  is  no  such  thing  as  a general  rise 
or  a general  fall  of  values.  Every  rise  of  value  supposes  a fall, 
and  every  fall  a rise. 

II.  The  temporary  or  Market  Value  of  a thing  depends  on  the 
demand  and  supply  ; rising  as  the  demand  rises,  and  falhng  as  the 
supply  rises.  The  demand,  however,  varies  with  the  value,  being 
generally  greater  when  the  thing  is  cheap  than  when  it  is  dear ; 
and  the  value  always  adjusts  itself  in  such  a manner  that  the  demand 
is  equal  to  the  supply. 

III.  Besides  their  temporary  value,  things  have  also  a permanent, 
or,  as  it  may  be  called,  a Natural  Value,  to  which  the  market  value, 
after  every  variation,  always  tends  to  return  ; and  the  oscillations 
compensate  for  one  another,  so  that,  on  the  average,  commodities 
exchange  at  about  their  natural  value. 

IV.  The  natural  value  of  some  things  is  a scarcity  value ; but 
most  things  naturally  exchange  for  one  another  in  the  ratio  of  their 
cost  of  production,  or  at  what  may  be  termed  their  Cost  Value. 

V.  The  things  which  are  naturally  and  permanently  at  a scarcity 
value  are  those  of  which  the  supply  cannot  be  increased  at  all, 
or  not  sufficiently  to  satisfy  the  whole  of  the  demand  which  would 
exist  for  them  at  their  cost  value. 

VI.  A monopoly  value  means  a scarcity  value.  Monopoly 


SUMMARY  OF  THE  THEURV  OF  VALUE 


479 


cannot  give  a value  to  anything  except  through  a limitation  of  the 
supply. 

VII.  Every  commodity  of  which  the  supply  can  be  indefinitely 
increased  by  labour  and  capital,  exchanges  for  other  things  pro- 
portionally to  the  cost  necessary  for  producing  and  bringing  to 
market  the  most  costly  portion  of  the  supply  required.  The 
natural  value  is  synonymous  with  the  Cost  Value ; and  the  cost 
value  of  a thing  means  the  cost  value  of  the  most  costly  portion 
of  it. 

VIII.  Cost  of  Production  consists  of  several  elements,  some 
of  which  are  constant  and  universal,  others  occasional.  The 
imiversal  elements  of  cost  of  production  are,  the  wages  of  the 
labour,  and  the  profits  of  the  capital.  The  occasional  elements 
are  taxes,  and  any  extra  cost  occasioned  by  a scarcity  value  of  some 
of  the  requisites. 

IX.  Rent  is  not  an  element  in  the  cost  of  production  of  the 
commodity  which  yields  it ; except  in  the  cases  (rather  conceivable 
than  actually  existing)  in  which  it  results  from,  and  represents,  a 
scarcity  value.  But  when  land  capable  of  yielding  rent  in  agriculture 
is  apphed  to  some  other  purpose,  the  rent  which  it  would  have 
yielded  is  an  element  in  the  cost  of  production  of  the  commodity 
which  it  is  employed  to  produce. 

X.  Omitting  the  occasional  elements ; things  which  admit  of 
indefinite  increase,  naturally  and  permanently  exchange  for  each 
other  according  to  the  comparative  amount  of  wages  which  must 
be  paid  for  producing  them,  and  the  comparative  amount  of  profits 
which  must  be  obtained  by  the  capitalists  who  pay  those  wages. 

XI.  The  comparative  amount  of  wages  does  not  depend  on 
what  wages  are  in  themselves.  High  wages  do  not  make  high 
values,  nor  low  wages  low  values.  The  comparative  amount  of 
wages  depends  partly  on  the  comparative  quantities  of  labour 
required,  and  partly  on  the  comparative  rates  of  its  remuneration. 

XII.  So,  the  comparative  rate  of  profits  does  not  depend  on 
what  profits  are  in  themselves ; nor  do  high  or  low  profits  make 
high  or  low  values.  It  depends  partly  on  the  comparative  lengths 
of  time  during  which  the  capital  is  employed,  and  partly  on  the 
comparative  rate  of  profits  in  different  employments. 

XIII.  If  two  things  are  made  by  the  same  quantity  of  labour, 
and  that  labour  paid  at  the  same  rate,  and  if  the  wages  of  the 
labourer  have  to  be  advanced  for  the  same  space  of  time,  and  the 
nature  of  the  employment  does  not  require  that  there  be  a permanent 


480 


BOOK  III.  CHAPTER  VI.  § 2 


difference  in  their  rate  of  profit ; then,  whether  wages  and  profits 
be  high  or  low,  and  whether  the  quantity  of  labour  expended  be 
much  or  little,  these  two  things  will,  on  the  average,  exchange  for 
one  another. 

XIV.  If  one  of  two  things  commands,  on  the  average,  a greater 
value  than  the  other,  the  cause  must  be  that  it  requires  for  its 
production  either  a greater  quantity  of  labour,  or  a kind  of  labour 
permanently  paid  at  a higher  rate  ; or  that  the  capital,  or  part  of 
the  capital,  which  supports  that  labour,  must  be  advanced  for  a 
longer  period ; or  lastly,  that  the  production  is  attended  with  some 
circumstance  which  requires  to  be  compensated  by  a permanently 
higher  rate  of  profit. 

XV.  Of  these  elements,  the  quantity  of  labour  required  for  the 
production  is  the  most  important : the  effect  of  the  others  is  smaller, 
though  none  of  them  are  insignificant. 

XVI.  The  lower  profits  are,  the  less  important  become  the 
minor  elements  of  cost  of  production,  and  the  less  do  commodities 
deviate  from  a value  proportioned  to  the  quantity  and  quality 
of  the  labour  required  for  their  production. 

XVII.  But  every  fall  of  profits  lowers,  in  some  degree,  the 
cost  value  of  things  made  with  much  or  durable  machinery,  and 
raises  that  of  things  made  by  hand  ; and  every  rise  of  profits  does 
the  reverse. 

§ 2.  Such  is  the  general  theory  of  Exchange  Value.  It  is 
necessary,  however,  to  remark  that  this  theory  contemplates  a 
system  of  production  carried  on  by  capitalists  for  profit,  and  not 
by  labourers  for  subsistence.  In  proportion  as  we  admit  this 
last  supposition — and  in  most  countries  we  must  admit  it,  at  least 
in  respect  of  agricultural  produce,  to  a very  great  extent — such 
of  the  preceding  theorems  as  relate  to  the  dependence  of  value  on 
cost  of  production  will  require  modification.  Those  theorems  are  all 
grounded  on  the  supposition  that  the  producer’s  object  and  aim  is 
to  derive  a profit  from  his  capital.  This  granted,  it  follows  that  he 
must  sell  his  commodity  at  the  price  which  will  afford  the  ordinary 
rate  of  profit,  that  is  to  say,  it  must  exchange  for  other  commodities 
at  its  cost  value.  But  the  peasant  proprietor,  the  metayer,  and 
even  the  peasant-farmer  or  allotment-holder — the  labourer,  under 
whatever  name,  producing  on  his  own  account — is  seeking,  not  an 
investment  for  his  little  capital,  but  an  advantageous  employment 
for  his  time  and  labour.  His  disbursements,  beyond  his  own 


SUMMARY  OF  THE  THEORY  OF  VALUE 


481 


maintenance  and  that  of  his  family,  are  so  small,  that  nearly  the 
whole  proceeds  of  the  sale  of  the  produce  are  wages  of  labour. 
When  he  and  his  family  have  been  fed  from  the  produce  of  the 
farm  (and  perhaps  clothed  with  materials  grown  thereon,  and 
manufactured  in  the  family)  he  may,  in  respect  of  the  supplementary 
remuneration  derived  from  the  sale  of  the  surplus  produce,  be 
compared  to  those  labourers  who,  deriving  their  subsistence  from 
an  independent  source,  can  afford  to  sell  their  labour  at  any  price 
which  is  to  their  minds  worth  the  exertion.  A peasant,  who  supports 
himself  and  his  family  with  one  portion  of  his  produce,  will  often 
sell  the  remainder  very  much  below  what  would  be  its  cost  value 
to  the  capitahst. 

There  is,  however,  even  in  this  case,  a minimum,  or  inferior 
, limit,  of  value.  The  produce  which  he  carries  to  market,  must 
bring  in  to  him  the  value  of  all  necessaries  which  he  is  compelled 
to  purchase  ; and  it  must  enable  him  to  pay  his  rent.  Rent,  under 
peasant  cultivation,  is  not  governed  by  the  principles  set  forth  in 
the  chapters  immediately  preceding,  but  is  either  determined  by 
custom,  as  in  the  case  of  metayers,  or,  if  fixed  by  competition, 
depends  on  the  ratio  of  population  to  land.  Rent,  therefore,  in 
this  case,  is  an  element  of  cost  of  production.  The  peasant  must 
work  until  he  has  cleared  his  rent  and  the  price  of  all  purchased 
necessaries.  After  this,  he  will  go  on  working  only  if  he  can  sell 
the  produce  for  such  a price  as  will  overcome  his  aversion  to  labour. 

The  minimum  just  mentioned  is  what  the  peasant  must  obtain 
in  exchange  for  the  whole  of  his  surplus  produce.  But  inasmuch 
as  this  surplus  is  not  a fixed  quantity,  but  may  be  either  greater 
or  less  according  to  the  degree  of  his  industry,  a minimum  value 
for  the  whole  of  it  does  not  give  any  minimum  value  for  a definite 
quantity  of  the  commodity.  In  this  state  of  things,  therefore,  it 
can  hardly  be  said  that  the  value  depends  at  all  on  cost  of  production. 
It  depends  entirely  on  demand  and  supply,  that  is,  on  the  proportion 
between  the  quantity  of  surplus  food  which  the  peasants  choose 
to  produce,  and  the  numbers  of  the  non-agricultural,  or  rather  of 
the  non-peasant  population.  If  the  buying  class  were  numerous 
and  the  growing  class  lazy,  food  might  be  permanently  at  a scarcity 
price.  I am  not  aware  that  this  case  has  anywhere  a real  existence. 
If  the  growing  class  is  energetic  and  industrious,  and  the  buyers 
few,  food  will  be  extremely  cheap.  This  also  is  a rare  case,  though 
some  parts  of  France  perhaps  approximate  to  it.  The  common 
cases  are,  either  that,  as  in  Ireland  until  lately,  the  peasant  class 

B 


482 


BOOK  HL  chapter  VL  § 3 


is  indolent  and  the  buyers  few,  or  the  peasants  industrious  and  the 
town  population  numerous  and  opulent,  as  in  Belgium,  the  north 
of  Italy,  and  parts  of  Germany.  The  price  of  the  produce  will 
adjust  itself  to  these  varieties  of  circumstances  unless  modified,  as 
in  many  cases  it  is,  by  the  competition  of  producers  who  are  not 
peasants,  or  by  the  prices  of  foreign  markets. 

§ 3.  Another  anomalous  case  is  that  of  slave-grown  produce : 
which  presents,  however,  by  no  means  the  same  degree  of  complica- 
tion. The  slave-owner  is  a capitalist,  and  his  inducement  to 
production  consists  in  a profit  on  his  capital  This  profit  must 
amount  to  the  ordinary  rate.  In  respect  to  his  expenses,  he  is  in 
the  same  position  as  if  his  slaves  were  free  labourers  workmg  with 
their  present  efficiency,  and  were  hired  with  wages  equal  to  their 
present  cost.  If  the  cost  is  less,  in  proportion  to  the  work  done, 
than  the  wages  of  free  labour  would  be,  so  much  the  greater  are  his 
profits  : but  if  all  other  producers  in  the  country  possess  the  same 
advantage,  the  values  of  commodities  will  not  be  at  all  afiected  by 
ft.  The  only  case  in  which  they  can  be  afiected,  is  when  the  privilege 
of  cheap  labour  is  confined  to  particular  branches  of  production, 
free  labourers  at  proportionally  higher  wages  being  employed  in  the 
remainder.  In  this  case,  as  in  aU  cases  of  permanent  inequality 
between  the  wages  of  different  employments,  prices  and  values 
receive  the  impress  of  the  inequality.  Slave-grown  will  exchange 
for  non-slave-grown  commodities  in  a less  ratio  than  that  of  the 
'xuantity  of  labour  required  for  their  production ; the  value  of 
^e  former  will  be  less,  of  the  latter  greater,  than  if  slavery  did 
not  exist. 

The  further  adaptation  of  the  theory  of  value  to  the  varieties 
of  existing  or  possible  industrial  systems  may  be  left  with  great 
advantage  to  the  intelligent  reader.  It  is  well  said  by  Montesquieu, 
“II  ne  faut  pas  toujours  tellement  epuiser  un  sujet,  qu’on  ne  laisse 
rien  a faire  au  lecteur.  II  ne  s’agit  pas  de  faire  lire,  mais  de  fairs 
penser.”  ♦ 

® iow,  Hv.  xL  [See  Appendix  S.  The  Theory  of  V nlut.1 


CHAPTER  Vn 


OP  MONEY 

I 1.  Having  proceeded  thus  far  in  ascertaining  the  general 
laws  of  Value,  without  introducing  the  idea  of  Money  (except 
occasionally  for  illustration,)  it  is  time  that  we  should  now  superadd 
that  idea,  and  consider  in  what  manner  the  principles  of  the  mutual 
interchange  of  commodities  are  affected  by  the  use  of  what  is  termed 
a Medium  of  Exchange. 

In  order  to  understand  the  manifold  functions  of  a Circulating 
Medium,  there  is  no  better  way  than  to  consider  what  are  the 
principal  inconveniences  which  we  should  experience  if  we  had  not 
such  a medium.  The  first  and  most  obvious  would  be  the  want  of 
a common  measure  for  values  of  different  sorts.  If  a tailor  had 
only  coats,  and  wanted  to  buy  bread  or  a horse,  it  would  be  very 
troublesome  to  ascertain  how  much  bread  he  ought  to  obtain  for 
a coat,  or  how  many  coats  he  should  give  for  a horse.  The  calcu- 
lation must  be  recommenced  on  different  data,  every  time  he 
bartered  his  coats  for  a different  kind  of  article  ; and  there  could  be 
no  current  price,  or  regular  quotations  of  value.  Whereas  now 
each  thing  has  a current  price  in  money,  and  he  gets  over  all 
difficulties  by  reckoning  his  coat  at  U.  or  51.,  and  a four-pound 
loaf  at  Qd.  or  Id.  As  it  is  much  easier  to  compare  different  lengths 
by  expressing  them  in  a common  language  of  feet  and  inches,  so  it 
is  much  easier  to  compare  values  by  means  of  a common  language 
of  pounds,  shilKngs,  and  pence.  In  no  other  way  can  values  be 
arranged  one  above  another  in  a scale  ; in  no  other  can  a person 
conveniently  calculate  the  sum  of  his  possessions  ; and  it  is  easier  to 
ascertain  and  remember  the  relations  of  many  things  to  one  thing, 
than  their  innumerable  cross  relations  with  one  another.  This 
advantage  of  having  a common  language  in  which  values  may  be 
expressed,  is,  even  by  itself,  so  important,  that  some  such  mode  of 
expressing  and  computing  them  would  probably  be  used  even  if  a 


484 


BOOK  IIL  CHAPTER  VIL  § 2 


pound  or  a shilling  did  not  express  any  real  thing,  but  a mere  unit 
of  calculation.  It  is  said  that  there  are  African  tribes  in  which  this 
somewhat  artificial  contrivance  actually  prevails.  They  calculate 
the  value  of  things  in  a sort  of  money  of  account,  called  macutes. 
They  say  one  thing  is  worth  ten  macutes,  another  fifteen,  another 
twenty.*  There  is  no  real  thing  called  a macute  : it  is  a conventional 
unit,  for  the  more  convenient  comparison  of  things  with  one  another. 

This  advantage,  however,  forms  but  an  inconsiderable  part  of 
the  economical  benefits  derived  from  the  use  of  money.  The 
inconveniences  of  barter  are  so  great,  that  without  some  more 
commodious  means  of  efiecting  exchanges,  the  division  of  employ- 
ments could  hardly  have  been  carried  to  any  considerable  extent. 
A tailor,  who  had  nothing  but  coats,  might  starve  before  he  could 
find  any  person  having  bread  to  seU  who  wanted  a coat : besides, 
he  would  not  want  as  much  bread  at  a time  as  would  be  worth  a 
coat,  and  the  coat  could  not  be  divided.  Every  person,  therefore, 
would  at  all  times  hasten  to  dispose  of  his  commodity  in  exchange 
for  anything  which,  though  it  might  not  be  fitted  to  his  own  im- 
mediate wants,  was  in  great  and  general  demand,  and  easily  divisible, 
so  that  he  might  be  sure  of  being  able  to  purchase  with  it  whatever 
was  offered  for  sale.  The  primary  necessaries  of  life  possess  these 
properties  in  a high  degree.  Bread  is  extremely  divisible,  and  an 
object  of  universal  desire.  StiQ,  this  is  not  the  sort  of  thing  re- 
quired : for,  of  food,  unless  in  expectation  of  a scarcity,  no  one 
wishes  to  possess  more  at  once,  than  is  wanted  for  immediate 
consumption  ; so  that  a person  is  never  sure  of  finding  an  immediate 
purchaser  for  articles  of  food  ; and  unless  soon  disposed  of,  most  of 
them  perish.  The  thing  which  people  would  select  to  keep  by 
them  for  making  purchases,  must  be  one  which,  besides  being 
divisible  and  generally  desired,  does  not  deteriorate  by  keeping. 
This  reduces  the  choice  to  a small  number  of  articles. 

§ 2.  By  a tacit  concurrence,  almost  all  nations,  at  a ver)’^  early 
period,  fixed  upon  certain  metals,  and  especially  gold  and  silver, 
to  serve  this  purpose.  No  other  substances  unite  the  necessary 
quahties  in  so  great  a degree,  with  so  many  subordinate  advantages. 
Next  to  food  and  clothing,  and  in  some  climates  even  before  clothing, 
the  strongest  inclination  in  a rude  state  of  society  is  for  personal 
ornament,  and  for  the  kind  of  distinction  which  is  obtained  by 
rarity  or  costliness  in  such  ornaments.  After  the  immediate 
* Montesquieu.  Esprit  des  Lois,  liv.  xxiL  ch.  8. 


MONEY 


485 


necessities  of  life  were  satisfied,  every  one  was  eager  to  accumulate 
as  great  a store  as  possible  of  things  at  once  costly  and  ornamental ; 
which  were  chiefly  gold,  silver,  and  jewels.  These  were  the  things 
which  it  most  pleased  every  one  to  possess,  and  which  there  was 
most  certainty  of  finding  others  willing  to  receive  in  exchange  for 
any  kind  of  produce.  They  were  among  the  most  imperishable  of  all 
substances.  They  were  also  portable,  and  containing  great  value 
in  small  bulk,  were  easily  hid  ; a consideration  of  much  importance 
in  an  age  of  insecurity.  Jewels  are  inferior  to  gold  and  silver  in  the 
quality  of  divisibility ; and  are  of  very  various  quahties,  not  to  be 
accurately  discriminated  without  great  trouble.  Gold  and  silver  are 
eminently  divisible,  and  when  pure,  always  of  the  same  quahty  ; and 
their  purity  may  be  ascertained  and  certified  by  a pubhc  authority. 

Accordingly,  though  furs  have  been  employed  as  money  in  some 
countries,  cattle  in  others,  in  Chinese  Tartary  cubes  of  tea  closely 
pressed  together,  the  shells  called  cowries  on  the  coast  of  Western 
Africa,  and  in  Abyssinia  at  this  day  blocks  of  rock  salt ; though 
even  of  metals,  the  less  costly  have  sometimes  been  chosen,  as  iron 
in  Lacedaemon  from  an  ascetic  policy,  copper  in  the  early  Roman 
repubhc  from  the  poverty  of  the  people  ; gold  and  silver  have  been 
generally  preferred  by  nations  which  were  able  to  obtain  them, 
either  by  industry,  commerce,  or  conquest.  To  the  quahties  which 
originally  recommended  them,  another  came  to  be  added,  the 
importance  of  which  only  unfolded  itself  by  degrees.  Of  all  com- 
modities they  are  among  the  least  influenced  by  any  of  the  causes 
which  produce  fluctuations  of  value.  No  commodity  is  quite 
free  from  such  fluctuations.  Gold  and  silver  have  sustained,  since 
the  beginning  of  history,  one  great  permanent  alteration  of  value, 
from  the  discovery  of  the  American  mines ; and  some  temporary 
variations,  such  as  that  which,  in  the  last  great  war,i  was  produced 
by  the  absorption  of  the  metals  in  hoards,  and  in  the  mihtary  chests 
of  the  immense  armies  constantly  in  the  field.  In  the  present  age 
the  opening  of  new  sources  of  supply,  so  abundant  as  the  Ural 
mountains,  Cahfornia,  and  Austraha,2  may  be  the  commencement 
of  another  period  of  decline,  on  the  hmits  of  which  it  would  be 
useless  at  present  to  speculate.  But  on  the  whole,  no  commodities 
are  so  little  exposed  to  causes  of  variation.  They  fluctuate  less  than 
almost  any  other  things  in  their  cost  of  production.  And  from 

^ [7.e.  the  Napoleonic  war.] 

^ [So  from  the  3rd  ed.  (1852).  In  the  1st  ed.  (1848) ; so  abundant  as 
the  mines  of  the  Ural  mountains  and  of  Siberia.”  In  the  2nd  ed.  (1849) : 
to  which  may  now  be  added  California.”] 


486 


BOOK  III.  CHAPTER  VII.  § 2 


their  durability,  the  total  quantity  in  existence  is  at  all  times  so 
great  in  proportion  to  the  annual  supply,  that  the  effect  on  value 
even  of  a change  in  the  cost  of  production  is  not  sudden  : a very 
long  time  being  required  to  diminish  materially  the  quantity  in 
existence,  and  even  to  increase  it  very  greatly  not  being  a rapid 
process.  Gold  and  silver,  therefore,  are  more  fit  than  any  other 
commodity  to  be  the  subject  of  engagements  for  receiving  or  paying 
a given  quantity  at  some  distant  period.  If  the  engagement  were 
made  in  corn,  a failure  of  crops  might  increase  the  burthen  of  the 
payment  in  one  year  to  fourfold  what  was  intended,  or  an  exuberant 
harvest  sink  it  in  another  to  one-fourth.  If  stipulated  in  cloth, 
some  manufacturing  invention  might  permanently  reduce  the 
payment  to  a tenth  of  its  original  value.  Such  things  have  occurred 
even  in  the  case  of  payments  stipulated  in  gold  and  silver ; but  the 
great  fall  of  their  value  after  the  discovery  of  America,  is,  as  yet,i 
the  only  authenticated  instance ; and  in  this  case  the  change  was 
extremely  gradual,  being  spread  over  a period  of  many  years. 

When  gold  and  silver  had  become  virtually  a medium  of  exchange, 
by  becoming  the  things  for  which  people  generally  sold,  and  with 
which  they  generally  bought,  whatever  they  had  to  sell  or  to  buy ; 
the  contrivance  of  coining  obviously  suggested  itself.  By  this 
process  the  metal  was  divided  into  convenient  portions,  of  any 
degree  of  smallness,  and  bearing  a recognised  proportion  to  one 
another ; and  the  trouble  was  saved  of  weighing  and  assaying  at 
every  change  of  possessors,  an  inconvenience  which  on  the  occasion 
of  small  purchases  would  soon  have  become  insupportable.  Govern- 
ments found  it  their  interest  to  take  the  operation  into  their  own 
hands,  and  to  interdict  all  coining  by  private  persons ; indeed, 
their  guarantee  was  often  the  only  one  which  would  have  been 
relied  on,  a reliance  however  which  very  often  it  ill  deserved ; 
profiigate  governments  having  until  a very  modern  period  seldom 
scrupled,  for  the  sake  of  robbing  their  creditors,  to  confer  on  all 
other  debtors  a licence  to  rob  theirs,  by  the  shallow  and  impudent 
artifice  of  lowering  the  standard ; that  least  covert  of  all  modes  of 
knavery,  which  consists  in  calling  a shiUing  a pound,  that  a debt  of 
one  hundred  pounds  may  be  cancelled  by  the  payment  of  a hundred 
shillings.  It  would  have  been  as  simple  a plan,  and  would  have 
answered  the  purpose  as  well,  to  have  enacted  that  “ a hundred 
should  always  be  interpreted  to  mean  five,  which  would  have 
efiected  the  same  reduction  in  all  pecuniary  contracts,  and  would 
^ [“  As  yet  ” added  in  2nd  ed.  (1849).] 


MONEY 


487 


not  have  been  at  all  more  shameless.  Such  strokes  of  policy  have  not 
wholly  ceased  to  be  recommended,  but  they  have  ceased  to  be 
practised ; except  occasionally  through  the  medium  of  paper 
money,  in  which  case  the  character  of  the  transaction,  from  the 
greater  obscurity  of  the  subject,  is  a little  less  barefaced. 

§ 3.  Money,  when  its  use  has  grown  habitual,  is  the  medium 
through  which  the  incomes  of  the  different  members  of  the  com- 
munity are  distributed  to  them,  and  the  measure  by  which  they 
estimate  their  possessions.  As  it  is  always  by  means  of  money  that 
people  provide  for  their  different  necessities,  there  grows  up  in  their 
minds  a powerful  association  leading  them  to  regard  money  as  wealth 
in  a more  peculiar  sense  than  any  other  article  ; and  even  those  who 
pass  their  lives  in  the  production  of  the  most  useful  objects,  acquire 
the  habit  of  regarding  those  objects  as  chieffy  important  by  their 
capacity  of  being  exchanged  for  money.  A person  who  parts  with 
money  to  obtain  commodities,  unless  he  intends  to  sell  them,  appears 
to  the  imagination  to  be  making  a worse  bargain  than  a person  who 
parts  with  commodities  to  get  money  ; the  one  seems  to  be  spending 
his  means,  the  other  adding  to  them.  Illusions  which,  though  now  in 
some  measure  dispelled,  were  long  powerful  enough  to  overmaster  the 
mind  of  every  politician,  both  speculative  and  practical,  in  Europe. 

It  must  be  evident,  however,  that  the  mere  introduction  of  a 
particular  mode  of  exchanging  things  for  one  another  by  first 
exchanging  a thing  for  money,  and  then  exchanging  the  money 
for  something  else,  makes  no  difference  in  the  essential  character 
of  transactions.  It  is  not  with  money  that  things  are  really  pur- 
chased. Nobody’s  income  (except  that  of  the  gold  or  silver  miner) 
is  derived  from  the  precious  metals.  The  pounds  or  shillings  which 
a person  receives  weekly  or  yearly,  are  not  what  constitutes  his 
income ; they  are  a sort  of  tickets  or  orders  which  he  can  present 
for  payment  at  any  shop  he  pleases,  and  which  entitle  him  to 
receive  a certain  value  of  any  commodity  that  he  makes  choice  of. 
The  farmer  pays  his  labourers  and  his  landlord  in  these  tickets, 
as  the  most  convenient  plan  for  himself  and  them ; but  their 
real  income  is  their  share  of  his  corn,  cattle,  and  hay,  and  it  makes 
no  essential  difference  whether  he  distributes  it  to  them  directly, 
or  sells  it  for  them  and  gives  them  the  price  ; but  as  they  would  have 
to  sell  it  for  money  if  he  did  not,  and  as  he  is  a seller  at  any  rate, 
it  best  suits  the  purposes  of  all,  that  he  should  sell  their  share  along 
with  his  own,  and  leave  the  labourers  more  leisure  for  work  and  the 


488 


BOOK  III.  CHAPTER  VII.  § 3 


landlord  for  being  idle.  The  capitalists,  except  those  who  are 
producers  of  the  precious  metals,  derive  no  part  of  their  income  from 
those  metals,  since  they  only  get  them  by  buying  them  with  their 
own  produce : while  all  other  persons  have  their  incomes  paid  to 
them  by  the  capitalists,  or  by  those  who  have  received  payment  from 
the  capitalists ; and  as  the  capitalists  have  nothing,  from  the  first, 
except  their  produce,  it  is  that  and  nothing  else  which  supplies  all 
incomes  furnished  by  them.  There  cannot,  in  short,  be  intrinsically 
a more  insignificant  thing,  in  the  economy  of  society,  than  money ; 
except  in  the  character  of  a contrivance  for  sparing  time  and  labour. 
It  is  a machine  for  doing  quickly  and  commodiously,  what  would  be 
done,  though  less  quickly  and  commodiously,  without  it : and  like 
many  other  kinds  of  machinery,  it  only  exerts  a distinct  and 
independent  influence  of  its  own  when  it  gets  out  of  order. 

The  introduction  of  money  does  not  interfere  with  the  operation 
of  any  of  the  Laws  of  Value  laid  down  in  the  preceding  chapters. 
The  reasons  which  make  the  temporary  or  market  value  of  things 
depend  on  the  demand  and  supply,  and  their  average  and  permanent 
values  upon  their  cost  of  production,  are  as  applicable  to  a money 
system  as  to  a system  of  barter.  Things  which  by  barter  would 
exchange  for  one  another,  will,  if  sold  for  money,  sell  for  an  equal 
amount  of  it,  and  so  will  exchange  for  one  another  still,  though 
the  process  of  exchanging  them  will  consist  of  two  operations 
instead  of  only  one.  The  relations  of  commodities  to  one  another 
remain  unaltered  by  money : the  only  new  relation  introduced  is 
their  relation  to  money  itself  ; how  much  or  how  little  money  they 
will  exchange  for  ; in  other  words,  how  the  Exchange  Value  of  money 
itself  is  determined.  And  this  is  not  a question  of  any  difficulty, 
when  the  illusion  is  dispelled,  which  caused  money  to  be  looked 
upon  as  a peculiar  thing,  not  governed  by  the  same  laws  as  other 
things.  Money  is  a commodity,  and  its  value  is  determined  like 
that  of  other  commodities,  temporarily  by  demand  and  supply, 
permanently  and  on  the  average  by  cost  of  production.  The 
illustration  of  these  principles,  considered  in  their  application  to 
money,  must  be  given  in  some  detail,  on  account  of  the  confusion 
which,  in  minds  not  scientifically  instructed  on  the  subject,  envelopes 
the  whole  matter ; partly  from  a lingering  remnant  of  the  mis- 
leading associations,  and  partly  from  the  mass  of  vapoury  and 
baseless  speculation  with  which  this,  more  than  any  other  topic 
of  political  economy,  has  in  latter  times  become  surrounded.  I 
shall  therefore  treat  of  the  Value  of  Money  in  a chapter  apart. 


CHAPTER  Vm 


OF  THE  VALUE  OF  MONEY.  AS  DEPENDENT  ON  DEMAND  AND  SUPPLY 

§ 1.  It  is  unfortunate  that  in  the  very  outset  of  the  subject 
we  have  to  clear  from  our  path  a formidable  ambiguity  of  language. 
The  Value  of  Money  is  to  appearance  an  expression  as  precise,  as 
free  from  possibihty  of  misunderstanding,  as  any  in  science.  The 
value  of  a thing  is  what  it  will  exchange  for  : the  value  of  money 
is  what  money  will  exchange  for ; the  purchasing  power  of  money. 
If  prices  are  low,  money  will  buy  much  of  other  things,  and  is  of 
high  value  ; if  prices  are  high,  it  will  buy  little  of  other  things,  and 
is  of  low  value.  The  value  of  money  is  inversely  as  general  prices  : 
falling  as  they  rise,  and  rising  as  they  fall. 

But  unhappily  the  same  phrase  is  also  employed,  in  the  current 
language  of  commerce,  in  a very  different  sense.  Money,  which  is 
so  commonly  understood  as  the  synonym  of  wealth,  is  more 
especially  the  term  in  use  to  denote  it  when  it  is  the  subject  of 
borrowing.  When  one  person  lends  to  another,  as  well  as  when 
he  pays  wages  or  rent  to  another,  what  he  transfers  is  not  the  mere 
money,  but  a right  to  a certain  value  of  the  produce  of  the  country, 
to  be  selected  at  pleasure ; the  lender  having  first  bought  this 
right  by  giving  for  it  a portion  of  his  capital.  What  he  really 
lends  is  so  much  capital ; money  is  the  mere  instrument  of  transfer. 
But  the  capital  usually  passes  from  the  lender  to  the  receiver  through 
the  means  either  of  money,  or  of  an  order  to  receive  money,  and  at 
any  rate  it  is  in  money  that  the  capital  is  computed  and  estimated. 
Hence,  borrowing  capital  is  universally  called  borrowing  money ; 
the  loan  market  is  called  the  money  market : those  who  have  their 
capital  disposable  for  investment  on  loan  are  called  the  monied 
class  : and  the  equivalent  given  for  the  use  of  capital,  or  in  other 
words,  interest,  is  not  only  called  the  interest  of  money,  but,  by  a 
grosser  perversion  of  terms,  the  value  of  money.  This  misapplication 
of  language,  assisted  by  some  fallacious  appearances  which  we 


490 


BOOK  III.  CHAPTER  VHL  § 2 


shall  notice  and  clear  up  hereafter,*  has  created  a general  notion 
among  persons  in  business,  that  the  Value  of  Money,  meaning  the 
rate  of  interest,  has  an  intimate  connexion  with  the  Value  of  Money 
in  its  proper  sense,  the  value  or  purchasing  power  of  the  circulating 
medium.  We  shall  return  to  this  subject  before  long ; at  present 
it  is  enough  to  say,  that  by  Value  I shall  always  mean  Exchange 
Value,  and  by  money  the  medium  of  exchange,  not  the  capital 
which  is  passed  from  hand  to  hand  through  that  medium. 

§ 2.  The  value  or  purchasing  power  of  money  depends,  in  the 
first  instance,  on  demand  and  supply.  But  demand  and  supply, 
in  relation  to  money,  present  themselves  in  a somewhat  different 
shape  from  the  demand  and  supply  of  other  things. 

The  supply  of  a commodity  means  the  quantity  offered  for  sale. 
But  it  is  not  usual  to  speak  of  offering  money  for  sale.  People  are 
not  usually  said  to  buy  or  sell  money.  This,  however,  is.  merely 
an  accident  of  language.  In  point  of  fact,  money  is  bought  and 
sold  like  other  things,  whenever  other  things  are  bought  and  sold 
for  money.  Whoever  sells  com,  or  tallow,  or  cotton,  buys  money. 
Whoever  buys  bread,  or  wine,  or  clothes,  sells  money  to  the  dealer 
in  those  articles.  The  money  with  which  people  are  offering  to 
buy  is  money  offered  for  sale.  The  supply  of  money,  then,  is  the 
quantity  of  it  which  people  are  wanting  to  lay  out ; that  is,  all  the 
money  they  have  in  their  possession,  except  what  they  are  hoarding, 
or  at  least  keeping  by  them  as  a reserve  for  future  contingencies. 
The  supply  of  money,  in  short,  is  all  the  money  in  circulation  at  the 
time. 

The  demand  for  money,  again,  consists  of  all  the  goods  offered 
for  sale.  Every  seller  of  goods  is  a buyer  of  money,  and  the  goods 
he  brings  with  him  constitute  his  demand.  The  demand  for  money 
differs  from  the  demand  for  other  things  in  this,  that  it  is  limited 
only  by  the  means  of  the  purchaser.  The  demand  for  other  things 
is  for  so  much  and  no  more ; but  there  is  always  a demand  for  as 
much  money  as  can  be  got.  Persons  may  indeed  refuse  to  seU, 
and  withdraw  their  goods  from  the  market,  if  they  cannot  get  for 
them  what  they  consider  a sufficient  price.  But  this  is  only  when 
they  think  that  the  price  will  rise,  and  that  they  shall  get  more  money 
by  waiting.  If  they  thought  the  low  price  likely  to  be  permanent, 
they  would  take  what  they  could  get.  It  is  always  a sine  qud  nan 
with  a dealer  to  dispose  of  his  goods. 

* Infra,  chap,  ixiii. 


VALUE  OF  MONEY 


491 


As  the  whole  of  the  goods  in  the  market  compose  the  demand 
for  money,  so  the  whole  of  the  money  constitutes  the  demand  for 
goods.  The  money  and  the  goods  are  seeking  each  other  for  the 
purpose  of  being  exchanged.  They  are  reciprocally  supply  and 
demand  to  one  another.  It  is  indifferent  whether,  in  characterizing 
the  phenomena,  we  speak  of  the  demand  and  supply  of  goods,  or 
the  supply  and  the  demand  of  money.  They  are  equivalent  expres- 
sions. 

We  shall  proceed  to  illustrate  this  proposition  more  fully.  And 
in  doing  this,  the  reader  wiU  remark  a great  difference  between 
the  class  of  questions  which  now  occupy  us,  and  those  which  we 
previously  had  under  discussion  respecting  Values.  In  considering 
Value,  we  were  only  concerned  with  causes  which  acted  upon 
particular  commodities  apart  from  the  rest.  Causes  which  affect 
all  commodities  alike  do  not  act  upon  values.  But  in  considering 
the  relation  between  goods  and  money,  it  is  with  the  causes  that 
operate  upon  all  goods  whatever  that  we  are  specially  concerned. 
We  are  comparing  goods  of  all  sorts  on  one  side,  with  money  on  the 
other  side,  as  things  to  be  exchanged  against  each  other. 

Suppose,  everything  else  being  the  same,  that  there  is  an  increase 
in  the  quantity  of  money,  say  by  the  arrival  of  a foreigner  in  a 
place,  with  a treasure  of  gold  and  silver.  When  he  commences 
expending  it  (for  this  question  it  matters  not  whether  productively 
or  unproductively),^e  adds  to  the  supply  of  money,  and,  by  the 
same  act,  to  the  demand  for  goods.  Doubtless  he  adds,  in  the  first 
instance,  to  the  demand  only  for  certain  kinds  of  goods,  namely, 
those  which  he  selects  for  purchase ; he  will  immediately  raise 
the  price  of  those,  and  so  far  as  he  is  individually  concerned,  of  those 
only.  If  he  spends  his  funds  in  giving  entertainments,  he  will  raise 
the  prices  of  food  and  wine.  If  he  expends  them  in  establishing 
a manufactory,  he  will  raise  the  prices  of  labour  and  materials. 
But  at  the  higher  prices,  more  money  will  pass  into  the  hands  of  the 
sellers  of  these  different  articles ; and  they,  whether  labourers  or 
dealers,  having  more  money  to  lay  out,  will  create  an  increased 
demand  for  all  the  things  which  they  are  accustomed  to  purchase  : 
these  accordingly  will  rise  in  price,  and  so  on  until  the  rise  has 
reached  everything.  I say  everything,  though  it  is  of  course 
possible  that  the  influx  of  money  might  take  place  through  the 
medium  of  some  new  class  of  consumers,  or  in  such  a manner  as  to 
alter  the  proportions  of  different  classes  of  consumers  to  one  another, 
BO  that  a greater  share  of  the  national  income  than  before  would 


492 


BOOK  m.  CHAPTER  VUL  § 2 


thenceforth  be  expended  in  some  articles,  and  a smaller  in  others ; 
exactly  as  if  a change  had  taken  place  in  the  tastes  and  wants  of  the 
community.  If  this  were  the  case,  then  until  production  had 
accommodated  itself  to  this  change  in  the  comparative  demand 
for  different  things,  there  would  be  a real  alteration  in  values,  and 
some  things  would  rise  in  price  more  than  others,  while  some  perhaps 
would  not  rise  at  all.  These  effects,  however,  would  evidently 
proceed,  not  from  the  mere  increase  of  money,  but  from  accessory 
circumstances  attending  it.  We  are  now  only  called  upon  to  con- 
sider what  would  be  the  effect  of  an  increase  of  money,  considered 
by  itself.  Supposing  the  money  in  the  hands  of  individuals  to  be 
increased,  the  wants  and  inclinations  of  the  community  collectively 
in  respect  to  consumption  remaining  exactly  the  same  ; the  increase 
of  demand  would  reach  all  things  equally,  and  there  would  be  an 
universal  rise  of  prices.  We  might  suppose,  with  Hume,  that 
some  morning,  every  person  in  the  nation  should  wake  and  find  a 
gold  coin  in  his  pocket : this  example,  however,  would  involve  an 
alteration  of  the  proportions  in  the  demand  for  different  com- 
modities ; the  luxuries  of  the  poor  would,  in  the  first  instance,  be 
raised  in  price  in  a much  greater  degree  than  other  things.  Let 
us  rather  suppose,  therefore,  that  to  every  pound,  or  shilling,  or 
penny,  in  the  possession  of  any  one,  another  pound,  shilling,  or 
penny,  were  suddenly  added.  There  would  be  an  increased  money 
demand,  and  consequently  an  increased  money  value,  or  price, 
for  things  of  all  sorts.  This  increased  value  would  do  no  good  to 
any  one  ; would  make  no  difference,  except  that  of  having  to  reckon 
pounds,  shillings,  and  pence,  in  higher  numbers.  It  would  be  an 
increase  of  values  only  as  estimated  m money,  a thing  only  wanted 
to  buy  other  things  with ; and  would  not  enable  any  one  to  buy 
more  of  them  than  before.  Prices  would  have  risen  in  a certaiu 
ratio,  and  the  value  of  money  would  have  fallen  in  the  same  ratio. 

It  is  to  be  remarked  that  this  ratio  would  be  precisely  that  in 
which  the  quantity  of  money  had  been  increased.  If  the  whole 
money  in  circulation  was  doubled,  prices  would  be  doubled.  If  it 
was  only  increased  one-fourth,  prices  would  rise  one-fourth.  There 
would  be  one-fourth  more  money,  all  of  which  would  be  used  to 
purchase  goods  of  some  description.  When  there  had  been  time 
for  the  increased  supply  of  money  to  reach  all  markets,  or  (according 
to  the  conventional  metaphor)  to  permeate  all  the  channels  of  circu- 
lation, all  prices  would  have  risen  one-fourth.  But  the  general  rise 
of  price  is  independent  of  this  diffusing  and  equahzing  process.  Even 


VALUE  OF  MONEY 


493 


if  some  prices  were  raised  more,  and  others  less,  the  average  rise 
would  be  one-fourth.  This  is  a necessary  consequence  of  the  fact 
that  a fourth  more  money  would  have  been  given  for  only  the  same 
quantity  of  goods.  General  prices,  therefore,  would  in  any  case  be 
a fourth  higher. 

The  very  same  effect  would  be  produced  on  prices  if  we  suppose 
the  goods  diminished,  instead  of  the  money  increased  : and  the 
contrary  effect  if  the  goods  were  increased  or  the  money  diminished. 
If  there  were  less  money  in  the  hands  of  the  community,  and  the 
same  amount  of  goods  to  be  sold,  less  money  altogether  would  be 
given  for  them,  and  they  would  be  sold  at  lower  prices  ; lower,  too, 
in  the  precise  ratio  in  which  the  money  was  diminished.  So  that 
the  value  of  money,  other  things  being  the  same,  varies  inversely 
as  its  quantity  ; every  increase  of  quantity  lowering  the  value,  and 
every  diminution  raising  it,  in  a ratio  exactly  equivalent. 

This,  it  must  be  observed,  is  a property  peculiar  to  money.  We 
did  not  find  it  to  be  true  of  commodities  generally,  that  every 
diminution  of  supply  raised  the  value  exactly  in  proportion  to  the 
deficiency,  or  that  every  increase  lowered  it  in  the  precise  ratio  of 
the  excess.  Some  things  are  usually  affected  in  a greater  ratio  than 
that  of  the  excess  or  deficiency,  others  usually  in  a less  : because, 
in  ordinary  cases  of  demand,  the  desire,  being  for  the  thing  itself,  may 
be  stronger  or  weaker  : and  the  amount  of  what  people  are  willing 
to  expend  on  it,  being  in  any  case  a limited  quantity,  may  be  affected 
in  very  unequal  degrees  by  difficulty  or  facifity  of  attainment.  But 
in  the  case  of  money,  which  is  desired  as  the  means  of  universal 
purchase,  the  demand  consists  of  everything  which  people  have  to 
sell ; and  the  only  limit  to  what  they  are  willing  to  give  is  the  limit 
set  by  their  having  nothing  more  to  offer.  The  whole  of  the 
goods  being  in  any  case  exchanged  for  the  whole  of  the  money 
which  comes  into  the  market  to  be  laid  out,  they  will  sell  for  less 
or  more  of  it,  exactly  according  as  less  or  more  is  brought. 

§ 3.  From  what  precedes,  it  might  for  a moment  be  supposed 
that  all  the  goods  on  sale  in  a country,  at  any  one  time,  are  exchanged 
for  aU  the  money  existing  and  in  circulation  at  that  same  time  : 
or,  in  other  words,  that  there  is  always  in  circulation  in  a country 
a quantity  of  money  equal  in  value  to  the  whole  of  the  goods  then 
and  there  on  sale.  But  this  would  be  a complete  misapprehension. 
The  money  laid  out  is  equal  in  value  to  the  goods  it  purchases  ; but 
the  quantity  of  money  laid  out  is  not  the  same  thing  with  the 


494 


BOOK  IlL  CHAPTER  VIH.  § 3 


quantity  in  circulation.  As  tlie  money  passes  from  hand  to  hand,  the 
same  piece  of  money  is  laid  out  many  times,  before  all  the  things 
on  sale  at  one  time  are  purchased  and  finally  removed  from  the 
market : and  each  pound  or  dollar  must  be  counted  for  as  many 
pounds  or  dollars,  as  the  number  of  times  it  changes  hands  in  order 
to  effect  this  object.  The  greater  part  of  the  goods  must  also  be 
counted  more  than  once,  not  only  because  most  things  pass  through 
the  hands  of  several  sets  of  manufacturers  and  dealers  before  they 
assume  the  form  in  which  they  are  finally  consumed,  but  because 
in  times  of  speculation  (and  all  times  are  so,  more  or  less)  the  same 
goods  are  often  bought  repeatedly,  to  be  resold  for  a profit,  before 
they  are  bought  for  the  purpose  of  consumption  at  all. 

If  we  assume  the  quantity  of  goods  on  sale,  and  the  number  of 
times  those  goods  are  resold,  to  be  fixed  quantities,  the  value  of 
money  will  depend  upon  its  quantity,  together  with  the  average 
number  of  times  that  each  piece  changes  hands  in  the  process. 
The  whole  of  the  goods  sold  (counting  each  resale  of  the  same  goods 
as  so  much  added  to  the  goods)  have  been  exchanged  for  the  whole 
of  the  money,  multiplied  by  the  number  of  purchases  made  on  the 
average  by  each  piece.  Consequently,  the  amount  of  goods  and  of 
transactions  being  the  same,  the  value  of  money  is  inversely  as 
its  quantity  multiplied  by  what  is  called  the  rapidity  of  circulation. 
And  the  quantity  of  money  in  circulation  is  equal  to  the  money 
value  of  all  the  goods  sold,  divided  by  the  number  which  expresses 
the  rapidity  of  circulation. 

The  phrase,  rapidity  of  circulation,  requires  some  comment. 
It  must  not  be  understood  to  mean  the  number  of  purchases  made 
by  each  piece  of  money  in  a given  time.  Time  is  not  the  thing 
to  be  considered.  The  state  of  society  may  be  such  that  each 
piece  of  money  hardly  performs  more  than  one  purchase  in  a year  ; 
but  if  this  arises  from  the  small  number  of  transactions — from  the 
small  amount  of  business  done,  the  want  of  activity  in  traffic,  or 
because  what  traffic  there  is,  mostly  takes  place  by  barter — it 
constitutes  no  reason  why  prices  should  be  lower,  or  the  value  of 
money  higher.  The  essential  point  is,  not  how  often  the  same 
money  changes  hands  in  a given  time,  but  how  often  it  changes 
hands  in  order  to  perform  a given  amount  of  traffic.  We  must 
compare  the  number  of  purchases  made  by  the  money  in  a given 
time,  not  with  the  time  itself,  but  with  the  goods  sold  in  that  same 
time.  If  each  piece  of  money  changes  hands  on  an  average  ten 
times  while  goods  are  sold  to  the  value  of  a million  sterling,  It  if 


VALUE  OF  MONEY 


495 


evident  that  the  money  required  to  circulate  those  goods  is  100,000/. 
And  conversely,  if  the  money  in  circulation  is  100,000/.,  and  each 
piece  changes  hands  by  the  purchase  of  goods  ten  times  in  a month, 
the  sales  of  goods  for  money  which  take  place  every  month  must 
amount  on  the  average  to  1,000,000/. 

Eapidity  of  circulation  being  a phrase  so  ill  adapted  to  express 
the  only  thing  which  it  is  of  any  importance  to  express  by  it,  and 
having  a tendency  to  confuse  the  subject  by  suggesting  a meaning 
extremely  different  from  the  one  intended,  it  would  be  a good  thing 
if  the  phrase  could  be  got  rid  of,  and  another  substituted,  more 
directly  significant  of  the  idea  meant  to  be  conveyed.  Some  such 
expression  as  “ the  efficiency  of  money,’’  though  not  unexceptionable, 
would  do  better ; as  it  would  point  attention  to  the  quantity  of 
work  done,  without  suggesting  the  idea  of  estimating  it  by  time. 
Until  an  appropriate  term  can  be  devised,  we  must  be  content, 
when  ambiguity  is  to  be  apprehended,  to  express  the  idea  by  the 
circumlocution  which  alone  conveys  it  adequately,  namely,  the 
average  number  of  purchases  made  by  each  piece  in  order  to  effect 
a given  pecuniary  amount  of  transactions. 

§ 4.  The  proposition  which  we  have  laid  down  respecting  tha 
dependence  of  general  prices  upon  the  quantity  of  money  in  cir- 
culation, must  be  understood  as  applying  only  to  a state  of  things 
in  which  money,  that  is,  gold  or  silver,  is  the  exclusive  instrument 
of  exchange,  and  actually  passes  from  hand  to  hand  at  every  purchase, 
credit  in  any  of  its  shapes  being  unknown.  When  credit  comes 
into  play  as  a means  of  purchasing,  distinct  from  money  in  hand, 
we  shall  hereafter  find  that  the  connexion  between  prices  and  the 
amount  of  the  circulating  medium  is  much  less  direct  and  intimate, 
and  that  such  connexion  as  does  exist  no  longer  admits  of  so  simple 
a mode  of  expression.  But  on  a subject  so  full  of  complexity  as  that 
of  currency  and  prices,  it  is  necessary  to  lay  the  foundation  of  our 
theory  in  a thorough  understanding  of  the  most  simple  cases,  which 
we  shall  always  find  lying  as  a groundwork  or  substratum  under 
those  which  arise  in  practice.  That  an  increase  of  the  quantity  of 
money  raises  prices,  and  a diminution  lowers  them,  is  the  most 
elementary  proposition  in  the  theory  of  currency,  and  without  it  wo 
should  have  no  key  to  any  of  the  others.  In  any  state  of  things, 
however,  except  the  simple  and  primitive  one  which  we  have  sup- 
posed, the  proposition  is  only  true  other  things  being  the  same  : 
and  what  those  other  things  are,  which  must  be  the  same,  we  are 


406 


BOOK  m.  CHAPTER  Vm.  § 4 


not  yet  ready  to  pronounce.  We  can,  however,  point  out,  even 
now,  one  or  two  of  the  cautions  with  which  the  principle  must  be 
guarded  in  attempting  to  make  use  of  it  for  the  practical  explanation 
of  phenomena  ; cautions  the  more  indispensable,  as  the  doctrine, 
though  a scientific  truth,  has  of  late  years  been  the  foundation  of 
a greater  mass  of  false  theory,  and*  erroneous  interpretation  of 
facts,  than  any  other  proposition  relating  to  interchange.  From 
the  time  of  the  resumption  of  cash  payments  by  the  Act  of  1819, 
and  especially  since  the  commercial  crisis  of  1825,  the  favourite 
explanation  of  every  rise  or  fall  of  prices  has  been  the  “ currency ; ” 
and  hke  most  popular  theories,  the  doctrine  has  been  applied 
with  little  regard  to  the  conditions  necessary  for  making  it  correct. 

For  example,  it  is  habitually  assumed  that  whenever  there  is 
a greater  amount  of  money  in  the  country,  or  in  existence,  a rise 
of  prices  must  necessarily  foUow.  But  this  is  by  no  means  an 
inevitable  consequence.  In  no  commodity  is  it  the  quantity  in 
existence,  but  the  quantity  offered  for  sale,  that  determines  the 
value.  Whatever  may  be  the  quantity  of  money  in  the  country, 
only  that  part  of  it  wdl  affect  prices  which  goes  into  the  market 
of  commodities,  and  is  there  actually  exchanged  against  goods. 
Whatever  increases  the  amount  of  this  portion  of  the  money  in  the 
country,  tends  to  raise  prices.  But  money  hoarded  does  not  act 
on  prices.  Money  kept  in  reserve  by  individuals  to  meet  con- 
tingencies which  do  not  occur,  does  not  act  on  prices.  The  money 
in  the  coffers  of  the  Bank,  or  retained  as  a reserve  by  private 
bankers,  does  not  act  on  prices  until  drawn  out,  nor  even  then 
unless  drawn  out  to  be  expended  in  commodities. 

It  frequently  happens  that  money,  to  a considerable  amount, 
is  brought  into  the  country,  is  there  actually  invested  i as  capital, 
and  again  flows  out,  without  having  ever  once  acted  upon  the 
markets  of  commodities,  but  only  upon  the  market  of  securities, 
or,  as  it  is  commonly  though  improperly  called,  the  money  market. 
Let  us  return  to  the  case  already  put  for  illustration,  that  of  a 
foreigner  landing  in  the  country  with  a treasure.  We  supposed 
him  to  employ  his  treasure  in  the  purchase  of  goods  for  his  own  use, 
or  in  setting  up  a manufactory  and  employing  labourers ; and  in 
either  case  he  would,  cceteris  'paribus^  raise  prices.  But  instead  of 
doing  either  of  these  things,  he  might  very  probably  prefer  to 
invest  his  fortune  at  interest ; which  we  shall  suppose  him  to  do  in 
the  most  ob\fious  way,  by  becoming  a competitor  for  a portion  of 
'[“Invested”  substituted  for  “ emplo5’ed  ” in  3rd  ed.  (1852).] 


VALUE  OF  MONEY 


m 


the  stock,  exchequer  bills,  railway  debentures,  mercantile  bills, 
mortgages,  &c.,  which  are  at  all  times  in  the  hands  of  the  public. 
By  doing  this  he  would  raise  the  prices  of  those  different  securities, 
or  in  other  words  would  lower  the  rate  of  interest ; and  since  this 
would  disturb  the  relation  previously  existing  between  the  rate  of 
interest  on  capital  in  the  country  itself,  and  that  in  foreign  countries, 
it  would  probably  induce  some  of  those  who  had  floating  capital 
seeking  employment,  to  send  it  abroad  for  foreign  investment 
rather  than  buy  securities  at  home  at  the  advanced  price.  As 
much  money  might  thus  go  out  as  had  previously  come  in,  while 
the  prices  of  commodities  would  have  shown  no  trace  of  its  temporary 
presence.  This  is  a case  highly  deserving  of  attention  : and  it  is 
a fact^ow  beginning  to  be  recognised,  that  the  passage  of  the 
precious  metals  from  country  to  country  is  determined  much  more 
than  was  formerly  supposed  by  the  state  of  the  loan  market  in 
different  countries,  and  much  less  by  the  state  of  prices. 

Another  point  must  be  adverted  to,  in  order  to  avoid  serious 
error  in  the  interpretation  of  mercantile  phenomena.  If  there 
be,  at  any  time,  an  increase  in  the  number  of  money  transactions, 
a thing  continually  liable  to  happen  from  differences  in  the  activity 
of  speculation,  and  even  in  the  time  of  year  (since  certain  kinds  of 
business  are  transacted  only  at  particular  seasons) ; an  increase 
of  the  currency  which  is  only  proportional  to  this  increase  of  trans- 
actions, and  is  of  no  longer  duration,  has  no  tendency  to  raise 
prices.  At  the  quarterly  periods  when  the  public  dividends  are 
paid  at  the  Bank,  a sudden  increase  takes  place  of  the  money  in  the 
hands  of  the  public ; an  increase  estimated  at  from  a fifth  to  two- 
fifths  of  the  whole  issues  of  the  Bank  of  England.  Yet  this  never 
has  any  effect  on  prices  ; and  in  a very  few  weeks,  the  currency  has 
again  shrunk  into  its  usual  dimensions,  by  a mere  reduction  in  the 
demands  of  the  public  (after  so  copious  a supply  of  ready  money) 
for  accommodation  from  the  Bank  in  the  way  of  discount  or  loan. 
In  like  manner  the  currency  of  the  agricultural  districts  fluctuates 
in  amount  at  different  seasons  of  the  year.  It  is  always  lowest  in 
August : “ it  rises  generally  towards  Christmas,  and  obtains  its 
greatest  elevation  about  Lady-day,  when  the  farmer  commonly 
lays  in  his  stock,  and  has  to  pay  his  rent  and  summer  taxes,”  and 
when  he  therefore  makes  his  principal  applications  to  country 
bankers  for  loans.  “ Those  variations  occur  with  the  same  regularity 
as  the  season,  and  with  just  as  little  disturbance  of  the  markets  as 
the  quarterly  fluctuations  of  the  notes  of  the  Bank  of  England. 


498 


BOOK  m.  CHAPTER  VIH.  § 4 


As  soon  as  the  extra  payments  have  been  completed,  the  superfluous” 
currency,  which  is  estimated  at  half  a million,  “ as  certainly  and 
immediately  is  reabsorbed  and  disappears.”  * 

If  extra  currency  were  not  forthcoming  to  make  these  extra 
payments,  one  of  three  things  must  happen.  Either  the  payments 
must  be  made  without  money,  by  a resort  to  some  of  those  con- 
trivances by  which  its  use  is  dispensed  with ; or  there  must  be  an 
increase  in  the  rapidity  of  circulation,  the  same  sum  of  money 
being  made  to  perform  more  payments ; or,  if  neither  of  these 
things  took  place,  money  to  make  the  extra  payments  must  be 
withdrawn  from  the  market  for  commodities,  and  prices,  conse- 
quently, must  fall.  An  increase  of  the  circulating  medium,  conform- 
able in  extent  and  duration  to  the  temporary  stress  of  business, 
does  not  raise  prices,  but  merely  prevents  this  fall. 

The  sequel  of  our  investigation  will  point  out  many  other  qualifi- 
cations with  which  the  proposition  must  be  received,  that  the  value 
of  the  circulating  medium  depends  on  the  demand  and  supply, 
and  is  in  the  inverse  ratio  of  the  quantity ; ^ qualifications  which, 
under  a complex  system  of  credit  like  that  existing  in  England, 
render  the  proposition  an  extremely  incorrect  expression  of  the  fact. 

♦ Fullarton,  Regulation  of  Currencies^  2nd  edit.  pp.  87-9. 

' [The  rest  of  the  sentence  was  added  in  the  4th  ed.  (1857),  and  the  pro- 
position described  as  a totally  incorrect  expression  of  the  fact.”  In  the 
6th  ed.  (1862)  “ extremely  ” was  substituted  for  “ totally.”] 


CHAPTER  IX 


OF  THE  VALUE  OF  MONEY,  AS  DEPENDENT  ON  COST  OP  PRODUCTION 

§ 1.  But  money,  no  more  than  commodities  in  general,  has 
its  value  definitely  determined  by  demand  and  supply.  The  ultimate 
regulator  of  its  value  is  Cost  of  Production. 

We  are  supposing,  of  course,  that  things  are  left  to  themselves. 
Governments  have  not  always  left  things  to  themselves.  They 
have  undertaken  to  prevent  the  quantity  of  money  from  adjusting 
itself  according  to  spontaneous  laws,  and  have  endeavoured  to 
regulate  it  at  their  pleasure ; generally  with  a view  of  keeping  a 
greater  quantity  of  money  in  the  country,  than  would  otherwise 
have  remained  there.  It  was,  until  lately,  the  policy  of  all  govern- 
ments to  interdict  the  exportation  and  the  melting  of  money  ; while, 
by  encouraging  the  exportation  and  impeding  the  importation  of 
other  things,  they  endeavoured  to  have  a stream  of  money  constantly 
flowing  in.  By  this  course  they  gratified  two  prejudices ; they 
drew,  or  thought  that  they  drew,  more  money  into  the  country, 
which  they  believed  to  be  tantamount  to  more  wealth ; and  they 
gave,  or  thought  that  they  gave,  to  all  producers  and  dealers,  high 
prices,  which,  though  no  real  advantage,  people  are  always  inclined 
to  suppose  to  be  one. 

In  this  attempt  to  regulate  the  value  of  money  artificially  by 
means  of  the  supply,  governments  have  never  succeeded  in  the  degree,  • 
or  even  in  the  manner,  which  they  intended.  Their  prohibitions 
against  exporting  or  melting  the  coin  have  never  been  effectual. 

A commodity  of  such  small  bulk  in  proportion  to  its  value  is  so 
easily  smuggled,  and  still  more  easily  melted,  that  it  has  been 
impossible  by  the  most  stringent  measures  to  prevent  these  opera- 
tions. All  the  risk  which  it  was  in  the  power  of  governments  to 
attach  to  them,  was  outweighed  by  a very  moderate  profit.*  In 

♦ The  effect  of  the  prohibition  cannot,  however,  have  been  so  entirely 
insignificant  as  it  has  been  supposed  to  be  by  writers  on  the  subject.  The 


600 


BOOK  III.  CHAPTER  IX.  § 1 


the  more  indirect  mode  of  aiming  at  the  same  purpose,  by  throwing 
difficulties  in  the  way  of  making  the  returns  for  exported  goods  in 
any  other  commodity  than  money,  they  have  not  been  quite  so 
unsuccessful.  They  have  not,  indeed,  succeeded  in  making  money 
flow  continuously  into  the  country ; but  they  have  to  a certain 
extent  been  able  to  keep  it  at  a higher  than  its  natural  level ; and 
have,  thus  far,  removed  the  value  of  money  from  exclusive  depend- 
ence on  the  causes  which  fix  the  value  of  things  not  artificially 
interfered  with. 

We  are,  however,  to  suppose  a state,  not  of  artificial  regulation, 
but  of  freedom.  In  that  state,  and  assuming  no  charge  to  be  made 
for  coinage,  the  value  of  money  will  conform  to  the  value  of  the 
bullion  of  which  it  is  made.  A pound  weight  of  gold  or  silver  in 
coin,  and  the  same  weight  in  an  ingot,  will  precisely  exchange  for 
one  another.  On  the  supposition  of  freedom,  the  metal  cannot  be 
worth  more  in  the  state  of  bullion  than  of  coin ; for  as  it  can  be 
melted  without  any  loss  of  time,  and  with  hardly  any  expense,  this 
would  of  course  be  done  until  the  quantity  in  circulation  was  so 
much  diminished  as  to  equalize  its  value  with  that  of  the  same 
weight  in  bullion.  It  may  be  thought  however  that  the  coin, 
though  it  cannot  be  of  less,  may  be,  and  being  a manufactured 
article  will  naturally  be,  of  greater  value  than  the  bullion  contained 
in  it,  on  the  same  principle  on  which  linen  cloth  is  of  more  value 
than  an  equal  weight  of  linen  yam.  This  would  be  true,  were  it 
not  that  Government,  in  this  country,  and  in  some  others,  coins 
money  gratis  for  anyone  who  furnishes  the  metal.  The  labour  and 
expense  of  coinage,  when  not  charged  to  the  possessor,  do  not 
raise  the  value  of  the  article.  If  Government  opened  an  office 
where,  on  delivery  of  a given  weight  of  yarn,  it  returned  the  same 
weight  of  cloth  to  any  one  who  asked  for  it,  cloth  would  be  worth 
no  more  in  the  market  than  the  yarn  it  contained.  As  soon  as 
coin  is  worth  a fraction  more  than  the  value  of  the  bullion,  it  becomes 
the  interest  of  the  holders  of  bullion  to  send  it  to  be  coined.  If 
Government,  however,  throws  the  expense  of  coinage,  as  is  reason- 
able, upon  the  holder,  by  making  a charge  to  cover  the  expense  (which 
is  done  by  giving  back  rather  less  in  coin  than  has  been  received 
in  bullion,  and  is  called  levying  a seignorage),  the  coin  will  rise, 

facts  adduced  by  Mr.  Fullarton,  in  the  note  to  page  7 of  his  work  on  the  Regu- 
lation  of  Currencies,  shows  that  it  required  a greater  percentage  of  difference  in 
value  between  coin  £^nd  bullion  than  has  commonly  been  imagined,  to  bring  the 
coin  to  the  melting-pot. 


VALUE  OF  MONEY 


601 


to  the  extent  of  the  seignorage,  above  the  value  of  the  bullion. 
If  the  Mint  kept  back  one  per  cent  to  pay  the  expense  of  coinage, 
it  would  be  against  the  interest  of  the  holders  of  bullion  to  have 
it  coined,  until  the  coin  was  more  valuable  than  the  bullion  by  at 
least  that  fraction.  The  coin,  therefore,  would  be  kept  one  per 
cent  higher  in  value,  which  could  only  be  by  keeping  it  one  per  cent 
less  in  quantity,  than  if  its  coinage  were  gratuitous. 

The  Government  might  attempt  to  obtain  a profit  by  the  trans- 
action, and  might  lay  on  a seignorage  calculated  for  that  purpose  ; 
but  whatever  they  took  for  coinage  beyond  its  expenses,  would  be 
so  much  profit  on  private  coining.  Coining,  though  not  so  easy  an 
operation  as  melting,  is  far  from  a difficult  one,  and,  when  the  coin 
produced  is  of  full  weight  and  standard  fineness,  is  very  difficult 
to  detect.  If,  therefore,  a profit  could  be  made  by  coining  good 
money,  it  would  certainly  be  done  : and  the  attempt  to  make 
seignorage  a source  of  revenue  would  be  defeated.  Any  attempt 
to  keep  the  value  of  the  coin  at  an  artificial  elevation,  not  by  a 
seignorage,  but  by  refusing  to  coin,  would  be  frustrated  in  the  same 
manner.*  , 

§ 2.  The  value  of  money,  then,  conforms,  permanently,  and, 
in  a state  of  freedom,  almost  immediately,  to  the  value  of  the 
metal  of  which  it  is  made  ; with  the  addition,  or  not,  of  the  expenses 
of  coinage,  according  as  those  expenses  are  borne  by  the  individual 
or  by  the  state.  This  simplifies  extremely  the  question  which  we 
have  here  to  consider  : since  gold  and  silver  bullion  are  commodities 
like  any  others,  and  their  value  depends,  like  that  of  other  things, 
on  their  cost  of  production. 

To  the  majority  of  civilized  countries,  gold  and  silver  are  foreign 
products  : and  the  circumstances  which  govern  the  values  of  foreign 
products,  present  some  questions  which  we  are  not  yet  ready  to 
examine.  For  the  present,  therefore,  we  must  suppose  the  country 
which  is  the  subject  of  our  inquiries,  to  be  supplied  with  gold  and 

♦ In  England,  though  there  is  no  seignorage  on  gold  coin,  (the  Mint  re- 
turning in  coin  the  same  weight  of  pure  metal  which  it  receives  in  bullion,) 
there  is  a delay  of  a few  weeks  after  the  bullion  is  deposited,  before  the  coin 
can  be  obtained,  occasioning  a loss  of  interest,  which,  to  the  holder,  is  equivalent 
to  a trifling  seignorage.  From  this  cause,  the  value  of  coin  is  in  general 
slightly  above  that  of  the  bullion  it  contains.  An  ounce  of  gold,  according 
to  the  quantity  of  metal  in  a sovereign,  should  be  worth  3Z.  17s.  10^.  ; but  it 
was  usually  quoted  at  31.  17«.  6tZ.,  until  the  Bank  Charter  Act  of  1844  made  it 
imperative  on  the  Bank  to  give  its  notes  for  all  bullion  offered  to  it  at  the  rate 
of  31  ns.  9d. 


602 


BOOK  III.  CHAPTER  IX.  § 2 


silver  by  its  own  mines,  reserving  for  future  consideration  how  far 
our  conclusions  require  modification  to  adapt  them  to  the  more 
usual  case. 

Of  the  three  classes  into  which  commodities  are  divided — 
those  absolutely  limited  in  supply,  those  which  may  be  had  in 
unlimited  quantity  at  a given  cost  of  production,  and  those  which 
may  be  had  in  unlimited  quantity,  but  at  an  increasing  cost  of 
production — the  precious  metals,  being  the  produce  of  mines, 
belong  to  the  third  class.  Their  natural  value,^  tkeref ore , is  in  the 
long  run  proportional  to  their  cost  of  production  in  The  most  Tin- 
favourable  existing  circumstances,  that  is,  at  the  worst  mine  which 
it  is  necessary  to  work  in  order  to  obtain  the  required  si^ply\  A 
pound  weight  of  gold  will,  in  the  gold-producing  countries,  ulti- 
mately tend  to  exchange  for  as  much  of  every  other  commodity  as 
is  produced  at  a cost  equal  to  its  own  ; meaning  by  its  own  cost  the 
cost  in  labour  and  expense,  at  the  least  productive  sources  of  supply 
which  the  then  existing  demand  makes  it  necessary  to  work.  The 
average  value  of  gold  is  made  to  conform  to  its  natural  value  in 
the  same  manner  as  the  values  of  other  things  are  made  to  con- 
form to  their  natural  value.  Suppose  that  it  were  selling  above  its 
natural  value ; that  is,  above  the  value  which  is  an  equivalent  for 
the  labour  and  expense  of  mining,  and  for  the  risks  attending  a 
branch  of  industry  in  which  nine  out  of  ten  experiments  have 
usually  been  failures.  A part  of  the  mass  of  floating  capital  which 
is  on  the  look  out  for  investment,  would  take  the  direction  of  mining 
enterprise ; the  supply  would  thus  be  increased,  and  the  value 
would  fall.  If,  on  the  contrary,  it  were  selling  below  its  natural 
value,  miners  would  not  be  obtaining  the  ordinary  profit ; they 
would  slacken  their  works ; if  the  depreciation  was  great,  some  of 
the  inferior  mines  would  perhaps  stop  working  altogether : and  a 
falling  ofi  in  the  annual  supply,  preventing  the  annual  wear  and 
tear  from  being  completely  compensated,  would  by  degrees  reduce 
the  quantity,  and  restore  the  value. 

When  examined  more  closely,  the  following  are  the  details  of 
the  process.  If  gold  is  above  its  natural  or  cost  value — the  coin, 
as  we  have  seen,  conforming  in  its  value  to  the  bullion — money 
will  be  of  high  value,  and  the  prices  of  all  things,  labour  included, 
will  be  low.  These  low  prices  will  lower  the  expenses  of  all  producers ; 
but  as  their  returns  will  also  be  lowered,  no  advantage  will  be 
obtained  by  any  producer,  except  the  producer  of  gold : whose 
returns  from  his  mine,  not  depending  on  price,  will  be  the  same 


VALUE  OF  MONEY 


603 


before,  and  his  expenses  being  less,  he  will  obtain  extra  profits, 
and  will  be  stimulated  to  increase  his  production.  E converso  if 
the  metal  is  below  its  natural  value  : since  this  is  as  much  as  to  say 
that  prices  are  high,  and  the  money  expenses  of  all  producers 
unusually  great : for  this,  however,  all  other  producers  will  be 
compensated  by  increased  money  returns  : the  miner  alone  will 
extract  from  his  mine  no  more  metal  than  before,  while  his 
expenses  will  be  greater  : his  profits  therefore  being  diminished 
or  annihilated,  he  will  diminish  his  production,  if  not  abandon 
his  employment. 

In  this  manner  it  is  that  the  value  of  money  is  made  to  conform 
to  the  cost  of  production  of  the  metal  of  which  it  is  made.  It  may 
be  well,  however,  to  repeat  (what  has  been  said  before)  that  the 
adjustment  takes  a long  time  to  effect,  in  the  case  of  a commodity 
so  generally  desired  and  at  the  same  time  so  durable  as  the  precious 
metals.  Being  so  largely  used  not  only  as  money  but  for  plate  and 
ornament,  there  is  at  all  times  a very  large  quantity  of  these  metals 
in  existence  : while  they  are  so  slowly  worn  out,  that  a comparatively 
small  annual  production  is  sufficient  to  keep  up  the  supply,  and  to 
make  any  addition  to  it  which  may  be  required  by  the  increase  of 
goods  to  be  circulated,  or  by  the  increased  demand  for  gold  and  silver 
articles  by  wealthy  consumers.  Even  if  this  small  annual  supply 
were  stopt  entirely,  it  would  require  many  years  to  reduce  the 
quantity  so  much  as  to  make  any  very  material  difference  in  prices. 
The  quantity  may  be  increased  much  more  rapidly  than  it  can  be 
diminished ; but  the  increase  must  be  very  great  before  it  can 
make  itself  much  felt  over  such  a mass  of  the  precious  metals  as 
exists  in  the  whole  commercial  world.  And  hence  the  effects  of  all 
changes  in  the  conditions  of  production  of  the  precious  metals  are 
at  first,  and  continue  to  be  for  many  years,  questions  of  quantity 
only,  with  little  reference  to  cost  of  production.  ^ More  especially 
is  this  the  case  when,  as  at  the  present  time,  many  new  sources  of 
supply  have  been  simultaneously  opened,  most  of  them  practicable 
by  labour  alone,  without  any  capital  in  advance  beyond  a pickaxe 
and  a week’s  food ; and  when  the  operations  are  as  yet  wholly 
experimental,  the  comparative  permanent  productiveness  of  the 
different  sources  being  entirely  unascertained. 

§ 3.  Since,  however,  the  value  of  money  really  conforms,  like 
that  of  other  things,  though  more  slowly,  to  its  cost  of  production, 

1 [The  final  sentence  of  this  paragraph  was  added  in  the  3rd  ed.  (1852).] 


604 


book  m.  CHAPTER  IX.  § 3 


some  political  economists  have  objected  altogether  to  the  statement 
that  the  value  of  money  depends  on  its  quantity  combined  with 
the  rapidity  of  circulation  ; which,  they  think,  is  assuming  a law  for 
money  that  does  not  exist  for  any  other  commodity,  when  the  truth 
is  that  it  is  governed  by  the  very  same  laws.  To  this  we  may 
answer,  in  the  first  place,  that  the  statement  in  question  assumes  no 
peculiar  law.  It  is  simply  the  law  of  demand  and  supply,  which  is 
acknowledged  to  be  applicable  to  all  commodities,  and  which,  in 
the  case  of  money  as  of  most  other  things,  is  controlled,  but  not  set 
aside,  by  the  law  of  cost  of  production,  since  cost  of  production 
would  have  no  effect  on  value  if  it  could  have  none  on  supply.  But, 
secondly,  there  really  is,  in  one  respect,  a closer  connexion  between 
the  value  of  money  and  its  quantity,  than  between  the  values  of 
other  things  and  their  quantity.  The  value  of  other  things  con- 
forms to  the  changes  in  the  cost  of  production,  without  requiring, 
as  a condition,  that  there  should  be  any  actual  alteration  of  the 
supply  ; the  potential  alteration  is  sufficient ; and  if  there  even  be 
an  actual  alteration,  it  is  but  a temporary  one,  except  in  so  far  as 
the  altered  value  may  make  a difference  in  the  demand,  and  so 
require  an  increase  or  diminution  of  supply,  as  a consequence, 
not  a cause,  of  the  alteration  in  value.  Now  this  is  also  true  of 
gold  and  silver,  considered  as  articles  of  expenditure  for  ornament 
and  luxury ; but  it  is  not  true  of  money.  If  the  permanent  cost 
of  production  of  gold  were  reduced  one-fourth,  it  might  happen 
that  there  would  not  be  more  of  it  bought  for  plate,  gilding,  or 
jewellery,  than  before ; and  if  so,  though  the  value  would  fall,  the 
quantity  extracted  from  the  mines  for  these  purposes  would  be  no 
greater  than  previously.  Not  so  with  the  portion  used  as  money ; 
that  portion  could  not  fall  in  value  one-fourth,  unless  actually 
increased  one-fourth ; for,  at  prices  one-fourth  higher,  one-fourth 
more  money  would  be  required  to  make  the  accustomed  purchases  ; 
and  if  this  were  not  forthcoming,  some  of  the  commodities  would  be 
without  purchasers,  and  prices  could  not  be  kept  up.  Alterations, 
therefore,  in  the  cost  of  production  of  the  precious  metals,  do  not 
act  upon  the  value  of  money  except  just  in  proportion  as  they 
increase  or  diminish  its  quantity ; which  cannot  be  said  of  any 
other  commodity.  It  would  therefore,  I conceive,  be  an  error, 
both  scientifically  and  practically,  to  discard  the  proposition 
which  asserts  a connexion  between  the  value  of  money  and  its 
quantity. 

It  is  evident,  however,  that  the  cost  of  production,  in  the  long 


VALUE  OF  MONEY 


605 


run,  regulates  the  quantity ; and  that  every  country  (temporary 
fluctuations  excepted)  will  possess,  and  have  in  circulation,  just  that 
quantity  of  money  which  will  perform  all  the  exchanges  required 
of  it,  consistently  with  maintaining  a value  conformable  to  its  cost 
of  production.  The  prices  of  things  will,  on  the  average,  be  such 
that  money  will  exchange  for  its  own  cost  in  all  other  goods  : and, 
precisely  because  the  quantity  cannot  be  prevented  from  affecting 
the  value,  the  quantity  itself  will  (by  a sort  of  self-acting  machinery) 
be  kept  at  the  amount  consistent  with  that  standard  of  prices — at 
the  amount  necessary  for  performing,  at  those  prices,  all  the  business 
required  of  it. 

“ The  quantity  wanted  will  depend  partly  on  the  cost  of  produc- 
ing gold,  and  partly  on  the  rapidity  of  its  circulation.  The  rapidity 
of  circulation  being  given,  it  would  depend  on  the  cost  of  production  : 
and  the  cost  of  production  being  given,  the  quantity  of  money 
would  depend  on  the  rapidity  of  its  circulation.”  * After  what  has 
been  already  said,  I hope  that  neither  of  these  propositions  stands 
in  need  of  any  further  illustration. 

Money,  then,  like  commodities  in  general,  having  a value  de- 
pendent on,  and  proportional  to,  its  cost  of  production  ; the  theory 
of  money  is,  by  the  admission  of  this  principle,  stript  of  a great  part 
of  the  mystery  which  apparently  surrounded  it.  We  must  not 
forget,  however,  that  this  doctrine  only  applies  to  the  places  in 
which  the  precious  metals  are  actually  produced ; and  that  we 
have  yet  to  enquire  whether  the  law  of  the  dependence  of  value  on 
cost  of  production  applies  to  the  exchange  of  things  produced  at 
distant  places.  But  however  this  may  be,  our  propositions  with 
respect  to  value  will  require  no  other  alteration,  where  money  is  an 
imported  commodity,  than  that  of  substituting  for  the  cost  of  its 
production  the  cost  of  obtaining  it  in  the  country.  Every  foreign 
commodity  is  bought  by  giving  for  it  some  domestic  production  ; 
and  the  labour  and  capital  which  a foreign  commodity  costs  to  us 
is  the  labour  and  capital  expended  in  producing  the  quantity  of 
our  own  goods  which  we  give  in  exchange  for  it.  WTiat  this  quantity 
depends  upon, — what  determines  the  proportions  of  interchange 
between  the  productions  of  one  country  and  those  of  another, — is 
indeed  a question  of  somewhat  greater  complexity  than  those  we 

♦ From  some  printed,  but  not  published.  Lectures  of  Mr.  Senior : in  which 
the  great  differences  in  the  business  done  by  money,  as  well  as  in  the  rapidity 
of  its  circulation  in  different  states  of  society  and  civilization,  are  interestingly 
illustrated. 


506 


BOOR  m.  CHAPTER  IX.  § 3 


have  hitherto  considered.  But  this  at  least  is  indisputable,  that 
within  the  country  itself  the  value  of  imported  commodities  is 
determined  by  the  value,  and  consequently  by  the  cost  of  production, 
of  the  equivalent  given  for  them  ; and  money,  where  it  is  an  imported 
commodity,  is  subject  to  the  same  law.i 


* [See  Appendix  T.  TTie  Value  of  MorteyJ] 


CHAPTER  X 


OF  A DOUBLE  STANDARD,  AND  SUBSIDIARY  COINS 

§ 1.  Though  the  qualities  necessary  to  fit  any  commodity 
for  being  used  as  money  are  rarely  united  in  any  considerable 
perfection,  there  are  two  commodities  which  possess  them  in  an 
eminent,  and  nearly  an  equal  degree ; the  two  precious  metals,  as 
they  are  called  ; gold  and  silver.  Some  nations  have  accordingly 
attempted  to  compose  their  circulating  medium  of  these  two  metals 
indiscriminately. 

There  is  an  obvious  convenience  in  making  use  of  the  more 
costly  metal  for  larger  payments  and  the  cheaper  one  for  smaller  ; 
and  the  only  question  relates  to  the  mode  in  which  this  can  best 
be  done.  The  mode  most  frequently  adopted  has  been  to  establish 
between  the  two  metals  a fixed  proportion  ; to  decide,  for  example, 
that  a gold  coin  called  a sovereign  should  be  equivalent  to  twenty  of 
the  silver  coins  called  shillings  : both  the  one  and  the  other  being 
called,  in  the  ordinary  money  of  account  of  the  country,  by  the  same 
denomination,  a pound  : and  it  being  left  free  to  every  one  who  has 
a pound  to  pay,  either  to  pay  it  in  the  one  metal  or  in  the  other. 

At  the  time  when  the  valuation  of  the  two  metals  relatively  to 
3ach  other,  say  twenty  shillings  to  the  sovereign,  or  twenty-one 
shillings  to  the  guinea,  was  first  made,  the  proportion  probably 
corresponded,  as  nearly  as  it  could  be  made  to  do,  with  the  ordinary 
relative  values  of  the  two  metals  grounded  on  their  cost  of  produc- 
tion : and  if  those  natural  or  cost  values  always  continued  to  bear 
the  same  ratio  to  one  another,  the  arrangement  would  be  unobjec- 
tionable. This,  however,  is  far  from  being  the  fact.  Gold  and  silver, 
though  the  least  variable  in  value  of  all  commodities,  are  not  in- 
variable, and  do  not  always  vary  simultaneously.  Silver,  for 
example,  was  lowered  in  permanent  value  more  than  gold,  by  the 
discovery  of  the  American  mines  ; and  those  small  variations  of 
value  which  take  place  occasionally  do  not  affect  both  metals  alike. 


508 


BOOK  III.  CHAPTER  X.  § 2 


Suppose  such  a variation  to  take  place  : the  value  of  the  two  metals 
relatively  to  one  another  no  longer  agreeing  with  their  rated  pro- 
portion, one  or  other  of  them  will  now  be  rated  below  its  bullion 
value,  and  there  will  be  a profit  to  be  made  by  melting  it. 

Suppose,  for  example,  that  gold  rises  in  value  relatively  to 
silver,  so  that  the  quantity  of  gold  in  a sovereign  is  now  worth  more 
than  the  quantity  of  silver  in  twenty  shillings.  Two  consequences 
will  ensue.  No  debtor  will  any  longer  find  it  his  interest  to  pay  in 
gold.  He  will  always  pay  in  silver,  because  twenty  shillings  are  a 
legal  tender  for  a debt  of  one  pound,  and  he  can  procure  silver 
convertible  into  twenty  shillings  for  less  gold  than  that  contained 
in  a sovereign.  The  other  consequence  will  be,  that  unless  a sovereign 
can  be  sold  for  more  than  twenty  shillings,  all  the  sovereigns  will  be 
melted,  since  as  bullion  they  will  purchase  a greater  number  of 
shillings  than  they  exchange  for  as  coin.  The  converse  of  all  this 
would  happen  if  silver,  instead  of  gold,  were  the  metal  which  had 
risen  in  comparative  value.  A sovereign  would  not  now  be  worth 
so  much  as  twenty  shillings,  and  whoever  had  a pound  to  pay  would 
prefer  paying  it  by  a sovereign ; while  the  silver  coins  would  be 
collected  for  the  purpose  of  being  melted,  and  sold  as  bullion  for  gold 
at  their  real  value,  that  is,  above  the  legal  valuation.  The  money 
of  the  community,  therefore,  would  never  really  consist  of  both 
metals,  but  of  the  one  only  which,  at  the  particular  time,  best  suited 
the  interest  of  debtors ; and  the  standard  of  the  currency  would 
be  constantly  liable  to  change  from  the  one  metal  to  the  other,  at  a 
loss,  on  each  change,  of  the  expense  of  coinage  on  the  metal  which 
fell  out  of  use. 

It  appears,  therefore,  that  the  value  of  money  is  liable  to  more 
frequent  fluctuations  when  both  metals  are  a legal  tender  at  a fixed 
valuation,  than  when  the  exclusive  standard  of  the  currency  is  either 
gold  or  silver.  Instead  of  being  only  affected  by  variations  in  the 
cost  of  production  of  one  metal  it  is  subject  to  derangement  from 
those  of  two.  The  particular  kind  of  variation  to  which  a currency 
is  rendered  more  liable  by  having  two  legal  standards,  is  a fall  of 
value,  or  what  is  commonly  called  a depreciation  ; since  practically 
that  one  of  the  two  metals  will  always  be  the  standard,  of  which  the 
real  has  fallen  below  the  rated  value.  If  the  tendency  of  the  metals 
be  to  rise  in  value,  all  payments  will  be  made  in  the  one  which  has 
risen  least ; and  if  to  fall,  then  in  that  which  has  fallen  most. 

§ 2.  The  plan  of  a double  standard  is  still  occasionally  brought 


DOUBLE  STANDARD,  AND  SUBSIDIARY  COINS 


609 


forward  by  here  and  there  a writer  or  orator  as  a great  improvement 
in  currency.  It  is  probable  that,  with  most  of  its  adherents,  its 
chief  merit  is  its  tendency  to  a sort  of  depreciation,  there  being  at 
all  times  abundance  of  supporters  for  any  mode,  either  open  or 
covert,  of  lowering  the  standard.  Some,  however,  are  influenced  by 
an  exaggerated  estimate  of  an  advantage  which  to  a certain  extent 
is  real,  that  of  being  able  to  have  recourse,  for  replenishing  the 
circulation,  to  the  united  stock  of  gold  and  silver  in  the  commercial 
world,  instead  of  being  confined  to  one  of  them,  which,  from  acci- 
dental absorption,  may  not  be  obtainable  with  sufficient  rapidity. 
The  advantage  without  the  disadvantages  of  a double  standard, 
seems  to  be  best  obtained  by  those  nations  with  whom  one  only  of 
the  two  metals  is  a legal  tender,  but  the  other  also  is  coined,  and 
allowed  to  pass  for  whatever  value  the  market  assigns  to  it.^ 

When  this  plan  is  adopted,  it  is  naturally  the  more  costly  metal 
which  is  left  to  be  bought  and  sold  as  an  article  of  commerce.  But 
nations  which,  like  England,  adopt  the  more  costly  of  the  two  as 
their  standard,  resort  to  a different  expedient  for  retaining  them  both 
in  circulation,  namely,  to  make  silver  a legal  tender,  but  only  for 
small  payments.  In  England,  no  one  can  be  compelled  to  receive 
silver  in  payment  for  a larger  amount  than  forty  shillings.  With 
this  regulation  there  is  necessarily  combined  another,  namely,  that 
silver  coin  should  be  rated,  in  comparison  with  gold,  somewhat  above 
its  intrinsic  value  ; that  there  should  not  be,  in  twenty  shillings,  as 
much  silver  as  is  worth  a sovereign  : for  if  there  were,  a very  slight 
turn  of  the  market  in  its  favour  would  make  it  worth  more  than  a 
sovereign,  and  it  would  be  profitable  to  melt  the  silver  coin.  The 
over-valuation  of  the  silver  coin  creates  an  inducement  to  buy  silver 
and  send  it  to  the  Mint  to  be  coined,  since  it  is  given  back  at  a higher 
value  than  properly  belongs  to  it ; this,  however,  has  been  guarded 


* [The  following  passage,  which  occurred  in  the  original  ed.  (1848)  at  this 
point,  was  omitted  in  the  3rd  ed.  (1852) : 

“ This  is  the  case  in  France.  Silver  alone  is  (I  believe)  a legal  tender, 
and  all  sums  are  expressed  and  accounts  kept  in  francs,  a silver  coin.  Gold 
is  also  coined,  for  convenience,  but  does  not  pass  at  a fixed  valuation ; the 
twenty  francs  marked  on  a napoleon  are  merely  nominal,  napoleons  being 
never  to  be  bought  for  that  sum,  but  always  bearing  a small  premium,  or 
agio  as  it  is  called;  though,  as  the  agio  is  very  trifling,  (the  bullion  value  differing 
very  little  from  twenty  francs),  it  is  seldom  possible  to  pass  a napoleon  for 
more  than  that  sum  in  ordinary  retail  transactions.  Silver,  then,  is  the  real 
money  of  the  country,  and  gold  coin  only  a merchandise ; bu^»,  though  not 
a legal  tender,  it  answers  all  the  real  purposes  of  one,  since  no  creditor  is  at 
all  likely  to  refuse  receiving  it  at  the  market  price,  in  payment  of  his  debt.”] 


610 


BOOK  III.  CHAPTER  XL  § 2 


against,  by  limiting  the  quantity  of  the  silver  coinage,  which  is  not 
left,  hke  that  of  gold,  to  the  discretion  of  individuals,  but  is  deter- 
mined by  the  government,  and  restricted  to  the  amount  supposed 
to  be  required  for  small  payments.  The  only  precaution  necessary 
is,  not  to  put  so  high  a valuation  upon  the  silver,  as  to  hold  out  a 
strong  temptation  to  private  coining.^ 


^ [See  Appendix  U.  Bimetallism.'] 


CHAPTER  XI 


OF  CREDIT,  AS  A SUBSTITUTE  FOR  MONEY 

§ 1.  The  functions  of  credit  have  been  a subject  of  as  much 
misunderstanding  and  as  much  confusion  of  ideas,  as  any  single  topic 
in  Political  Economy.  This  is  not  owing  to  any  peculiar  difficulty 
in  the  theory  of  the  subject,  but  to  the  complex  nature  of  some  of  the 
mercantile  phenomena  arising  from  the  forms  in  which  credit  clothes 
itself ; by  which  attention  is  diverted  from  the  properties  of  credit 
in  general,  to  the  peculiarities  of  its  particular  forms. 

As  a specimen  of  the  confused  notions  entertained  respecting  the 
nature  of  credit,  we  may  advert  to  the  exaggerated  language  so  often 
used  respecting  its  national  importance.  Credit  has  a great,  but 
not,  as  many  people  seem  to  suppose,  a magical  power ; it  cannot 
make  something  out  of  nothing.  How  often  is  an  extension  of 
credit  talked  of  as  equivalent  to  a creation  of  capital,  or  as  if  credit 
actually  were  capital.  It  seems  strange  that  there  should  be  any 
need  to  point  out,  that  credit  being  only  permission  to  use  the  capital 
of  another  person,  the  means  of  production  cannot  be  increased  by 
it,  but  only  transferred.  If  the  borrower’s  means  of  production 
and  of  employing  labour  are  increased  by  the  credit  given  him,  the 
lender’s  are  as  much  diminished.  The  same  sum  cannot  be  used  as 
capital  both  by  the  owner  and  also  by  the  person  to  whom  it  is  lent : 
it  cannot  supply  its  entire  value  in  wages,  tools,  and  materials,  to 
two  sets  of  labourers  at  once.  It  is  true  that  the  capital  which  A 
has  borrowed  from  B,  and  makes  use  of  in  his  business,  still  forms 
part  of  the  wealth  of  ,B  for  other  purposes  : he  can  enter  into  arrange- 
ments in  reliance  on  it,  and  can  borrow,  when  needful,  an  equivalent 
sum  on  the  security  of  it ; so  that  to  a superficial  eye  it  might  seem 
as  if  both  B and  A had  the  use  of  it  at  once.  But  the  smallest  con- 
sideration will  show  that  when  B has  parted  with  his  capital  to  A, 
the  use  of  it  as  capital  rests  with  A alone,  and  that  B has  no  other 
service  from  it  than  in  so  far  as  his  ultimate  claim  upon  it  serves  him 


512 


BOOK  III.  CHAPTER  XI.  § 2 


to  obtain  the  use  of  another  capital  from  a third  person  C.  All 
capital  (not  his  own)  of  which  any  person  has  really  the  use,  is,  and 
must  be,  so  much  subtracted  from  the  capital  of  some  one  else.* 

§ 2.  Bu^though  credit  is  but  a transfer  of  capital  from  hand  to 
hand,  it  is  generally,  and  naturally,  a transfer  to  hands  more  com- 
petent to  employ  the  capital  efficiently  in  production.  If  there 
were  no  such  thing  as  credit,  or  if,  from  general  insecurity  and  want 
of  confidence,  it  were  scantily  practised,  many  persons  who  possess 
more  or  less  of  capital,  but  who,  from  their  occupations,  or  for  want 
of  the  necessary  skill  and  knowledge,  cannot  personally  superintend 
its  employment,  would  derive  no  benefit  from  it : their  funds  would 
either  lie  idle,  or  would  be,  perhaps,  wasted  and  annihilated  in 
unskilful  attempts  to  make  them  yield  a profit.  All  this  capital  is 
now  lent  at  interest,  and  made  available  for  production.  Capital 
thus  circumstanced  forms  a large  portion  of  the  productive  resources 
of  any  commercial  country ; and  is  naturally  attracted  to  those 
producers  or  traders  who,  being  in  the  greatest  business,  have  the 
means  of  employing  it  to  most  advantage ; because  such  are  both 
the  most  desirous  to  obtain  it,  and  able  to  give  the  best  security. 
Although,  therefore,  the  productive  funds  of  the  country  are  not 
increased  by  credit,  they  are  called  into  a more  complete  state  of 
productive  activity.  As  the  confidence  on  which  credit  is  grounded 

* [1866]  To  make  the  proposition  in  the  text  strictly  true,  a corrective, 
though  a very  slight  one,  requires  to  be  made.  The  circulating  medium 
existing  in  a country  at  a given  time,  is  partly  employed  in  purchases  for  pro- 
ductive, and  partly  for  unproductive  consumption.  According  as  a larger 
proportion  of  it  is  employed  in  the  one  way  or  in  the  other,  the  real  capital  of 
the  country  is  greater  or  less.  If,  then,  an  addition  were  made  to  the  circulating 
medium  in  the  hands  of  unproductive  consumers  exclusively,  a larger  portion  of 
the  existing  stock  of  commodities  would  be  bought  for  unproductive  consump- 
tion, and  a smaller  for  a productive,  which  state  of  things,  while  it  lasted,  would 
be  equivalent  to  a diminution  of  capital ; and  on  the  contrary,  if  the  addition 
made  be  to  the  portion  of  the  circulating  medium  which  is  in  the  hands  of 
producers,  and  destined  for  their  business,  a greater  portion  of  the  commodities 
in  the  country  will  for  the  present  be  employed  as  capital,  and  a less  portion 
unproductively.  Now  an  effect  of  this  latter  character  naturally  attends  some 
extensions  of  credit,  especially  when  taking  place  in  the  form  of  bank  notes, 
or  other  instruments  of  exchange.  The  adffitional  bank  notes  are,  in  ordinary 
course,  first  issued  to  producers  or  dealers,  to  be  employed  as  capital ; and 
though  the  stock  of  commodities  in  the  country  is  no  greater  than  before,  yet  as 
a greater  share  of  that  stock  now  comes  by  purchase  into  the  hands  of  producers 
and  dealers,  to  that  extent  what  would  have  been  unproductively  consumed 
is  applied  to  production,  and  there  is  a real  increase  of  capital.  The  effect 
ceases,  and  a counter-process  takes  place,  when  the  additional  credit  is  stopped, 
and  the  notes  called  in. 


CREDIT  AS  A SUBSTITUTE  FOR  MONEY 


613 


extends  itself,  means  are  developed  by  which  even  the  smallest 
portions  of  capital,  the  sums  which  each  person  keeps  by  him  to  meet 
contingencies,  are  made  available  for  productive  uses.  The  principal 
instruments  for  this  purpose  are  banks  of  deposit.  Where  these  do 
not  exist,  a prudent  person  must  keep  a sufficient  sum  unemployed 
in  his  own  possession,  to  meet  every  demand  which  he  has  even  a 
slight  reason  for  thinking  himself  liable  to.  When  the  practice, 
however,  has  grown  up  of  keeping  this  reserve  not  in  his  own  custody 
but  with  a banker,  many  small  sums,  previously  lying  idle,  becoming 
aggregated  in  the  banker’s  hands  ; and  the  banker,  being  taught  by 
experience  what  proportion  of  the  amount  is  hkely  to  be  wanted  in 
a given  time,  and  knowing  that  if  one  depositor  happens  to  require 
more  than  the  average,  another  will  require  less,  is  able  to  lend  the 
remainder,  that  is,  the  far  greater  part,  to  producers  and  dealers  : 
thereby  adding  the  amount,  not  indeed  to  the  capital  in  existence, 
but^  to  that  in  employment,  and  making  a corresponding  addition 
to  the  aggregate  production  of  the  community. 

While  credit  is  thus  indispensable  for  rendering  the  whole  capital 
of  the  country  productive,  it  is  also  a means  by  which  the  industrial 
talent  of  the  country  is  turned  to  better  account  for  purposes  of 
production.  Many  a person  who  has  either  no  capital  of  his  own, 
or  very  little,  but  who  has  qualifications  for  business  which  are 
known  and  appreciated  by  some  possessors  of  capital,  is  enabled 
to  obtain  either  advances  in  money,  or  more  frequently  goods  on 
credit,  by  which  his  industrial  capacities  are  made  instrumental  to 
the  increase  of  the  public  wealth ; and  this  benefit  will  be  reaped 
far  more  largely,  whenever,  through  better  laws  and  better  education, 
the  community  shall  have  made  such  progress  in  integrity,  that 
personal  character  can  be  accepted  as  a sufficient  guarantee  not  only 
against  dishonestly  appropriating,  but  against  dishonestly  risking, 
what  belongs  to  another. 

Such  are,  in  the  most  general  point  of  view,  the  uses  of  credit  to 
the  productive  resources  of  the  world.  But  these  considerations 
only  apply  to  the  credit  given  to  the  industrious  classes — to  pro- 
ducers and  dealers.  Credit  given  by  dealers  to  unproductive 
consumers  is  never  an  addition,  but  always  a detriment,  to  the  sources 
of  public  wealth.  It  makes  over  in  temporary  use,  not  the  capital  of 
the  unproductive  classes  to  the  productive,  but  that  of  the  produc- 
tive to  the  unproductive.  If  A,  a dealer,  supplies  goods  to  B,  a 
landowner  or  annuitant,  to  be  paid  for  at  the  end  of  five  years,  as 
much  of  the  capital  of  A as  is  equal  to  the  value  of  these  goods 


614 


BOOK  III.  CHAPTER  XI.  § 3 


remains  for  five  years  unproductive.  During  sucli  a period,  if  pay- 
ment had  been  made  at  once,  the  sum  might  have  been  several  times 
expended  and  replaced,  and  goods  to  the  amount  might  have  been 
several  times  produced,  consumed,  and  reproduced:  consequently 
B’s  withholding  lOOZ.  for  five  years,  even  if  he  pays  at  last,  has  cost 
to  the  labouring  classes  of  the  community  during  that  period  an 
absolute  loss  of  probably  several  times  that  amount.  A,  indivi- 
dually, is  compensated,  by  putting  a higher  price  upon  his  goods, 
which  is  ultimately  paid  by  B : but  there  is  no  compensation 
made  to  the  labouring  classes,  the  chief  sufferers  by  every 
diversion  of  capital,  whether  permanently  or  temporarily,  to 
unproductive  uses.  The  country  has  had  lOOL  less  of  capital 
during  those  five  years,  B having  taken  that  amount  from  A’s 
capital,  and  spent  it  unproductively,  in  anticipation  of  his  own 
means,  and  having  only  after  five  years  set  apart  a sum  from  his 
income  and  converted  it  into  capital  for  the  purpose  of  indemni- 
fying A. 

§ 3.  Thus  far  of  the  general  function  of  Credit  in  production. 
It  is  not  a productive  power  in  itself,  though,  without  it,  the  produc- 
tive powers  already  existing  could  not  be  brought  into  complete 
employment.  But  a more  intricate  portion  of  the  theory  of  Credit 
is  its  influence  on  prices ; the  chief  cause  of  most  of  the  mercantile 
phenomena  which  perplex  observers.  In  a sta,te  of  commerce  in 
whi(i^muflh  credit  is  habitually  yiven.  general  prices  at  any  moment 
depend  much  more  upon  the  state  of  iH^n.the  quantity  of 

moneys  For  credit,  though  it  is  not  productive  pnwp.r,  is^purchasing 
^werT~^ and  a person  who,  having  credit,  avails  himself  of  it  in  the 
purchase^)!  goods,  creates  just  as  much  demand  for  the  goods,  and 
tends  quite  aa  munh  to  rai?=ie  their  price,  as  if  he  made  an  equal 
amount  of  purchases  with  ready  money. 

The  credit  which  we  are  now  called  upon  to  consider,  as  a distinct 
purchasing  power,  independent  of  money,  is  of  course  not  credit  in 
its  simplest  form,  that  of  money  lent  by  one  person  to  another,  and 
paid  directly  into  his  hands  ; for  when  the  borrower  expends  this  in 
purchases,  he  makes  the  purchases  with  money,  not  credit,  and 
exerts  no  purchasing  power  over  and  above  that  conferred  by  the 
money.  The  forms  of  credit  which  create  purchasing  power  are 
those  in  which  no  money  passes  at  the  time,  and  very  often  none 
passes  at  all,  the  transaction  being  included  with  a mass  of  other 
transactions  in  an  account,  and  nothing  paid  but  a balance.  This 


CREDIT  AS  A SUBSTITUTE  FOR  MONEY 


615 


takes  place  in  a variety  of  ways,  which  we  shall  proceed  to  examine, 
beginning,  as  is  our  custom,  with  the  simplest. 

First : Suppose  A and  B to  be  two  dealers,  who  have  transactions 
with  each  other  both  as  buyers  and  as  sellers.  A buys  from  B on  credit. 
B does  the  like  with  respect  to  A.  At  the  end  of  the  year,  the  sum 
of  A’s  debts  to  B is  set  against  the  sum  of  B’s  debts  to  A,  and  it  is 
ascertained  to  which  side  a balance  is  due.  This  balance,  which  may 
be  less  than  the  amount  of  many  of  the  transactions  singly,  and  is 
necessarily  less  than  the  sum  of  the  transactions,  is  all  that  is  paid 
in  money  ; and  perhaps  even  this  is  not  paid,  but  carried  over  in  an 
account  current  to  the  next  year.  A single  payment  of  a hundred 
pounds  may  in  this  manner  suffice  to  liquidate  a long  series  of 
transactions,  some  of  them  to  the  value  of  thousands. 

But  secondly  : The  debts  of  A to  B may  be  paid  without  the 
intervention  of  money,  even  though  there  be  no  reciprocal  debts  of  B 
to  A.  A may  satisfy  B by  making  over  to  him  a debt  due  to  himself 
from  a third  person,  C.  This  is  conveniently  done  by  means  of  a 
written  instrument,  called  a bill  of  exchange,  which  is,  in  fact,  a 
transferable  order  by  a creditor  upon  his  debtor,  and  when  accepted 
by  the  debtor,  that  is,  authenticated  by  his  signature,  becomes  an 
acknowledgment  of  debt. 

§ 4.  Bills  of  exchange  were  first  introduced  to  save  the  expense 
and  risk  of  transporting  the  precious  metals  from  place  to  place. 
“ Let  it  be  supposed,”  says  Mr.  Henry  Thornton,*  “ that  there  are 
in  London  ten  manufacturers  who  sell  their  article  to  ten  shopkeepers 
in  York,  by  whom  it  is  retailed ; and  that  there  are  in  York  ten 
manufacturers  of  another  commodity,  who  sell  it  to  ten  shopkeepers 
in  London.  There  would  be  no  occasion  for  the  ten  shopkeepers  in 
London  to  send  yearly  to  York  guineas  for  the  payment  of  the 
York  manufacturers,  and  for  the  ten  York  shopkeepers  to  send 
yearly  as  many  guineas  to  London.  It  would  only  be  necessary  for 
the  York  manufacturers  to  receive  from  each  of  the  shopkeepers  at 
their  own  door  the  money  in  question,  giving  in  return  letters  which 
should  acknowledge  the  receipt  of  it ; and  which  should  also  direct 
the  money,  lying  ready  in  the  hands  of  their  debtors  in  London,  to  be 
paid  to  the  London  manufacturers,  so  as  to  cancel  the  debt  in  London 

♦ Enquiry  into  the  Nature  and  Effects  of  the  Paper  Crtdit  of  Great  Britain, 
p.  24.  This  work,  published  in  1802,  is  even  now  [1848]  the  clearest  exposition 
that  I am  acquainted  with,  in  the  English  language,  of  the  modes  in  which 
credit  is  given  and  taken  in  a mercantile  community. 


616 


BOOK  III.  CHAPTER  XI.  § 4 


in  the  same  manner  as  that  at  York.  The  expense  and  the  risk  of 
all  transmission  of  money  would  thus  be  saved.  Letters  ordering 
the  transfer  of  the  debt  are  termed,  in  the  language  of  the  present 
day,  bills  of  exchange.  They  are  bills  by  which  the  debt  of  one 
person  is  exchanged  for  the  debt  of  another ; and  the  debt,  perhaps, 
which  is  due  in  one  place,  for  the  debt  due  in  another.” 

Bills  of  exchange  having  been  found  convenient  as  means  of 
paying  debts  at  distant  places  without  the  expense  of  transporting 
the  precious  metals,  their  use  was  afterwards  greatly  extended  from 
another  motive.  It  is  usual  in  every  trade  to  give  a certain  length 
of  credit  for  goods  bought : three  months,  six  months,  a year,  even 
two  years,  according  to  the  convenience  or  custom  of  the  particular 
trade.  A dealer  who  has  sold  goods,  for  which  he  is  to  be  paid  in 
six  months,  but  who  desires  to  receive  payment  sooner,  draws  a bill 
on  his  debtor  payable  in  six  months,  and  gets  the  bill  discounted  by 
a banker  or  other  money-lender,  that  is,  transfers  the  bill  to  him, 
receiving  the  amount,  minus  interest  for  the  time  it  has  still  to  run. 
It  has  become  one  of  the  chief  functions  of  biQs  of  exchange  to  serve 
as  a means  by  which  a debt  due  from  one  person  can  thus  be  made 
available  for  obtaining  credit  from  another.  The  convenience  of  the 
expedient  has  led  to  the  frequent  creation  of  bills  of  exchange  not 
grounded  on  any  debt  previously  due  to  the  drawer  of  the  bill  by 
the  person  on  whom  it  is  drawn.  These  are  called  accommodation 
bills  ; and  sometimes,  with  a tinge  of  disapprobation,  -fictitious  biUs. 
Their  nature  is  so  clearly  stated,  and  with  such  judicious  remarks, 
by  the  author  whom  I have  just  quoted,  that  I shall  transcribe  the 
entire  passage.* 

“ A,  being  in  want  of  lOOZ.,  requests  B to  accept  a note  or  bill 
drawn  at  two  months,  which  B,  therefore,  on  the  face  of  it,  is  bound  to 
pay ; it  is  understood,  however,  that  A will  take  care  either  to  dis- 
charge the  bill  himself,  or  to  furnish  B with  the  means  of  paying  it. 
A obtains  ready  money  for  the  bill  on  the  joint  credit  of  the  two 
parties.  A fulfils  his  promise  of  papng  it  when  due,  and  thus  con- 
cludes the  transaction.  This  service  rendered  by  B to  A is,  however, 
not  unlikely  to  be  requited,  at  a more  or  less  distant  period,  by  a 
similar  acceptance  of  a bill  on  A,  drawn  and  discounted  for  B’s 
convenience. 

“ Let  us  now  compare  such  a bill  with  a real  bill.  Let  us  consider 
in  what  points  they  differ,  or  seem  to  differ  ; and  in  what  they  agree. 

“ They  agree,  inasmuch  as  each  is  a discountable  article  ; each 
* Pp.  29-33. 


CREDIT  AS  A SUBSTITUTE  FOR  MONEY 


617 


has  also  been  created  for  the  purpose  of  being  discounted  ; and  each 
is,  perhaps,  discounted  in  fact.  Each,  therefore,  serves  equally 
to  supply  means  of  speculation  to  the  merchant.  So  far,  moreover, 
as  bills  and  notes  constitute  -what  is  called  the  circulating  medium, 
or  paper  currency  of  the  country,  and  prevent  the  use  of  guineas, 
the  fictitious  and  the  real  bill  are  upon  an  equality  ; and  if  the  price 
of  commodities  be  raised  in  proportion  to  the  quantity  of  paper 
currency,  the  one  contributes  to  that  rise  exactly  in  the  same  manner 
as  the  other. 

“ Before  we  come  to  the  points  in  which  they  differ,  let  us  advert 
to  one  point  in  which  they  are  commonly  supposed  to  be  unlike ; 
but  in  which  they  cannot  be  said  always  or  necessarily  to  differ. 

“ Real  notes  (it  is  sometimes  said)  represent  actual  property. 
There  are  actual  goods  in  existence,  which  are  the  counterpart  to 
every  real  note.  Notes  which  are  not  drawn  in  consequence  of  a 
sale  of  goods,  are  a species  of  false  wealth,  by  which  a nation  is 
deceived.  These  supply  only  an  imaginary  capital ; the  others 
indicate  one  that  is  real. 

“ In  answer  to  this  statement  it  may  be  observed,  first,  that  the 
notes  given  in  consequence  of  a real  sale  of  goods  cannot  be  considered 
as  on  that  account  certainly  representing  any  actual  property. 
Suppose  that  A sells  lOOZ.  worth  of  goods  to  B at  six  months’  credit, 
and  takes  a bill  at  six  months  for  it;  and  that  B,  within  a month  after, 
sells  the  same  goods,  at  a like  credit,  to  C,  taking  a like  bill ; and 
again,  that  C,  after  another  month,  sells  them  to  D,  taking  a like  bill, 
and  so  on.  There  may  then,  at  the  end  of  six  months,  be  six  bills 
of  lOOZ.  each,  existing  at  the  same  time  ; and  every  one  of  these 
may  possibly  have  been  discounted.  Of  all  these  bills,  then,  only 
one  represents  any  actual  property. 

“ In  order  to  justify  the  supposition  that  a real  bill  (as  it  is 
called)  represents  actual  property,  there  ought  to  be  some  power  in 
the  bill-holder  to  prevent  the  property  which  the  bill  represents, 
from  being  turned  to  other  purposes  than  that  of  paying  the  bill  in 
question.  No  such  power  exists  ; neither  the  man  who  holds  the  real 
bill,  nor  the  man  who  discounts  it,  has  any  property  in  the  specific 
goods  for  which  it  was  given : he  as  much  trusts  to  the  general 
ability  to  pay  of  the  giver  of  the  bill,  as  the  holder  of  any  fictitious 
bill  does.  The  fictitious  bill  may,  in  many  cases,  be  a bill  given  by 
a person  having  a large  and  known  capital,  a part  of  which  the 
fictitious  bill  may  be  said  in  that  case  to  represent.  The  supposition 
that  real  bills  represent  property,  and  that  fictitious  bills  do  not, 


618 


BOOK  m.  CHAPTER  XI.  § 4 


seems,  therefore,  to  be  one  by  which  more  than  justice  is  done  to 
one  of  these  species  of  bills,  and  something  less  than  justice  to  the 
other. 

“We  come  next  to  some  points  in  which  they  differ. 

“ First,  the  fictitious  note,  or  note  of  accommodation,  is  liable 
to  the  objection  that  it  professes  to  be  what  it  is  not.  This  objection, 
however,  lies  only  agaiost  those  fictitious  bills  which  are  passed  as 
real.  In  many  cases  it  is  sufiiciently  obvious  what  they  are. 
Secondly,  the  fictitious  bill  is,  in  general,  less  hkely  to  be  punctually 
paid  than  the  real  one.  There  is  a general  presumption,  that  the 
dealer  in  fictitious  bills  is  a man  who  is  a more  adventurous  specu- 
lator than  he  who  carefully  abstains  from  them.  It  follows,  thirdly, 
that  fictitious  bills,  besides  being  less  safe,  are  less  subject  to  limita- 
tion as  to  their  quantity.  The  extent  of  a man’s  actual  sales 
forms  some  limit  to  the  amount  of  his  real  notes  ; and  as  it  is  highly 
desirable  in  commerce  that  credit  should  be  dealt  out  to  all  persons 
in  some  sort  of  regular  and  due  proportion,  the  measure  of  a man’s 
actual  sales,  certified  by  the  appearance  of  his  bills  drawn  in  virtue 
of  those  sales,  is  some  rule  in  the  case,  though  a very  imperfect  one 
in  many  respects. 

“ A fictitious  biU,  or  bill  of  accommodation,  is  evidently  in 
substance  the  same  as  any  common  promissory  note ; and  even 
better  in  this  respect,  that  there  is  but  one  security  to  the  promis- 
sory note,  whereas  in  the  case  of  the  biU  of  accommodation,  there  are 
two.  So  much  jealousy  subsists  lest  traders  should  push  their 
means  of  raising  money  too  far,  that  paper,  the  same  in  its  general 
nature  with  that  which  is  given,  being  the  only  paper  which  can  be 
given,  by  men  out  of  business,  is  deemed  somewhat  discreditable 
when  coming  from  a merchant.  And  because  such  paper,  when  in 
the  merchant’s  hand,  necessarily  imitates  the  paper  which  passes 
on  the  occasion  of  a sale  of  goods,  the  epithet  fictitious  has  been  cast 
upon  it ; an  epithet  which  has  seemed  to  countenance  the  confused 
and  mistaken  notion,  that  there  is  something  altogether  false  and 
delusive  in  the  nature  of  a certain  part  both  of  the  paper  and  of  the 
apparent  wealth  of  the  country.” 

A bUl  of  exchange,  when  merely  discounted,  and  kept  in  the 
portfoho  of  the  discounter  until  it  falls  due,  does  not  perform  the 
functions  or  supply  the  place  of  money,  but  is  itself  bought  and  sold 
for  money.  It  is  no  more  currency  than  the  public  funds,  or  any  other 
securities.  But  when  a bill  drawn  upon  one  person  is  paid  to  another 
(or  even  to  the  same  person)  in  discharge  of  a debt  or  a pecuniary 


CREDIT  AS  A SUBSTITUTE  FOR  MONEY 


619 


claim,  it  does  something  for  which,  if  the  bill  did  not  exist,  money 
would  be  required  : it  performs  the  functions  of  currency.  This  is 
a use  to  which  bills  of  exchange  are  often  applied.  “They  not  only,” 
continues  Mr.  Thornton,*  “ spare  the  use  of  ready  money;  they  also 
occupy  its  place  in  many  cases.  Let  us  imagine  a farmer  in  the 
country  to  discharge  a debt  of  101.  to  his  neighbouring  grocer,  by 
giving  him  a bill  for  that  sum,  drawn  on  his  cornfactor  in  London 
for  grain  sold  in  the  metropolis  ; and  the  grocer  to  transmit  the  bill, 
he  having  previously  indorsed  it,  to  a neighbouring  sugar-baker, 
in  discharge  of  a like  debt ; and  the  sugar-baker  to  send  it,  when  again 
indorsed,  to  a West  India  merchant  in  an  outport,  and  the  West 
India  merchant  to  deliver  it  to  his  country  banker,  who  also  indorses 
it,  and  sends  it  into  further  circulation.  The  bill  in  this  case  will 
have  effected  five  payments,  exactly  as  if  it  were  a 10/.  note  payable 
to  a bearer  on  demand.  A multitude  of  bills  pass  between  trader 
and  trader  in  the  country,  in  the  manner  which  has  been  described; 
and  they  evidently  form,  in  the  strictest  sense,  a part  of  the  circu- 
lating medium  of  the  kingdom.” 

Many  bills,  both  domestic  and  foreign,  are  at  last  presented  for 
payment  quite  covered  with  indorsements,  each  of  which  repre- 
sents either  a fresh  discounting,  or  a pecuniary  transaction  in  which 
the  bill  has  performed  the  functions  of  money.  Within  the  present 
generation,!  the  circulating  medium  of  Lancashire,  for  sums  above 
five  pounds,  was  almost  entirely  composed  of  such  bills. 

§ 5.  A third  form  in  which  credit  is  employed  as  a substitute 
for  currency,  is  that  of  promissory  notes.  A bill  drawn  upon  any 
one  and  accepted  by  him,  and  a note  of  hand  by  him  promising 
to  pay  the  same  sum,  are,  as  far  as  he  is  concerned,  exactly  equiva- 
lent, except  that  the  former  commonly  bears  interest  and  the  latter 
generally  does  not ; and  that  the  former  is  commonly  payable  only 
after  a certain  lapse  of  time,  and  the  latter  payable  at  sight.  But  it  is 
chiefly  in  the  latter  form  that  it  has  become,  in  commercial  countries, 
an  express  occupation  to  issue  such  substitutes  for  money.  Dealers 
in  money  (as  lenders  by  profession  are  improperly  called)  desire, 
like  other  dealers,  to  stretch  their  operations  beyond  what  can 
be  carried  on  by  their  own  means  : they  wish  to  lend,  not  their 
capital  merely,  but  their  credit,  and  not  only  such  portion  of  their 

* P.  40. 

^ [So  from  the  4th  ed.  (1857).  The  original  (1848)  ran;  **Up  to  twenty 
years  ago.”] 


620 


BOOK  III.  CHAPTER  XL  § 6 


credit  as  consists  of  funds  actually  deposited  with  them,  but  theii 
power  of  obtaining  credit  from  the  public  generally,  so  far  as  they 
think  they  can  safely  employ  it.  This  is  done  in  a very  convenient 
manner  by  lending  their  own  promissory  notes  payable  to  bearer 
on  demand  : the  borrower  being  willing  to  accept  these  as  so  much 
money,  because  the  credit  of  the  lender  makes  other  people  willingly 
receive  them  on  the  same  footing,  in  purchases  or  other  payments. 
These  notes,  therefore,  perform  all  the  functions  of  currency,  and 
render  an  equivalent  amount  of  money  which  was  previously  in 
circulation,  unnecessary.  As,  however,  being  payable  on  demand, 
they  may  be  at  any  time  returned  on  the  issuer,  and  money  demanded 
for  them,  he  must,  on  pain  of  bankruptcy,  keep  by  him  as  much 
money  as  will  enable  him  to  meet  any  claims  of  that  sort  which 
can  be  expected  to  occur  within  the  time  necessary  for  providing 
himself  with  more : and  prudence  also  requires  that  he  should 
not  attempt  to  issue  notes  beyond  the  amount  which  experience 
shows  can  remain  in  circulation  without  being  presented  for 
payment. 

The  convenience  of  this  mode  of  (as  it  were)  coining  credit, 
having  once  been  discovered,  governments  have  availed  themselves 
of  the  same  expedient,  and  have  issued  their  own  promissory 
notes  in  payment  of  their  expenses ; a resource  the  more  useful, 
because  it  is  the  only  mode  in  which  they  are  able  to  borrow  money 
without  paying  interest,  their  promises  to  pay  on  demand  being, 
in  the  estimation  of  the  holders,  equivalent  to  money  in  hand. 
The  practical  differences  between  such  government  notes  and  the 
issues  of  private  bankers,  and  the  further  diversities  of  which  this 
class  of  substitutes  for  money  are  susceptible,  will  be  considered 
presently. 

§ 6.  A fourth  mode  of  making  credit  answer  the  purposes  of 
money,  by  which,  when  carried  far  enough,  money  may  be  very 
completely  superseded,  consists  in  making  payments  by  cheques. 
The  custom  of  keeping  the  spare  cash  reserved  for  immediate  use 
or  against  contingent  demands,  in  the  hands  of  a banker,  and  making 
all  payments,  except  small  ones,  by  orders  on  bankers,  is  in  this 
country  spreading  to  a continually  larger  portion  of  the  public. 
If  the  person  making  the  payment,  and  the  person  receiving  it, 
keep  their  money  with  the  same  banker,  the  payment  takes  place 
without  any  intervention  of  money,  by  the  mere  transfer  of  its 
amoimt  in  the  banker’s  books  from  the  credit  of  the  payer  to  that 


CREDIT  AS  A SUBSTITUTE  FOR  MONEY 


6ii 

of  the  receiver.  If  all  persons  in  London  kept  their  cash  at  the 
same  banker’s,  and  made  all  their  payments  by  means  of  cheques, 
no  money  would  be  required  or  used  for  any  transactions  beginning 
and  terminating  in  London.  This  ideal  limit  is  almost  attained 
in  fact,  so  far  as  regards  transactions  between  dealers.  It  is  chiefly 
in  the  retail  transactions  between  dealers  and  consumers,  and  in 
the  payment  of  wages,  that  money  or  bank  notes  now  pass,  and 
then  only  when  the  amounts  are  small.  In  London,  even  shop- 
keepers of  any  amount  of  capital  or  extent  of  business  have  generally 
an  account  with  a banker  ; which,  besides  the  safety  and  convenience 
of  the  practice,  is  to  their  advantage  in  another  respect,  by  giving 
them  an  understood  claim  to  have  their  biUs  discounted  in  cases 
when  they  could  not  otherwise  expect  it.  As  for  the  merchants 
and  larger  dealers,  they  habitually  make  all  payments  in  the  course 
of  their  business  by  cheques.  They  do  not,  however,  all  deal  with 
the  same  banker,  and  when  A gives  a cheque  to  B,  B usually  pays 
it  not  into  the  same  but  into  some  other  bank.  But  the  convenience 
of  business  has  given  birth  to  an  arrangement  which  makes  all 
the  banking  houses  of  the  City  of  London,  for  certain  purposes, 
virtually  one  establishment.  A banker  does  not  send  the  cheques 
which  are  paid  into  his  banking  house,  to  the  banks  on  which 
they  are  drawn,  and  demand  money  for  them.  There  is  a building 
called  the  Clearing-house,  to  which  every  City  banker  sends,  each 
afternoon,  all  the  cheques  on  other  bankers  which  he  has  received 
during  the  day,  and  they  are  there  exchanged  for  the  cheques  on 
him  which  have  come  into  the  hands  of  other  bankers,  the  balances 
only  being  paid  in  money ; ^ or  even  these  not  in  money,  but  in 
cheques  on  the  Bank  of  England.  By  this  contrivance,  all  the 
business  transactions  of  the  City  of  London  during  that  day,  amount- 
ing often  to  millions  of  pounds,  and  a vast  amount  besides  of 
country  transactions,  represented  by  bills  which  country  bankers 
have  drawn  upon  their  London  correspondents,  are  [1848]  liquidated 
by  payments  not  exceeding  on  the  average  200,0001.* 

By  means  of  the  various  instruments  of  credit  which  have  now 

^ [The  concluding  clause  of  this  sentence  was  added  in  the  4th  ed.  (1857).] 

♦ According  to  Mr.  Tooke  {Inquiry  into  the  Currency  Principle,  p.  27)  the 
adjustments  of  the  Clearing-house  “ in  the  year  1839  amounted  to  954,401, 600Z., 
making  an  average  amount  of  payments  of  upwards  of  3,000,000Z.  of  bills  of 
exchange  and  cheques  daily  effected  through  the  medium  of  little  more  than 
200,000Z.  of  bank  notes.” — [1862]  At  present  a very  much  greater  amount  of 
transactions  is  daily  liquidated,  without  bank  notes  at  all,  cheques  on  the  Bank 
of  England  supplying  their  place. 


522 


BOOK  III.  CHAPTER  XI.  § 6 


been  explained,  the  immense  business  of  a country  like  Great 
Britain  is  transacted  with  an  amount  of  the  precious  metals  sur- 
prisingly small ; many  times  smaller,  in  proportion  to  the  pecuniary 
value  of  the  commodities  bought  and  sold,  than  is  found  necessary 
in  France,  or  any  other  country  in  which,  the  habit  and  the  dis- 
position to  give  credit  not  being  so  generally  diffused,  these  “ econo- 
mizing expedients,”  as  they  have  been  called,  are  not  practised  to 
the  same  extent.  What  becomes  of  the  money  thus  superseded 
in  its  functions,  and  by  what  process  it  is  made  to  disappear  from 
circulation,  are  questions  the  discussion  of  which  must  be  for  a 
short  time  postponed. 


CHAPTER  XII 


INFLUENCE  OP  CREDIT  ON  PRICES 

5 1.  Having  now  formed  a general  idea  of  the  modes  in  which 
credit  is  made  available  as  a substitute  for  money,  we  have  to  con- 
sider in  what  manner  the  use  of  these  substitutes  affects  the  value 
of  money,  or,  what  is  equivalent,  the  prices  of  commodities.  It 
is  hardly  necessary  to  say  that  the  permanent  value  of  money — 
the  natural  and  average  prices  of  commodities — are  not  in  question 
here.  These  are  determined  by  the  cost  of  producing  or  of  obtaining 
the  precious  metals.  An  ounce  of  gold  or  silver  will  in  the  long  run 
exchange  for  as  much  of  every  other  commodity,  as  can  be  produced 
or  imported  at  the  same  cost  with  itself.  And  an  order,  or  note  of 
hand,  or  bill  payable  at  sight,  for  an  ounce  of  gold,  while  the  credit 
of  the  giver  is  unimpaired,  is  worth  neither  more  nor  less  than  the 
gold  itself. 

It  is  not,  however,  with  ultimate  or  average,  but  with  imme- 
diate and  temporary  prices,  that  we  are  now  concerned.  These, 
as  we  have  seen,  may  deviate  very  widely  from  the  standard  of  cost 
of  production.  Among  other  causes  of  fluctuation,  one  we  have 
found  to  be  the  quantity  of  money  in  circulation.  Other  things 
being  the  same,  an  increase  of  the  money  in  circulation  raises  prices, 
a diminution  lowersHiemL.  If  more  money  is  thrown  into  circulation 
than  the  quantity  which  can  circulate  at  a value  conformable  to  its 
cost  of  production,  the  value  of  money,  so  long  as  the  excess  lasts, 
will  remain  below  the  standard  of  cost  of  production,  and  general 
prices  will  be  sustained  above  the  natural  rate. 

But  we  have  now  found  that  there  are  other  things,  such  as 
bank  notes,  bills  of  exchange,  and  cheques,  which  circulate  as 
money,  and  perform  all  the  functions  of  it : and  the  question 
arises,  Do  these  various  substitutes  operate  on  prices  in  the 
same  manner  as  money  itself  ? Does  an  increase  in  the  quantity 
of  transferable  paper  tend  to  raise  prices,  in  the  same  manner 


624 


BOOK  III.  CHAPTER  XII.  § 2 


and  degree  as  an  increase  in  the  quantity  of  money  ? There  has 
been  no  small  amount  of  discussion  on  this  point  among  writers 
of  currency,  without  any  result  so  conclusive  as  to  have  yet  obtained 
general  assent. 

I apprehend  that  bank  notes,  bills,  or  cheques,  as  such,  do  not  act 
on  prices  at  all.  What  does  act  on  prices  is  Credit,  in  whatever  shape 
given,  and  whether  it  gives  rise  to  any  transferable  instruments 
capable  of  passing  into  circulation  or  not. 

I proceed  to  explain  and  substantiate  this  opinion. 

yviaitn  § 2.  Money  acts  upon  prices  in  no  other  wav  than  bv  being 
tendered  iiTexchange  for  c^moditi^  The  demand  which  influ- 
ences  the  prices  of  commodities  consists  of  the  money  offered  for  them. 
But  the  money  offered  is  not  the  same  thing  with  the  money 
possessed.  It  is  sometimes  less,  sometimes  very  much  more.  In 
the  long  run  indeed,  the  money  which  people  lay  out  will  be  neither 
more  nor  less  than  the  money  which  they  have  to  lay  out : but  this 
is  far  from  being  the  case  at  any  given  time.  Sometimes  they  keep 
money  by  them  for  fear  of  an  emergency,  or  in  expectation  of  a 
more  advantageous  opportunity  for  expending  it.  In  that  case  the 
money  is  said  not  to  be  in  circulation  : in  plainer  language,  it  is 
not  offered,  nor  about  to  be  offered,  for  commodities.  Money  not  in 
circulation  has  no  effect  on  prices.  The  converse,  however,  is  a 
much  commoner  case ; people  make  purchases  with  money  not  in 
their  possession.  An  article,  for  instance,  which  is  paid  for  by  a 
cheque  on  a banker,  is  bought  with  money  which  not  only  is  not  in 
the  payer’s  possession,  but  generally  not  even  in  the  banker’s, 
having  been  lent  by  him  (all  but  the  usual  reserve)  to  other  persons. 
We  just  now  made  the  imaginary  supposition  that  all  persons  dealt 
with  a bank,  and  all  with  the  same  bank,  payments  being  universally 
made  by  cheques.  In  this  ideal  case,  there  would  be  no  money 
anywhere  except  in  the  hands  of  the  banker : who  might  then 
safely  part  with  all  of  it,  by  selling  it  as  bullion,  or  lending  it,  to  be 
sent  out  of  the  country  in  exchange  for  goods  or  foreign  securities. 
But  though  there  would  then  be  no  money  in  possession,  or  ultimately 
perhaps  even  in  existence,  money  would  be  offered,  and  commodities 
bought  with  it,  just  as  at  present.  People  would  continue  to  reckon 
their  incomes  and  their  capitals  in  money,  and  to  make  their  usual 
purchases  with  orders  for  the  receipt  of  a thing  which  would  have 
Hterally  ceased  to  exist.  There  would  be  in  all  this  nothing  to  com- 
plain of,  so  long  as  the  money,  in  disappearing,  left  an  equivalent 


INFLUENCE  OF  CREDIT  ON  PRICES 


625 


value  in  other  things,  applicable  when  required  to  the  reimbursement 
of  those  to  whom  the  money  originally  belonged. 

In  the  case  however  of  payment  by  cheques,  the  purchases  are 
at  any  rate  made,  though  not  with  money  in  the  buyer’s  possession, 
yet  with  money  to  which  he  has  a right.  But  he  may  make  purchases 
with  money  which  he  only  expects  to  have,  or  even  only  pretends 
to  expect.  He  may  obtain  goods  in  return  for  his  acceptances 
payable  at  a future  time ; or  on  his  note  of  hand ; or  on  a simple 
book  credit,  that  is,  on  a mere  promise  to  pay.  All  these  purchases 
have  exactly  the  same  effect  on  price,  as  if  they  were  made  with 
ready  money.  The  amount  of  purchasing  power  which  a person  can 
exercise  is  composed  of  all  the  money  in  his  possession  or  due  to  him, 
and  of  all  his  credit.  For  exercising  the  whole  of  this  power  he  finds 
a sufficient  motive  only  under  peculiar  circumstances ; but  he 
always  possesses  it ; and  the  portion  of  it  which  he  at  any  time 
does  exercise,  is  the  measure  of  the  effect  which  he  produces  on 
price. 

Suppose  that,  in  the  expectation  that  some  commodity  will  rise 
in  price,  he  determines,  not  only  to  invest  in  it  all  his  ready  money, 
but  to  take  up  on  credit,  from  the  producers  or  importers,  as  much 
of  it  as  their  opinion  of  his  resources  will  enable  him  to  obtain. 
Every  one  must  see  that  by  thus  acting  he  produces  a greater  effect 
on  price,  than  if  he  limited  his  purchases  to  the  money  he  has  actually 
in  hand.  He  creates  a demand  for  the  article  to  the  fuU  amount  of 
his  money  and  credit  taken  together,  and  raises  the  price  propor- 
tionally to  both.  And  this  effect  is  produced,  though  none  of  the 
written  instruments  called  substitutes  for  currency  may  be  called  into 
existence ; though  the  transaction  may  give  rise  to  no  bill  of  ex- 
change, nor  to  the  issue  of  a single  bank  note.  The  buyer,  instead 
of  taking  a mere  book  credit,  might  have  given  a bill  for  the  amount ; 
or  might  have  paid  for  the  goods  with  bank  notes  borrowed  for  that 
purpose  from  a banker,  thus  making  the  purchase  not  on  his  own 
credit  with  the  seller,  but  on  the  banker’s  credit  with  the  seller, 
and  his  own  with  the  banker.  Had  he  done  so,  he  would  have! 
produced  as  great  an  effect  on  price  as  by  a simple  purchase  to  the 
same  amount  on  a book  credit,  but  no  greater  effect.  The  credit 
itself,  not  the  form  and  mode  in  which  it  is  given,  is  the  operating 
cause. 

§ 3.  The  inclination  of  the  mercantile  public  to  increase  their 
demand  for  commodities  by  making  use  of  all  or  much  of  their  credit 


626 


BOOK  ni.  CHAPTER  XU.  § 3 


I as  a purchasing  power,  depends  on  their  expectation  of  profit. 
\ When  there  is  a general  impression  that  the  price  of  some  commodity 
is  likely  to  rise,  from  an  extra  demand,  a short  crop,  obstruction  to 
'importation,  or  any  other  cause,  there  is  a disposition  among  dealers 
to  increase  their  stocks,  in  order  to  profit  by  the  expected  rise. 
This  disposition  tends  in  itself  to  produce  the  effect  which  it  looks 
forward  to,  a rise  of  price  : and  if  the  rise  is  considerable  and  pro- 
gressive, other  speculators  are  attracted,  who,  so  long  as  the  price 
has  not  begun  to  fall,  are  willing  to  believe  that  it  will  continue 

I and  thus  a rise  of  price  for  which  there  were  originally  some  rational 
j grounds,  is  often  heightened  by  merely  speculative  purchases,  until 
; it  greatly  exceeds  what  the  original  grounds  will  ju^ify.  After  a 
I time  this  begins  to  be  perceived ; the  price  ceases  to  rise,  and  the 
I holders,  thinking  it  time  to  realize  their  gains,  are  amoous  to  sell. 

I Then  the  price  begins  to  decline  : the  holders  rush  into  the  market 
to  avoid  a still  greater  loss,  and,  few  being  willing  to  buy  in  a falling 
market,  the  price  falls  much  more  suddenly  than  it  rose.  Those 
who  have  bought  at  a higher  price  than  reasonable  calculation  justi- 
fied, and  who  have  been  overtaken  by  the  revulsion  before  they  had 
realized,  are  losers  in  proportion  to  the  greatness  of  the  fall,  and  to 
the  quantity  of  the  commodity  which  they  hold,  or  have  bound  them- 
selves to  pay  for. 

Now  all  these  effects  might  take  place  in  a community  to  which 
credit  was  unknown : the  prices  of  some  commodities  might  rise 
from  speculation,  to  an  extravagant  height,  and  then  fall  rapidly 
back.  But  if  there  were  no  such  thing  as  credit,  this  could  hardly 
happen  with  respect  to  commodities  generally.  If  ^ purchases 
w^e  made  with  ready  money,  the  payment  oFincreased  prices  for 
some  articles  would  draw  an  unusual  propofHon  of  the  money  of  the 
community  into  the  markets  for  those  articles,  and  must  jtheref ore 
dra^it  away  from  some  other  class  of  commodities,  and  thus  lower 
tMr  prices.  The  vacuum  might,  it  is  true,  be  partly  filled  up  by 
increased  rapidity  of  circulation^  and  in  this  manner-the-money  of 
the  community  is  virtually  increased  In  a time  of  speculative  activity, 
because  people  keep  little  of  it  by  them,  but  hasten  to  lay  it  out  in 
some  tempting  adventure  as  soon  as  possible  after  they  receive  it. 
This  resource,  however,  is  limited  : on  the  whole,  people  cannot^ 
wtoeTEe  quantity  of  money  remains  the  same,  layjout^mch  more  of 
it  in  some  things,  without  layihg  out  less  in  others.  But  wh^t  they 
cannot  do  by  ready  money,  they  can  do  by  an  extension  of  credit. 


INFLUENCE  OF  CREDIT  ON  PRICES 


527 


When  people  go  into  the  market  and  purchase  with  money  which 
they  hope  to  receive  hereafter,  they  are  drawing  upon  an  unlimited, 
not  a limited  fund.  Speculation,  thus  supported,  may  be  going  on  in 
any  number  of  commodities,  without  disturbing  the  regular  course 
of  business  in  others.  It  might  even  be  going  on  in  all  commodities 
at  once.  We  could  imagine  that  in  an  epidemic  fit  of  the  passion  of 
gambling,  all  dealers,  instead  of  giving  only  their  accustomed  orders 
to  the  manufacturers  or  growers  of  their  commodity,  commenced 
buying  up  all  of  it  which  they  could  procure,  as  far  as  their  capital 
and  credit  would  go.  All  prices  would  rise  enormously,  even  if  there 
were  no  increase  of  money,  and  no  paper  credit,  but  a mere  extension 
of  purchases  on  book  credits.  After  a time  those  who  had  bought 
would  wish  to  sell,  and  prices  would  collapse. 

This  is  the  ideal  extreme  case  of  what  is  called  a commercial 
crisis.  There  is  said  to  be  a commercial  crisis,  when  a great  number 
of  merchants  and  traders  at  once,  either  have,  or  apprehend  that  they 
shall  have,  a difficulty  in  meeting  their  engagements.  The  most 
usual  cause  of  this  general  embarrassment  is  the  recoil  of  prices  after 
they  have  been  raised  by  a spirit  of  speculation,  intense  in  degree, 
and  extending  to  many  commodities.  Some  accident  which  excites 
expectations  of  rising  prices,  such  as  the  opening  of  a new  foreign 
market,  or  simultaneous  indications  of  a short  supply  of  several 
great  articles  of  commerce,  sets  speculation  at  work  in  several 
leading  departments  at  once.  The  prices  rise,  and  the  holders 
realize,  or  appear  to  have  the  power  of  realizing,  great  gains.  In 
certain  states  of  the  public  mind,  such  examples  of  rapid  increase  of 
fortune  call  forth  numerous  imitators,  and  speculation  not  only  goes 
much  beyond  what  is  justified  by  the  original  grounds  for  expecting 
rise  of  price,  but  extends  itself  to  articles  in  which  there  never  was 
any  such  ground  : these,  however,  rise  like  the  rest  as  soon  as  specu- 
lation sets  in.  At  periods  of  this  kind  a great  extension  of  credit 
takes  place.  Not  only  do  all  whom  the  contagion  reaches  employ 
their  credit  much  more  freely  than  usual ; but  they  really  have  more 
credit,  because  they  seem  to  be  making  unusual  gains,  and  because 
a generally  reckless  and  adventurous  feeling  prevails,  which  dis- 
poses people  to  give  as  well  as  take  credit  more  largely  than  at  other 
times,  and  give  it  to  persons  not  entitled  to  it.  In  this  manner,  in 
the  celebrated  speculative  year  1825,  and  at  various  other  periods 
during  the  present  century,  the  prices  of  many  of  the  principal 
articles  of  commerce  rose  greatly,  without  any  fall  in  others,  so  that 
general  prices  might,  without  incorrectness,  be  said  to  have  risen. 


528 


BOOK  III.  CHAPTER  iXII.  § 3 


When,  after  such  a rise,  the  reaction  comes,  and  prices  begin  to  fall, 
though  at  first  perhaps  only  through  the  desire  of  the  holders  to 
realize,  speculative  purchases  cease  : but  were  this  all,  prices  would 
only  fall  to  the  level  from  which  they  rose,  or  to  that  which  is 
justified  by  the  state  of  the  consumption  and  of  the  supply. 
They  fall,  however,  much  lower ; for  as,  when  prices  were  rising, 
and  everybody  apparently  making  a fortune,  it  was  easy  to  obtain 
almost  any  amount  of  credit,  so  now,  when  everybody  seems  to  be 
losing,  and  many  fail  entirely,  it  is  with  difficulty  that  firms  of 
known  solidity  can  obtain  even  the  credit  to  which  they  are 
accustomed,  and  which  it  is  the  greatest  inconvenience  to  them 
to  be  without ; because  aU  dealers  have  engagements  to  fulfil,  and 
nobody  feeling  sure  that  the  portion  of  his  means  which  he  has 
entrusted  to  others  will  be  available  in  time,  no  one  hkes  to  part  with 
ready  money,  or  to  postpone  his  claim  to  it.  To  these  rational 
considerations  there  is  superadded,  in  extreme  cases,  a panic  as 
unreasoning  as  the  previous  over-confidence ; money  is  borrowed 
for  short  periods  at  almost  any  rate  of  interest,  and  sales  of  goods 
for  immediate  payment  are  made  at  almost  any  sacrifice.  Thus 
general  prices,  during  a commercial  revulsion,  fall  as  much  below 
the  usual  level  as  during  the  previous  period  of  speculation  they  have 
risen  above  it : the  fall,  as  well  as  the  rise,  originating  not  in  any- 
thing affecting  money,  but  in  the  state  of  credit ; an  unusually 
extended  employment  of  credit  during  the  earlier  period,  followed  by 
a great  diminution,  never  amounting,  however,  to  an  entire  cessation 
of  it,  in  the  later. 

It  is  not,  however,  universally  true  that  the  contraction  of  credit, 
characteristic  of  a commercial  crisis,  must  have  been  preceded  by 
an  extraordinary  and  irrational  extension  of  it.  There  are  other 
causes ; and  one  of  the  more  recent  crises,  that  of  1847,  is  an  instance, 
having  been  preceded  by  no  particular  extension  of  credit,  and  by 
no  speculations ; except  those  in  railway  shares,  which,  though  in 
many  cases  extravagant  enough,  yet  being  carried  on  mostly  with 
that  portion  of  means  which  the  speculators  could  afford  to  lose, 
were  not  calculated  to  produce  the  wide-spread  ruin  which  arises 
from  vicissitudes  of  price  in  the  commodities  in  which  men  habitually 
deal,  and  in  which  the  bulk  of  their  capital  is  invested.  The  crisis 
of  1847  belonged  to  another  class  of  mercantile  phenomena.  There 
occasionally  happens  a concurrence  of  circumstances  tending  to 
withdraw  from  the  loan  market  a considerable  portion  of  the  capital 
which  usually  supplies  it.  These  circumstances,  in  the  present  case, 


INFLUENCE  OF  CREDIT  ON  PRICES 


629 


were  great  foreign  payments,  (occasioned  by  a high  price  of  cotton 
and  an  unprecedented  importation  of  food,)  together  with  the  con- 
tinual demands  on  the  circulating  capital  of  the  country  by  railway 
calls  and  the  loan  transactions  of  railway  companies,  for  the  purpose 
of  being  converted  into  fixed  capital  and  made  unavailable  for 
future  lending.  These  various  demands  fell  principally,  as  such 
demands  always  do,  on  the  loan  market.  A great,  though  not  the 
greatest,  part  of  the  imported  food  was  actually  paid  for  by  the  pro- 
ceeds of  a government  loan.  The  extra  payments  which  purchasers 
of  corn  and  cotton,  and  railway  shareholders,  found  themselves 
obliged  to  make,  were  either  made  with  their  own  spare  cash,  or  with 
money  raised  for  the  occasion.  On  the  first  supposition,  they  were 
made  by  withdrawing  deposits  from  bankers,  and  thus  cutting  off 
a part  of  the  streams  which  fed  the  loan  market ; on  the  second 
supposition,  they  were  made  by  actual  drafts  on  the  loan  market, 
either  by  the  sale  of  securities,  or  by  taking  up  money  at  interest. 
This  combination  of  a fresh  demand  for  loans,  with  a curtailment  of 
the  capital  disposable  for  them,  raised  the  rate  of  interest,  and  made 
it  impossible  to  borrow  except  on  the  very  best  security.  Some 
firms,  therefore,  which  by  an  improvident  and  unmercantile  mode 
of  conducting  business  had  allowed  their  capital  to  become  either 
temporarily  or  permanently  unavailable,  became  unable  to  command 
that  perpetual  renewal  of  credit  which  had  previously  enabled  them 
to  struggle  on.  These  firms  stopped  payment : their  failure  involved 
more  or  less  deeply  many  other  firms  which  had  trusted  them ; 
and,  as  usual  in  such  cases,  the  general  distrust,  commonly  called 
a panic,  began  to  set  in,  and  might  have  produced  a destruction  of 
credit  equal  to  that  of  1825,  had  not  circumstances,  which  may  almost 
be  called  accidental,  given  to  a very  simple  measure  of  the  govern- 
ment (the  suspension  of  the  Bank  Charter  Act  of  1844)  a fortunate 
power  of  allaying  panic,  to  which,  when  considered  in  itself,  it  had 
no  sort  of  claim.* 

§ 4.  The  general  operation  of  credit  upon  prices  being  such  as 
we  have  described,  it  is  evident  that  if  any  particular  mode  or  form 
of  credit  is  calculated  to  have  a greater  operation  on  prices  than 

* [1865]  The  commercial  difficulties,  not  however  amounting  to  a com- 
mercial crisis,  of  1864,  had  essentially  the  same  origin.  Heavy  payments  for 
cotton  imported  at  high  prices,  and  large  investments  in  banking  and  other 
joint  stock  projects,  combined  with  the  loan  operations  of  foreign  governments, 
made  such  large  drafts  upon  the  loan  market  as  to  raise  the  rate  of  discount  on 
mercantile  bills  as  high  as  nine  per  cent. 


530 


BOOK  III.  CHAPTER  XII.  § 4 


K others,  it  can  only  be  by  giving  greater  facility,  or  greater  encourage- 
ment, to  the  multiplication  of  credit  transactions  generally.  If 
bank  notes,  for  instance,  or  bills,  have  a greater  effect  on  prices 
than  book  credits,  it  is  not  by  any  difference  in  the  transactions 
themselves,  which  are  essentially  the  same,  whether  taking  place 
in  the  one  way  or  in  the  other  : it  must  be  that  there  are  likely  to  be 
more  of  them.  If  credit  is  likely  to  be  more  extensively  used  as  a 
purchasing  power  when  bank  notes  or  bills  are  the  instruments  used, 
than  when  the  credit  is  given  by  mere  entries  in  an  account,  to  that 
extent  and  no  more  there  is  ground  for  ascribing  to  the  former 
a greater  power  over  the  markets  than  belongs  to  the  latter. 

Now  it  appears  that  there  is  some  such  distinction.  As  far  as 
respects  the  particular  transactions,  it  makes  no  difference  in  the 
effect  on  price  whether  A buys  goods  of  B on  simple  credit,  or  gives  a 
bill  for  them,  or  pays  for  them  with  bank  notes  lent  to  him  by  a 
banker  C.  The  difference  is  in  a subsequent  stage.  If  A has  bought 
the  goods  on  a book  credit,  there  is  no  obvious  or  convenient  mode 
by  which  B can  make  A’s  debt  to  him  a means  of  extending  his  own 
credit.  Whatever  credit  he  has,  will  be  due  to  the  general  opinion 
entertained  of  his  solvency  ; he  cannot  specifically  pledge  A’s  debt 
to  a third  person,  as  a security  for  money  lent  or  goods  bought. 
But  if  A has  given  him  a bill  for  the  amount,  he  can  get  this 
discounted,  which  is  the  same  thing  as  borrowing  money  on  the  joint 
credit  of  A and  himself : or  he  may  pay  away  the  bill  in  exchange 
for  goods,  which  is  obtaining  goods  on  the  same  joint  credit.  In 
either  case,  here  is  a second  credit  transaction,  grounded  on  the  first, 
and  which  would  not  have  taken  place  if  the  first  had  been  transacted 
without  the  intervention  of  a bill.  Nor  need  the  transactions  end 
here.  The  bill  may  be  again  discounted,  or  again  paid  away  for 
goods,  several  times  before  it  is  itself  presented  for  payment.  Nor 
would  it  be  correct  to  say  that  these  successive  holders,  if  they  had 
not  had  the  biU,  might  have  attained  their  purpose  by  purchasing 
goods  on  their  own  credit  with  the  dealers.  They  may  not  all  of 
them  be  persons  of  credit,  or  they  may  already  have  stretched  their 
credit  as  far  as  it  will  go.  And  at  all  events,  either  money  or  goods 
are  more  readily  obtained  on  the  credit  of  two  persons  than  of  one. 
Nobody  will  pretend  that  it  is  as  easy  a thing  for  a merchant  to 
borrow  a thousand  pounds  on  his  own  credit,  as  to  get  a bill  dis- 
counted to  the  same  amount,  when  the  drawee  is  of  known  solvency. 

If  we  now  suppose  that  A,  instead  of  giving  a bill,  obtains  a 
loan  of  bank  notes  from  a banker  C,  and  with  them  pays  B for  his 


INFLUENCE  OF  CREDIT  ON  PRICES 


631 


goods,  we  shall  find  the  difference  to  be  still  greater.  B is  now 
independent  even  of  a discounter  : A’s  bill  would  have  been  taken 
in  payment  only  by  those  who  were  acquainted  with  his  reputation 
for  solvency,  but  a banker  is  a person  who  has  credit  with  the  public 
generally,  and  whose  notes  are  taken  in  payment  by  every  one, 
at  least  in  his  own  neighbourhood  : insomuch  that,  by  a custom 
which  has  grown  into  law,  payment  in  bank  notes  is  a complete 
acquittance  to  the  payer,  whereas,  if  he  has  paid  by  a bill,  he  still 
remains  liable  to  the  debt,  if  the  person  on  whom  the  bill  is  drawn 
fails  to  pay  it  when  due.  B therefore  can  expend  the  whole  of  the 
bank  notes  without  at  all  involving  his  own  credit ; and  whatever 
power  he  had  before  of  obtaining  goods  on  book  credit,  remains  to 
him  unimpaired,  in  addition  to  the  purchasing  power  he  derives  from 
the  possession  of  the  notes.  The  same  remark  applies  to  every 
person  in  succession,  into  whose  hands  the  notes  may  come.  It  is 
only  A,  the  first  holder,  (who  used  his  credit  to  obtain  the  notes 
as  a loan  from  the  issuer,)  who  can  possibly  find  the  credit  he  possesses 
in  other  quarters  abated  by  it ; and  even  in  his  case  that  result  is 
not  probable ; for  though,  in  reason,  and  if  all  his  circumstances 
were  known,  every  draft  already  made  upon  his  credit  ought  to 
diminish  by  so  much  his  power  of  obtaining  more,  yet  in  practice 
the  reverse  more  frequently  happens,  and  his  having  been  trusted 
by  one  person  is  supposed  to  be  evidence  that  he  may  safely  be 
trusted  by  others  also. 

It  appears,  therefore,  that  bank  notes  are  a more  powerful 
instrument  for  raising  prices  than  bills,  and  bills  than  book  credits. 
It  does  not,  indeed,  follow  that  credit  will  be  more  used  because  it 
can  be.  When  the  state  of  trade  holds  out  no  particular  temptation 
to  make  large  purchases  on  credit,  dealers  will  use  only  a small 
portion  of  the  credit  power,  and  it  will  depend  only  on  convenience 
whether  the  portion  which  they  use  will  be  taken  in  one  form  or 
in  another.  It  is  not  until  the  circumstances  of  the  markets,  and  the 
state  of  the  mercantile  mind,  render  many  persons  desirous  of 
stretching  their  credit  to  an  imusual  extent,  that  the  distinctive 
properties  of  the  different  forms  of  credit  display  themselves.  Credit 
already  stretched  to  the  utmost  in  the  form  of  book  debts,  would 
be  susceptible  of  a great  additional  extension  by  means  of  bills, 
and  of  a still  greater  by  means  of  bank  notes.  The  first,  because 
each  dealer,  in  addition  to  his  own  credit,  would  be  enabled  to  create 
a further  purchasing  power  out  of  the  credit  which  he  had  himself 
given  to  others : the  second,  because  the  banker’s  credit  with  the 


632 


BOOK  III.  CHAPTER  XII.  § 6 


public  at  large,  coined  into  notes,  as  bullion  is  coined  into  pieces  of 
money  to  make  it  portable  and  divisible,  is  so  much  purchasing 
power  superadded,  in  the  hands  of  every  successive  holder,  to  that 
which  he  may  derive  from  his  own  credit.  To  state  the  matter 
otherwise ; one  single  exertion  of  the  credit-power  in  the  form  of 
book  credit  is  only  the  foundation  of  a single  purchase : but  if  a 
bill  is  drawn,  that  same  portion  of  credit  may  serve  for  as  many 
purchases  as  the  number  of  times  the  bill  changes  hands : while 
every  bank  note  issued  renders  the  credit  of  the  banker  a pur- 
chasing power  to  that  amount  in  the  hands  of  all  the  successive 
holders,  without  impairing  any  power  they  may  possess  of  effecting 
purchases  on  their  own  credit.  Credit,  in  short,  has  exactly  the 
same  purchasing  power  with  money  ; and  as  money  tells  upon 
prices  not  simply  in  proportion  to  its  amount,  but  to  its  amount 
multiplied  by  the  number  of  times  it  changes  hands,  so  also  does 
credit ; and  credit  transferable  from  hand  to  hand  is  in  that  pro- 
portion more  potent  than  credit  which  only  performs  one  purchase. 

§ 5.  All  this  purchasing  power,  however,  is  operative  upon 
prices  only  according  to  the  proportion  of  it  which  is  used ; and 
the  effect,  therefore,  is  only  felt  in  a state  of  circumstances  calcu- 
lated to  lead  to  an  unusually  extended  use  of  credit.  In  such  a state 
of  circumstances,  that  is,  in  speculative  times,  it  cannot,  I think,  be 
denied,  that  prices  are  likely  to  rise  higher  if  the  speculative  pur- 
chases are  made  with  bank  notes,  than  when  they  are  made  with  bills, 
and  when  made  by  bills  than  when  made  by  book  credits.  This, 
however,  is  of  far  less  practical  importance  than  might  at  first  be 
imagined  ; because,  in  point  of  fact,  speculative  purchases  are  not, 
in  the  great  majority  of  cases,  made  either  with  bank  notes  or  with 
bills,  but  are  made  almost  exclusively  on  book  credits.  “ AppHca- 
tions  to  the  Bank  for  extended  discount,”  says  the  highest  authority 
on  such  subjects,*  (and  the  same  thing  must  be  true  of  applications 
to  other  banks)  “ occur  rarely  if  ever  in  the  origin  or  progress  of 
extensive  speculations  in  commodities.  These  are  entered  into,  for 
the  most  part  if  not  entirely,  in  the  first  instance,  on  credit,  for  the 
length  of  term  usual  in  the  several  trades ; thus  entaihng  on  the 
parties  no  immediate  necessity  for  borrowing  so  much  as  may  be 
wanted  for  the  purpose  beyond  their  own  available  capital.  This 
applies  particularly  to  speculative  purchases  of  commodities  on  the 
spot,  with  a view  to  resale.  But  these  generally  form  the  smaller 
* Tooke,  History  of  Prices,  vol.  iv.  pp.  125-6. 


INFLUENCE  OF  CREDIT  ON  PRICES 


533 


proportion  of  engagements  on  credit.  By  far  the  largest  of  those 
entered  into  on  the  prospect  of  a rise  of  prices,  are  such  as  have  in 
view  importations  from  abroad.  The  same  remark,  too,  is  applic- 
able to  the  export  of  commodities,  when  a large  proportion  is  on  the 
credit  of  the  shippers  or  their  consignees.  As  long  as  circumstances 
hold  out  the  prospect  of  a favourable  result,  the  credit  of  the  parties 
is  generally  sustained.  If  some  of  them  wish  to  realize,  there  are 
others  with  capital  and  credit  ready  to  replace  them ; and  if  the 
events  fully  justify  the  grounds  on  which  the  speculative  transactions 
were  entered  into  (thus  admitting  of  sales  for  consumption  in  time 
to  replace  the  capital  embarked)  there  is  no  unusual  demand  for 
borrowed  capital  to  sustain  them.  It  is  only  when  by  the  vicissi- 
tudes of  political  events,  or  of  the  seasons,  or  other  adventitious 
circumstances,  the  forthcoming  suppHes  are  found  to  exceed  the 
computed  rate  of  consumption,  and  a fall  of  prices  ensues,  that  an 
increased  demand  for  capital  takes  place ; the  market  rate  of 
interest  then  rises,  and  increased  applications  are  made  to  the  Bank 
of  England  for  discount.”  So  that  the  multiplication  of  bank  notes 
and  other  transferable  paper  does  not,  for  the  most  part,  accompany 
and  facihtate  the  speculation  ; but  comes  into  play  chiefly  when  the 
tide  is  turning,  and  difiiculties  begin  to  be  felt. 

Of  the  extraordinary  height  to  which  speculative  transactions 
can  be  carried  upon  mere  book  credits,  without  the  smallest  addition 
to  what  is  commonly  called  the  currency,  very  few  persons  are  at 
all  aware.  “ The  power  of  purchase,”  says  Mr.  Tooke,*  “ by  persona 
having  capital  and  credit,  is  much  beyond  anything  that  those  who 
are  unacquainted  practically  with  speculative  markets  have  any 
idea  of.  ...  A person  having  the  reputation  of  capital  enough  for 
his  regular  business,  and  enjoying  good  credit  in  his  trade,  if  he 
takes  a sanguine  view  of  the  prospect  of  a rise  of  price  of  the  article 
in  which  he  deals,  and  is  favoured  by  circumstances  in  the  outset 
and  progress  of  his  speculation,  may  effect  purchases  to  an  extent 
perfectly  enormous,  compared  with  his  capital.”  Mr.  Tooke  con- 
firms this  statement  by  some  remarkable  instances,  exemphfying 
the  immense  purchasing  power  which  may  be  exercised,  and  rise  of 
price  which  may  be  produced,  by  credit  not  represented  by  either 
bank  notes  or  bills  of  exchange. 

“ Amongst  the  earher  speculators  for  an  advance  in  the  price  of 
tea,  in  consequence  of  our  dispute  with  China  in  1839,  were  several 

* Inquiry  into  the  Currency  Principle,  pp.  79  and  136-8. 


634 


BOOK  III.  CHAPTER  XII.  § 5 


retail  grocers  and  tea-dealers.  There  was  a general  disposition 
among  the  trade  to  get  in  stock  : that  is,  to  lay  in  at  once  a quantity 
which  would  meet  the  probable  demand  from  their  customers  for 
several  months  to  come.  Some,  however,  among  them,  more 
sanguine  and  adventurous  than  the  rest,  availed  themselves  of  their 
credit  with  the  importers  and  wholesale  dealers,  for  purchasing 
quantities  much  beyond  the  estimated  demand  in  their  own  business. 
As  the  purchases  were  made  in  the  first  instance  ostensibly,  and 
perhaps  really,  for  the  legitimate  purposes  and  within  the  limits  of 
their  regular  business,  the  parties  were  enabled  to  buy  without  the 
condition  of  any  deposit ; whereas  speculators,  known  to  be  such, 
are  required  to  pay  2Z.  per  chest,  to  cover  any  probable  difference  of 
price  which  might  arise  before  the  expiration  of  the  prompt,  which, 
for  this  article,  is  three  months.  Without,  therefore,  the  outlay  of 
a single  farthing  of  actual  capital  or  currency  in  any  shape,  they 
made  purchases  to  a considerable  extent ; and  with  the  profit 
realized  on  the  resale  of  a part  of  these  purchases,  they  were  enabled 
to  pay  the  deposit  on  further  quantities  when  required,  as  was  the 
case  when  the  extent  of  the  purchases  attracted  attention.  In  this 
way,  the  speculation  went  on  at  advancing  prices  (100  per  cent  and 
upwards)  till  nearly  the  expiration  of  the  prompt ; and  if  at  that  time 
circumstances  had  been  such  as  to  justify  the  apprehension  which 
at  one  time  prevailed,  that  all  future  supplies  would  be  cut  off,  the 
prices  might  have  still  further  advanced,  and  at  any  rate  not  have 
retrograded.  In  this  case,  the  speculators  might  have  realized,  if  not 
all  the  profit  they  had  anticipated,  a very  handsome  sum,  upon  which 
they  might  have  been  enabled  to  extend  their  business  greatly,  or  to 
retire  from  it  altogether,  with  a reputation  for  great  sagacity  in  thus 
making  their  fortune.  But  instead  of  this  favourable  result,  it  so 
happened  that  two  or  three  cargoes  of  tea  which  had  been  tran- 
shipped were  admitted,  contrary  to  expectation,  to  entry  on  their 
arrival  here,  and  it  was  found  that  further  indirect  shipments  were 
in  progress.  Thus  the  supply  was  increased  beyond  the  calculation 
of  the  speculators : and,  at  the  same  time,  the  consumption  had 
been  diminished  by  the  high  price.  There  was,  consequently,  a 
violent  reaction  on  the  market ; the  speculators  were  unable  to  sell 
without  such  a sacrifice  as  disabled  them  from  fulfilling  their  engage- 
ments, and  several  of  them  consequently  failed.  Among  these,  one 
was  mentioned,  who  having  a capital  not  exceeding  1200?.  which 
was  locked  up  in  his  business,  had  contrived  to  buy  4000  chests, 
value  above  80,000?.,  the  loss  upon  which  was  about  16,000?. 


INFLUENCE  OF  CREDIT  ON  PRICES 


535 


“ The  other  example  which  I have  to  give,  is  that  of  the  operation 
on  the  corn  market  between  1838  and  1842.  There  was  an  instance 
of  a person  who,  when  he  entered  on  his  extensive  speculations, 
was,  as  it  appeared  by  the  subsequent  examination  of  his  affairs, 
possessed  of  a capital  not  exceeding  50001.  y but  being  successful 
in  the  outset,  and  favoured  by  circumstances  in  the  progress  of 
his  operations,  he  contrived  to  make  purchases  to  such  an  extent, 
that  when  he  stopped  payment  his  engagements  were  found  to 
amount  to  between  500,000Z.  and  600, 000^.  Other  instances  might 
be  cited  of  parties  without  any  capital  at  all,  who,  by  dint  of  mere 
credit,  were  enabled,  while  the  aspect  of  the  market  favoured  their 
views,  to  make  purchases  to  a very  great  extent. 

“ And  be  it  observed,  that  these  speculations,  involving  enormous 
purchases  on  little  or  no  capital,  were  carried  on  in  1839  and  1840, 
when  the  money  market  was  in  its  most  contracted  state ; or  when, 
according  to  modern  phraseology,  there  was  the  greatest  scarcity 
of  money.” 

But  though  the  great  instrument  of  speculative  purchases  is 
book  credits,  it  cannot  be  contested  that  in  speculative  periods 
an  increase  does  take  place  in  the  quantity  both  of  bills  of  exchange 
and  of  bank  notes.  This  increase,  indeed,  so  far  as  bank  notes 
are  concerned,  hardly  ever  takes  place  in  the  earliest  stage  of  the 
speculations  : advances  from  bankers  (as  Mr.  Tooke  observes)  not 
being  applied  for  in  order  to  purchase,  but  in  order  to  hold  on 
without  selling  when  the  usual  term  of  credit  has  expired,  and  the 
high  price  which  was  calculated  on  has  not  arrived.  But  the  tea 
^ speculators  mentioned  by  Mr.  Tooke  could  not  have  carried  their 
speculations  beyond  the  three  months  which  are  the  usual  term 
of  credit  in  their  trade,  unless  they  had  been  able  to  obtain  advances 
from  bankers,  which,  if  the  expectation  of  a rise  of  price  had  still 
continued,  they  probably  could  have  done. 

Since,  then,  credit  in  the  form  of  bank  notes  is  a more  potent 
instrument  for  raising  prices  than  book  credits,  an  unrestrained 
power  of  resorting  to  this  instrument  may  contribute  to  prolong 
and  heighten  the  speculative  rise  of  prices,  and  hence  to  aggravate 
the  subsequent  recoil.  But  in  what  degree  ? and  what  importance 
ought  we  to  ascribe  to  this  possibility  ? It  may  help  us  to  form 
some  judgment  on  this  point,  if  we  consider  the  proportion  which 
the  utmost  increase  of  bank  notes  in  a period  of  speculation,  bears, 
I do  not  say  to  the  whole  mass  of  credit  in  the  country,  but  to 
the  bills  of  exchange  alone.  The  average  amount  of  bills  in  existence 


636 


BOOR  III.  CHAPTER  XII.  § 6 


at  any  one  time  is  supposed  greatly  to  exceed  [1848]  a hundred 
millions  sterling.*  The  bank  note  circulation  of  Great  Britain  and 
Ireland  seldom  exceeds  forty  millions,  and  the  increase  in  speculative 
periods  at  most  two  or  three.  And  even  this,  as  we  have  seen, 
hardly  ever  comes  into  play  until  that  advanced  period  of  the 
speculation  at  which  the  tide  shows  signs  of  turning,  and  the  dealers 
generally  are  rather  thinking  of  the  means  of  fulfilling  their  existing 
engagements,  than  meditating  an  extension  of  them : while  the 
quantity  of  bills  in  existence  is  largely  increased  from  the  very 
commencement  of  the  speculations. 

§ 6.  It  is  well  known  that,  of  late  years,  an  artificial  limitation 
of  the  issue  of  bank  notes  has  been  regarded  by  many  political 
economists,  and  by  a great  portion  of  the  public,  as  an  expedient 
of  supreme  efficacy  for  preventing,  and  when  it  cannot  prevent, 
for  moderating,  the  fever  of  speculation  ; and  this  opinion  received 
the  recognition  and  sanction  of  the  legislature  by  the  Currency 
Act  of  1844.  At  the  point,  however,  which  our  inquiries  have 
reached,  though  we  have  conceded  to  bank  notes  a greater  power 
over  prices  than  is  possessed  by  bills  or  book  credits,  we  have  not 


* The  most  approved  estimate  is  that  of  Mr.  Leatham,  grounded  on  the 
official  returns  of  bill  stamps  issued.  The  following  are  the  results  : — 


Tear. 

Bills  created  in  Great  Britain 
and  Ireland,  founded  on 
returns  of  Bill  Stamps 
issued  from  the  Stamp  Office. 

Average  amount  in 
circulation  at  one  time  in 
each  year. 

1832 

£356,153,409 

£89,038,352 

1833 

383,659,585 

95,914,896 

1834 

379,155,052 

94,788,763 

1835 

405,403,051 

101,350,762 

1836 

485,943,473 

121,485,868 

1837 

455,084,445 

113,771,111 

1838 

465,504,041 

116,376,010 

1839 

528,493,842 

132,123,460 

**  Mr.  Leatham,”  says  Mr.  Tooke,  **  gives  the  process  by  which,  upon  the 
data  furnished  by  the  returns  of  stamps,  he  arrives  at  these  results  ; and  I am 
disposed  to  think  that  they  are  as  near  an  approximation  to  the  truth  as  the 
nature  of  the  materials  admits  of  arriving  at.” — Inquiry  into  the  Currency 
Principle,  p.  26. — [1862]  Mr.  Newmarch  (Appendix  No.  39  to  Report  of  the 
Committee  on  the  Bank  Acts  in  1857,  and  History  of  Prices,  vol.  vi.  p.  587)  shows 
grounds  for  the  opinion  that  the  total  bill  circulation  in  1857  was  not  much 
less  than  180  millions  sterling  and  that  it  sometimes  rises  to  200  millions. 


INFLUENCE  OF  CREDIT  ON  PRICES 


637 


found  reason  to  think  that  this  superior  efficacy  has  much  share  in 
producing  the  rise  of  prices  which  accompanies  a period  of  specula- 
tion, nor  consequently  that  any  restraint  applied  to  this  one  instru- 
ment can  be  efficacious  to  the  degree  which  is  often  supposed,  in 
moderating  either  that  rise,  or  the  recoil  which  follows  it.  We 
shall  be  still  less  inclined  to  think  so,  when  we  consider  that  there 
is  a fourth  form  of  credit  transactions,  by  cheques  on  bankers, 
and  transfers  in  a banker’s  books,  which  is  exactly  parallel  in  every 
respect  to  bank  notes,  giving  equal  facilities  to  an  extension  of  credit, 
and  capable  of  acting  on  prices  quite  as  powerfully.  In  the  words 
of  Mr.  Fullarton,*  “ there  is  not  a single  object  at  present  attained 
through  the  agency  of  Bank  of  England  notes,  which  might  not  be 
as  effectually  accomplished  by  each  individual  keeping  an  account 
with  the  bank,  and  transacting  all  his  payments  of  five  pounds 
and  upwards  by  cheque.”  A bank,  instead  of  lending  its  notes  to 
a merchant  or  dealer,  might  open  an  account  with  him,  and  credit 
the  account  with  the  sum  it  had  agreed  to  advance  ; on  an  under- 
standing that  he  should  not  draw  out  that  sum  in  any  other  mode 
than  by  drawing  cheques  against  it  in  favour  of  those  to  whom 
he  had  occasion  to  make  payments.  These  cheques  might  possibly 
even  pass  from  hand  to  hand  like  bank  notes ; more  commonly, 
however,  the  receiver  would  pay  them  into  the  hands  of  his  own 
banker,  and  when  he  wanted  the  money,  would  draw  a fresh  cheque 
against  it : and  hence  an  objector  may  urge  that  as  the  original 
cheque  would  very  soon  be  presented  for  payment,  when  it  must 
be  paid  either  in  notes  or  in  coin,  notes  or  coin  to  an  equal  amount 
must  be  provided  as  the  ultimate  means  of  liquidation.  It  is  not 
so,  however.  The  person  to  whom  the  cheque  is  transferred  may 
perhaps  deal  with  the  same  banker,  and  the  cheque  may  return 
to  the  very  bank  on  which  it  was  drawn  : this  is  very  often  the  case 
in  country  districts ; if  so,  no  payment  will  be  called  for,  but  a 
simple  transfer  in  the  banker’s  books  will  settle  the  transaction. 
If  the  cheque  is  paid  into  a different  bank,  it  will  not  be  presented 
for  payment,  but  liquidated  by  set-off  against  other  cheques  ; and 
in  a state  of  circumstances  favourable  to  a general  extension  of 
banking  credits,  a banker  who  has  granted  more  credit,  and  has 
therefore  more  cheques  drawn  on  him,  will  also  have  more  cheques 
on  other  bankers  paid  to  him,  and  will  only  have  to  provide  notes 
or  cash  for  the  payment  of  balances  ; for  which  purpose  the  ordinary 


On  the  Regulation  of  Currencies,  p.  41. 


638 


BOOK  III.  CHAPTER  XIL  § 7 


reserve  of  prudent  bankers,  one-tbird  of  their  liabilities,  will  abund- 
antly suffice.  Now,  if  he  had  granted  the  extension  of  credit  by 
means  of  an  issue  of  his  own  notes,  he  must  equally  have  retained, 
in  coin  or  Bank  of  England  notes,  the  usual  reserve  : sGL^at  he 
can,  as  Mr.  FuUarton  says,  give  every  facility  of  credit  by  what 
may  be  termed  a cheque  circulation,  which  he  could  give  by  a note 
circulation. 

This  extension  of  credit  by  entries  in  a banker’s  books,  has  all 
that  superior  efficiency  in  acting  on  prices,  which  we  ascribed  to 
an  extension  by  means  of  bank  notes.  As  a bank  note  of  201.  ^ 
paid  to  any  one,  gives  him  201.  of  purchasing  power  based  on  credit, 
over  and  above  whatever  credit  he  had  of  his  own,  so  does  a cheque 
paid  to  him  do  the  same  : for,  although  he  may  make  no  purchase 
with  the  cheque  itself,  he  deposits  it  with  his  banker,  and  can  draw 
against  it.  As  this  act  of  drawing  a cheque  against  another  which 
has  been  exchanged  and  cancelled,  can  be  repeated  as  often  as  a 
purchase  with  a bank  note,  it  efEects  the  same  increase  of  purchasing 
power.  The  original  loan,  or  credit,  given  by  the  banker  to  his 
customer,  is  potentially  multiplied  as  a means  of  purchase,  in  the 
hands  of  the  successive  persons  to  whom  portions  of  the  credit  are 
paid  away,  just  as  the  purchasing  power  of  a bank  note  is  multiplied 
by  the  number  of  persons  through  whose  hands  it  passes  before  it 
is  returned  to  the  issuer. 

These  considerations  abate  very  much  from  the  importance  of 
any  efiect  which  can  be  produced  in  allaying  the  vicissitudes  of 
commerce,  by  so  superficial  a contrivance  as  the  one  so  much  relied 
on  of  late,  the  restriction  of  the  issue  of  bank  notes  by  an  artificial 
rule.  An  examination  of  all  the  consequences  of  that  restriction, 
and  an  estimate  of  the  reasons  for  and  against  it,  must  be  deferred 
until  we  have  treated  of  the  foreign  exchanges,  and  the  international 
movements  of  bullion.  At  present  we  are  only  concerned  with 
the  general  theory  of  prices,  of  which  the  different  influence  of 
different  kinds  of  credit  is  an  essential  part. 

§ 7.1  There  has  been  a great  amount  of  discussion  and  argument 
on  the  question  whether  several  of  these  forms  of  credit,  and  in 
particular  whether  bank  notes,  ought  to  be  considered  as  money. 
The  question  is  so  purely  verbal  as  to  be  scarcely  worth  raising, 
and  one  would  have  some  difficulty  in  comprehending  why  so  much 

* [This  section  was  added  in  the  4th  ed.  (1857).] 


INFLUENCE  OF  CREDIT  ON  PRICES 


639 


importance  is  attached  to  it,  if  there  were  not  some  authorities 
who,  still  adhering  to  the  doctrine  of  the  infancy  of  society  and  of 
political  economy,  that  the  quantity  of  money  compared  with  that 
of  commodities,  determines  general  prices,  think  it  important  to 
prove  that  bank  notes  and  no  other  forms  of  credit  are  money,  in 
order  to  support  the  inference  that  bank  notes  and  no  other  forms 
of  credit  influence  prices.  It  is. iiliyious,  however,  that  prices ^o 
not  de^nd  on  money^  but  on  purchases.  Money  left  with  a banker, 
and  not  drawn  against,  or  drawn  against  for  other  purposes  than 
buying  commodities,  has  no  effect  on  prices,  any  more  than  credit 
which  is  not  used.  Credit  which  is  used  to  purchase  commodities 
affects  prices  in  the  same  manner  as  money.  Money  and  credit  are 
thus  exactly  on  a par,  in  their  effect  on  prices ; and  whether  we 
choose  to  class  bank  notes  with  the  one  or  the  other,  is  in  this  respect 
entirely  immaterial. 

Since,  however,  this  question  of  nomenclature  has  been  raised, 
it  seems  desirable  that  it  should  be  answered.  The  reason  given 
for  considering  bank  notes  as  money,  is,  that  by  law  and  usage 
they  have  the  property,  in  common  with  metallic  money,  of  finally 
closing  the  transactions  in  which  they  are  employed ; while  no 
other  mode  of  paying  one  debt  by  transferring  another  has  that 
privilege.  The  first  remark  which  here  suggests  itself  is,  that  on 
this  showing,  the  notes  at  least  of  private  banks  are  not  money ; 
for  a creditor  cannot  be  forced  to  accept  them  in  payment  of  a 
debt.  They  certainly  close  the  transaction  if  he  does  accept  them  ; 
but  so,  on  the  same  supposition,  would  a bale  of  cloth,  or  a pipe 
of  wine ; which  are  not  for  that  reason  regarded  as  money.  It 
seems  to  be  an  essential  part  of  the  idea  of  money  that  it  be  legal 
tender.  An  inconvertible  paper  which  is  legal  tender  is  universally 
admitted  to  be  money  ; in  the  French  language  the  phrase  papier- 
monnaie  actually  means  inconvertibihty,  convertible  notes  being 
merely  billets  a porteur.  It  is  only  in  the  case  of  Bank  of  England 
notes  under  the  law  of  convertibility,  that  any  difficulty  arises ; 
those  notes  not  being  a legal  tender  from  the  Bank  itself,  though 
a legal  tender  from  all  other  persons.  Bank  of  England  notes 
undoubtedly  do  close  transactions,  so  far  as  respects  the  buyer. 
When  he  has  once  paid  in  Bank  of  England  notes,  he  can  in  no  case 
be  required  to  pay  over  again.  But  I confess  I cannot  see  how 
the  transaction  can  be  deemed  complete,  as  regards  the  seUer,  when 
he  will  only  be  found  to  have  received  the  price  of  his  commodity 
provided  the  Bank  keeps  its  promise  to  pay.  An  instrument  which 


540 


BOOK  m.  CHAPTER  XII.  § 8 


would  be  deprived  of  aU  value  by  the  insolvency  of  a corporation, 
cannot  be  money  in  any  sense  in  which  money  is  opposed  to  credit. 
It  either  is  not  money,  or  it  is  money  and  credit  too.  It  may  be 
most  suitably  described  as  coined  credit.  The  other  forms  of  credit 
may  be  distinguished  from  it  as  credit  in  ingots. 

§ 8.  Some  high  authorities  have  claimed  for  bank  notes,  as 
compared  with  other  modes  of  credit,  a greater  distinction  in  respect 
to  influence  on  price,  than  we  have  seen  reason  to  allow ; a difference, 
not  in  degree,  but  in  kind.  They  ground  this  distinction  on  the 
fact  that  aU  bills  and  cheques,  as  well  as  all  book-debts,  are  from 
the  first  intended  to  be,  and  actually  are,  ultimately  liquidated 
either  in  coin  or  in  notes.  The  bank  notes  in  circulation,  jointly 
with  the  coin,  are  therefore,  according  to  these  authorities,  the 
basis  on  which  all  the  other  expedients  of  credit  rest ; and  in  pro- 
portion to  the  basis  will  be  the  superstructure ; insomuch  that  the 
quantity  of  bank  notes  determines  that  of  all  the  other  forms  of 
credit.  If  bank  notes  are  multiplied,  there  will,  they  seem  to  think, 
be  more  bills,  more  payments  by  cheque,  and,  I presume,  more 
book  credits ; and  by  regulating  and  limiting  the  issue  of  bank 
notes,  they  think  that  all  other  forms  of  credit  are,  by  an  indirect 
consequence,  brought  under  a similar  limitation.  I believe  I have 
stated  the  opinion  of  these  authorities  correctly,  though  I have 
nowhere  seen  the  grounds  of  it  set  forth  with  such  distinctness 
as  to  make  me  feel  quite  certain  that  I understand  them.  It  may 
be  true  that,  according  as  there  are  more  or  fewer  bank  notes, 
there  is  also  in  general  (though  not  invariably),  more  or  less  of 
other  descriptions  of  credit ; for  the  same  state  of  affairs  which 
leads  to  an  increase  of  credit  in  one  shape,  leads  to  an  increase  of 
it  in  other  shapes.  But  I see  no  reason  for  believing  that  the  one 
is  the  cause  of  the  other.  ^ If  indeed  we  begin  by  assuming,  as  I 
suspect  is  tacitly  done,  that  prices  are  regulated  by  coin  and  bank 
notes,  the  proposition  maintained  will  certainly  follow  ; for,  accord- 
ing as  prices  are  higher  or  lower,  the  same  purchases  will  give  rise 
to  bills,  cheques,  and  book  credits  of  a larger  or  a smaller  amount. 
But  the  premise  in  this  reasoning  is  the  very  proposition  to  be 
proved.  Setting  this  assumption  aside,  I know  not  how  the  con- 
clusion can  be  substantiated.  The  credit  given  to  any  one  by 

^ [This  and  the  preceding  sentence  replaced  in  the  4th  ed.  (1857)  the 
following  sentence  of  the  original  text : “ I can  see  no  reason  for  the  doctrine, 
that  according  as  there  are  more  or  fewer  bank  notes,  there  will  be  more  or 
less  of  other  descriptions  of  credit.”] 


INFLUENCE  OF  CREDIT  ON  PRICES 


641 


those  with  whom  he  deals,  does  not  depend  on  the  quantity  of  bank 
notes  or  coin  in  circulation  at  the  time,  but  on  their  opinion  of  his 
solvency  : if  any  consideration  of  a more  general  character  enters 
into  their  calculation,  it  is  only  in  a time  of  pressure  on  the  loan 
market,  when  they  are  not  certain  of  being  themselves  able  to  obtain 
the  credit  on  which  they  have  been  accustomed  to  rely  ; and  even 
then,  what  they  look  to  is  the  general  state  of  the  loan  market, 
and  mot  (preconceived  theory  apart)  the  amount  of  bank  notes. 
So  far  as  to  the  willingness  to  give  credit.  And  the  willingness  of 
a dealer  to  use  his  credit  depends  on  his  expectations  of  gain,  that 
is,  on  his  opinion  of  the  probable  future  price  of  his  commodity ; 
an  opinion  grounded  either  on  the  rise  or  fall  already  going  on,  or 
on  his  prospective  judgment  respecting  the  supply  and  the  rate  of 
consumption.  When  a dealer  extends  his  purchases  beyond  his 
immediate  means  of  payment,  engaging  to  pay  at  a specified  time, 
he  does  so  in  the  expectation  either  that  the  transaction  will  have 
terminated  favourably  before  that  time  arrives,  or  that  he  shall 
then  be  in  possession  of  sufficient  funds  from  the  proceeds  of  his 
other  transactions.  The  fulfilment  of  these  expectations  depends 
upon  prices,  but  not  especially  upon  the  amount  of  bank  notes. 
He  may,  doubtless,  also  ask  himself,  in  case  he  should  be  disap- 
pointed in  these  expectations,  to  what  quarter  he  can  look  for  a 
temporary  advance,  to  enable  him,  at  the  worst,  to  keep  his  engage- 
ments. But  in  the  first  place,  this  prospective  reflection  on  the 
somewhat  more  or  less  of  difficulty  which  he  may  have  in  tiding 
over  his  embarrassments,  seems  too  slender  an  inducement  to  be 
much  of  a restraint  in  a period  supposed  to  be  one  of  rash  adventure, 
and  upon  persons  so  confident  of  success  as  to  involve  themselves 
beyond  their  certain  means  of  extrication.  And  further,  I appre- 
hend that  their  confidence  of  being  helped  out  in  the  event  of  ill- 
fortune,  will  mainly  depend  on  their  opinion  of  their  own  individual 
credit,  with,  perhaps,  some  consideration,  not  of  the  quantity  of 
the  currency,  but  of  the  general  state  of  the  loan  market.  They 
are  aware  that,  in  case  of  a commercial  crisis,  they  shall  have 
difficulty  in  obtaining  advances.  But  if  they  thought  it  likely  that 
a commercial  crisis  would  occur  before  they  had  realized,  they 
would  not  speculate.  If  no  great  contraction  of  general  credit 
occurs,  they  will  feel  no  doubt  of  obtaining  any  advances  which 
they  absolutely  require,  provided  the  state  of  their  own  affairs  at 
the  time  affords  in  the  estimation  of  lenders  a sufficient  prospect 
that  those  advances  will  be  repaid. 


CHAPTER  XIII 


Of  AN  INCONVERTIBLE  PAPER  CURRENCY 

§ 1.  After  experience  had  shown  that  pieces  of  paper,  of  nO 
intrinsic  value,  by  merely  bearing  upon  them  the  written  profession 
of  being  equivalent  to  a certain  number  of  francs,  dollars,  or  pounds, 
could  be  made  to  circulate  as  such,  and  to  produce  all  the  benefit  to 
the  issuers  which  could  have  been  produced  by  the  coins  which  they 
purported  to  represent ; governments  began  to  think  that  it  would 
be  a happy  device  if  they  could  appropriate  to  themselves  this 
benefit,  free  from  the  condition  to  which  individuals  issuing  such 
paper  substitutes  for  money  were  subject,  of  giving,  when  required, 
for  the  sign,  the  thing  signified.  They  determined  to  try  whether  they 
could  not  emancipate  themselves  from  this  unpleasant  obligation, 
and  make  a piece  of  paper  issued  by  them  pass  for  a pound,  by  merely 
calling  it  a pound,  and  consenting  to  receive  it  in  payment  of  the 
taxes.  And  such  is  the  influence  of  almost  all  established  govern- 
ments, that  they  have  generally  succeeded  in  attaining  this  object : 
I believe  I might  say  they  have  always  succeeded  for  a time,  and 
the  power  has  only  been  lost  to  them  after  they  had  compromised  it 
by  the  most  flagrant  abuse. 

In  the  case  supposed,  the  functions  of  money  are  performed  by  a 
thing  which  derives  its  power  for  performing  them  solely  from  con- 
vention ; but-cqnyention  is  quite  sufficient  to  confer  the  pjjwer ; 
since  nothing  more  is  needful  to  make  a person  accept  anything  as 
money,  and  even  at  any  arbitrary  value,  than  the  persuasion  that 
it  will  be  taken  from  him  on  the  same  terms  by  others.  The  only 
question  is,  what  determines  the  value  of  such  a currency  ; since  it 
cannot  be,  as  in  the  case  of  gold  and  silver  (or  paper  exchangeable 
for  them  at  pleasure),  the  cost  of  production. 

We  have  seen,  however,  that  even  in  the  case  of  a metallic 
currency,  the  immediate  agency  in  determining  its  value  is  its 
quantity.  If  the  quantity,  instead  of  depending  on  the  ordinary 


INCONVERTIBLE  PAPER  CURRENCY 


543 


mercantile  motives  of  profit  and  loss,  could  be  arbitrarily  fixed  by 
authority,  the  value  would  depend  on  the  fiat  of  that  authority,  not 
on  cost  of  production.  The  quantity  of  a paper  currency  not  con- 
vertible into  the  metals  at  the  option  of  the  holder,  can  be  arbi- 
trarily fixed ; especially  if  the  issuer  is  the  sovereign  power  of  the 
state.  The  value,  therefore,  of  such  a currency  is  entirely  arbitrary 
Suppose  that,  in  a country  of  which  the  currency  is  wholly 
metallic,  a paper  currency  is  suddenly  issued,  to  the  amount  of  half 
the  metallic  circulation ; not  by  a banking  establishment,  or  in  the 
form  of  loans,  but  by  the  government,  in  payment  of  salaries  and 
purchase  of  commodities.  The  currency  being  suddenly  increased 
by  one-half,  all  prices  will  rise,  and  among  the  rest,  the  prices  of  all 
things  made  of  gold  and  silver.  An  ounce  of  manufactured  gold 
will  become  more  valuable  than  an  ounce  of  gold  coin,  by  more  than 
that  customary  difference  which  compensates  for  the  value  of  the 
workmanship ; and  it  will  be  profitable  to  melt  the  coin  for  the 
purpose  of  being  manufactured,  until  as  much  has  been  taken  from 
the  currency  by  the  subtraction  of  gold,  as  had  been  added  to  it  by 
the  issue  of  paper.  Then  prices  will  relapse  to  what  they  were  at 
first,  and  there  will  be  nothing  changed  except  that  a paper  currency 
has  been  substituted  for  half  of  the  metallic  currency  which  existed 
before.  Suppose,  now,  a second  emission  of  paper  ; the  same  series 
of  effects  will  be  renewed ; and  so  on,  until  the  whole  of  the  metallic 
money  has  disappeared : that  is,  if  paper  be  issued  of  as  low  a 
denomination  as  the  lowest  coin ; if  not,  as  much  will  remain  as 
convenience  requires  for  the  smaller  payments.  The  addition  made 
to  the  quantity  of  gold  and  silver  disposable  for  ornamental  pur- 
poses, will  somewhat  reduce,  for  a time,  the  value  of  the  article ; 
and  as  long  as  this  is  the  case,  even  though  paper  has  been  issued  to 
the  original  amount  of  the  metallic  circulation,  as  much  coin  will 
remain  in  circulation  along  with  it,  as  will  keep  the  value  of  the 
currency  down  to  the  reduced  value  of  the  metallic  material ; but 
the  value  having  fallen  below  the  cost  of  production,  a stoppage  or 
diminution  of  the  supply  from  the  mines  will  enable  the  surplus  to 
be  carried  off  by  the  ordinary  agents  of  destruction,  after  which, 
the  metals  and  the  currency  will  recover  their  natural  value.  We 
are  here  supposing,  as  we  have  supposed  throughout,  that  the 
country  has  mines  of  its  own,  and  no  commercial  intercourse  with 
other  countries ; for,  in  a country  having  foreign  trade,  the  coin 
which  is  rendered  superfluous  by  an  issue  of  paper  is  carried  off  by  a 
much  prompter  method. 


544 


BOOK  III.  CHAPTER  XIII.  § 2 


Up  to  this  point,  the  effects  of  a paper  currency  are  substantially 
the  same,  whether  it  is  convertible  into  specie  or  not.  It  is  when 
the  metals  have  been  completely  superseded  and  driven  from  circu- 
lation, that  the  difference  between  convertible  and  inconvertible 
paper  begins  to  be  operative.  When  the  gold  or  silver  has  all  gone 
from  circulation,  and  an  equal  quantity  of  paper  has  taken  its  place, 
suppose  that  a still  further  issue  is  superadded.  The  same  series  of 
phenomena  recommences  : prices  rise,  among  the  rest  the  prices  of 
gold  and  silver  articles,  and  it  becomes  an  object  as  before  to  procure 
coin  in  order  to  convert  it  into  bullion.  There  is  no  longer  any  coin 
in  circulation ; but  if  the  paper  currency  is  convertible,  coin  may 
still  be  obtained  from  the  issuers,  in  exchange  for  notes.  All  addi- 
tional notes,  therefore,  which  are  attempted  to  be  forced  into  circu- 
lation after  the  metals  have  been  completely  superseded,  will  return 
upon  the  issuers  in  exchange  for  coin  ; and  they  will  not  be  able  to 
maintain  in  circulation  such  a quantity  of  convertible  paper  as  to 
sink  its  value  below  the  metal  which  it  represents.  It  is  not  so, 
however,  with  an  inconvertible  currency.  To  the  increase  of  that 
(if  permitted  by  law)  there  is  no  check.  The  issuers  may  add  to  it 
indefinitely,  lowering  its  value  and  raising  prices  in  proportion ; 
they  may,  in  other  words,  depreciate  the  currency  without  limit. 

Such  a power,  in  whomsoever  vested,  is  an  intolerable  evil.  All 
variations  in  the  value  of  the  circulating  medium  are  mischievous  : 
they  disturb  existing  contracts  and  expectations,  and  the  liability 
to  such  changes  renders  every  pecuniary  engagement  of  long  date 
entirely  precarious.  The  person  who  buys  for  himself,  or  gives  to 
another,  an  annuity  of  lOOZ.,  does  not  know  whether  it  will  be 
equivalent  to  2001.  or  to  501.  a few  years  hence.  Great  as  this  evi- 
would  be  if  it  depended  only  on  accident,  it  is  still  greater  when 
placed  at  the  arbitrary  disposal  of  an  individual  or  a body  of  indivi- 
duals ; who  may  have  any  kind  or  degree  of  interest  to  be  served  by 
an  artificial  fluctuation  in  fortunes ; and  who  have  at  any  rate  a 
strong  interest  in  issuing  as  much  as  possible,  each  issue  being  in 
itself  a source  of  profit.  Not  to  add,  that  the  issuers  may  have,  and 
in  the  case  of  a government  paper,  always  have,  a direct  interest  in 
lowering  the  value  of  the  currency,  because  it  is  the  medium  in 
which  their  own  debts  are  computed. 

§ 2.  In  order  that  the  value  of  the  currency  may  be  secure 
from  being  altered  by  design,  and  may  be  as  little  as  possible  liable 
to  fluctuation  from  accident,  the  articles  least  liable  of  all  known 


INCONVERTIBLE  PAPER  CURRENCY 


646 


commodities  to  vary  in  their  value,  the  precious  metals,  have  been 
made  in  all  civilized  countries  the  standard  of  value  for  the  circu- 
lating medium  ; and  no  paper  currency  ought  to  exist  of  which  the 
value  cannot  be  made  to  conform  to  theirs.  N or  has  this  fundamental 
maxim  ever  been  entirely  lost  sight  of,  even  by  the  governments 
which  have  most  abused  the  power  of  creating  inconvertible  paper. 
If  they  have  not  (as  they  generally  have)  professed  an  intention  of 
paying  in  specie  at  some  indefinite  future  time,  they  have  at  least, 
by  giving  to  their  paper  issues  the  names  of  their  coins,  made  a 
virtual,  though  generally  a false,  profession  of  intending  to  keep 
them  at  a value  corresponding  to  that  of  the  coins.  This  is  not 
impracticable,  even  with  an  inconvertible  paper.  There  is  not 
indeed  the  self-acting  check  which  convertibility  brings  with  it. 
But  there  is  a clear  and  unequivocal  indication  by  which  to  judge 
whether  the  currency  is  depreciated,  and  to  what  extent.  That 
indication  is,  the  price  of  the  precious  metals.  When  holders  of 
paper  cannot  demand  coin  to  be  converted  into  bullion,  and  when 
there  is  none  left  in  circulation,  bullion  rises  and  falls  in  price  like 
other  things  ; and  if  it  is  above  the  Mint  price,  if  an  ounce  of  gold, 
which  would  be  coined  into  the  equivalent  of  3Z.  17s.  lOJd.,  is  sold 
for  41.  or  dl.  in  paper,  the  value  of  the  currency  has  just  sunk  that 
much  below  what  the  value  of  a metallic  currency  would  be.  If, 
therefore,  the  issue  of  inconvertible  paper  were  subjected  to  strict 
rules,  one  rule  being  that  whenever  bullion  rose  above  the  Mint  price, 
the  issues  should  be  contracted  until  the  market  price  of  bullion  and 
the  Mint  price  were  again  in  accordance,  such  a currency  would 
not  be  subject  to  any  of  the  evils  usually  deemed  inherent  in  an 
inconvertible  paper. 

But  also  such  a system  of  currency  v^ould  have  no  advantages 
sufficient  to  recommend  it  to  adoption.  An  inconvertible  currency, 
regulated  by  the  price  of  bullion,  would  conform  exactly,  in  all  its 
variations,  to  a convertible  one ; and  the  only  advantage  gained 
would  be  that  of  exemption  from  the  necessity  of  keeping  any  reserve 
of  the  precious  metals  ; which  is  not  a very  important  consideration, 
especially  as  a government,  so  long  as  its  good  faith  is  not  suspected, 
needs  not  keep  so  large  a reserve  as  private  issuers,  being  not  so 
liable  to  great  and  sudden  demands,  since  there  never  can  be  any 
real  doubt  of  its  solvency.  Against  this  small  advantage  is  to  be  set, 
in  the  first  place,  the  possibility  of  fraudulent  tampering  with  the 
price  of  bullion  for  the  sake  of  acting  on  the  currency  ; in  the 
maimer  of  the  fictitious  sales  of  corn,  to  influence  the  averages,  so 


546 


BOOK  HL  CHAPTER  XIII.  § 3 


much  and  so  justly  complained  of  while  the  com  laws  were  in  force. 
But  a still  stronger  consideration  is  the  importance  of  adhering  to  a 
simple  principle,  intelligible  to  the  most  untaught  capacity.  Every- 
body can  understand  convertibility ; every  one  sees  that  what  can 
be  at  any  moment  exchanged  for  five  pounds  is  worth  five  pounds. 
Eegulation  by  the  price  of  bullion  is  a more  complex  idea,  and  does 
not  recommend  itself  through  the  same  familiar  associations.  There 
would  be  nothing  like  the  same  confidence,  by  the  public  generally, 
in  an  inconvertible  currency  so  regulated,  as  in  a convertible  one  : 
and  the  most  instructed  person  might  reasonably  doubt  whether 
such  a mle  would  be  as  likely  to  be  inflexibly  adhered  to.  The 
grounds  of  the  rule  not  being  so  well  understood  by  the  public, 
opinion  would  probably  not  enforce  it  with  as  much  rigidity,  and,  in 
any  circumstances  of  difiiculty,  would  be  likely  to  turn  against  it ; 
while  to  the  government  itself  a suspension  of  convertibility  would 
appear  a much  stronger  and  more  extreme  measure,  than  a relaxa- 
tion of  what  might  possibly  be  considered  a somewhat  artificial  rule. 
There  is  therefore  a great  preponderance  of  reasons  in  favour  of  a 
convertible,  in  preference  to  even  the  best  regulated  inconvertible 
currency.  The  temptation  to  over-issue,  in  certain  financial 
emergencies,  is  so  strong,  that  nothing  is  admissible  which  can  tend, 
in  however  slight  a degree,  to  weaken  the  barriers  that  restrain  it. 

§ 3.  Although  no  doctrine  in  political  economy  rests  on  more 
obvious  grounds  than  the  mischief  of  a paper  currency  not  main- 
tained at  the  same  value  with  a metallic,  either  by  convertibility, 
or  by  some  principle  of  limitation  equivalent  to  it ; and  although, 
accordingly,  this  doctrine  has,  though  not  till  after  the  discussions 
of  many  years,  been  tolerably  effectually  drummed  into  the  public 
mind ; yet  dissentients  are  still  numerous,  and  projectors  every 
now  and  then  start  up,  with  plans  for  curing  all  the  economical  evils 
of  society  by  means  of  an  unlimited  issue  of  inconvertible  paper. 
There  is,  in  truth,  a great  charm  in  the  idea.  To  be  able  to  pay  off 
the  national  debt,  defray  the  expenses  of  government  without 
taxation,  and  in  fine,  to  make  the  fortunes  of  the  whole  community, 
is  a brilliant  prospect,  when  once  a man  is  capable  of  believing  that 
printing  a few  characters  on  bits  of  paper  will  do  it.  The  philosopher’s 
stone  could  not  be  expected  to  do  more. 

As  these  projects,  however  often  slain,  always  resuscitate,  it  is 
not  superfluous  to  examine  one  or  two  of  the  fallacies  by  which 
the  schemers  impose  upon  themselves.  One  of  the  commonest  is, 


INCONVERTIBLE  PAPER  CURRENCY 


647 


that  a paper  currency  cannot  be  issued  in  excess  so  long  as  every 
note  issued  re'presents  property,  or  has  Sk  foundation  of  actual  property 
to  rest  on.  These  phrases,  of  representing  and  resting,  seldom 
convey  any  distinct  or  well-defined  idea  : when  they  do,  their 
meaning  is  no  more  than  this — that  the  issuers  of  the  paper  must 
have  property,  either  of  their  own,  or  entrusted  to  them,  to  the 
value  of  all  the  notes  they  issue : though  for  what  purpose  does 
not  very  clearly  appear ; for  if  the  property  cannot  be  claimed  in 
exchange  for  the  notes,  it  is  difi&cult  to  divine  in  what  manner  its 
mere  existence  can  serve  to  uphold  their  value.  I presume,  how- 
ever, it  is  intended  as  a guarantee  that  the  holders  would  be  finally 
reimbursed,  in  case  any  untoward  event  should  cause  the  whole 
concern  to  be  wound  up.  On  this  theory  there  have  been  many 
schemes  for  “ coining  the  whole  land  of  the  country  into  money  ’* 
and  the  like. 

In  so  far  as  this  notion  has  any  connexion  at  all  with  reason, 
it  seems  to  originate  in  confounding  two  entirely  distinct  evils,  to 
which  a paper  currency  is  liable.  One  is,  the  insolvency  of  the 
issuers  ; which,  if  the  paper  is  grounded  on  their  credit — if  it  makes 
any  promise  of  payment  in  cash,  either  on  demand  or  at  any  future 
time — of  course  deprives  the  paper  of  any  value  which  it  derives 
from  the  promise.  To  this  evil  paper  credit  is  equally  liable, 
however  moderately  used  ; and  against  it  a proviso  that  all  issues 
should  be  “ founded  on  property,”  as  for  instance  that  notes  should 
only  be  issued  on  the  security  of  some  valuable  thing  expressly 
pledged  for  their  redemption,  would  really  be  efficacious  as  a pre- 
caution. But  the  theory  takes  no  account  of  another  evil,  which 
is  incident  to  the  notes  of  the  most  solvent  firm,  company,  or 
government ; that  of  being  depreciated  in  value  from  being  issued 
injsxcessive  quantity.  The  assignats,  during  the  French  Revolution, 
were  an  example  of  a currency  grounded  on  these  principles.  The 
assignats  “ represented  ” an  immense  amount  of  highly  valuable 
property,  namely  the  lands  of  the  crown,  the  church,  the  monasteries, 
and  the  emigrants ; amounting  possibly  to  half  the  territory  of 
France.  They  were,  in  fact,  orders  or  assignments  on  this  mass  of 
land.  The  revolutionary  government  had  the  idea  of  “ coining  ” 
these  lands  into  money ; but,  to  do  them  justice,  they  did  not 
originally  contemplate  the  immense  multiplication  of  issues  to  which 
they  were  eventually  driven  by  the  failure  of  all  other  financial 
resources.  They  imagined  that  the  assignats  would  come  rapidly 
back  to  the  issuers  in  exchange  for  laud,  and  that  they  should  be 


548 


BOOK  III.  CHAPTER  XIII.  § 3 


able  to  reissue  them  continually  until  the  lands  were  all  disposed 
of,  without  having  at  any  time  more  than  a very  moderate  quantity 
in  circulation.  Their  hope  was  frustrated  : the  land  did  not  sell 
so  quickly  as  they  expected ; buyers  were  not  inclined  to  invest 
their  money  in  possessions  which  were  hkely  to  be  resumed  without 
compensation  if  the  Revolution  succumbed  : the  bits  of  paper 
which  represented  land,  becoming  prodigiously  multiplied,  could 
no  more  keep  up  their  value  than  the  land  itself  would  have  done 
if  it  had  all  been  brought  to  market  at  once  : and  the  result  was  that 
it  at  last  required  an  assignat  of  six  hundred  francs  to  pay  for  a 
pound  of  butter.i 

The  example  of  the  assignats  has  been  said  not  to  be  conclusive, 
because  an  assignat  only  represented  land  in  general,  but  not  a 
definite  quantity  of  land.  To  have  prevented  their  depreciation, 
the  proper  course,  it  is  affirmed,  would  have  been  to  have  made  a 
valuation  of  all  the  confiscated  property  at  its  metallic  value,  and 
to  have  issued  assignats  up  to,  but  not  beyond,  that  limit ; giving 
to  the  holders  a right  to  demand  any  piece  of  land,  at  its  registered 
valuation,  in  exchange  for  assignats  to  the  same  amount.  There 
can  be  no  question  about  the  superiority  of  this  plan  over  the  one 
actually  adopted.  Had  this  course  been  followed,  the  assignats  could 
never  have  been  depreciated  to  the  inordinate  degree  they  were ; 
for — as  they  would  have  retained  aU  their  purchasing  power  in 
relation  to  land,  however  much  they  might  have  fallen  in  respect 
to  other  things — before  they  had  lost  very  much  of  their  market 
value,  they  would  probably  have  been  brought  in  to  be  exchanged 
for  land.  It  must  be  remembered,  however,  that  their  not  being 
depreciated  would  pre-suppose  that  no  greater  number  of  them 
continued  in  circulation  than  would  have  circulated  if  they  had 
been  convertible  into  cash.  However  convenient,  therefore,  in  a 
time  of  revolution,  this  currency  convertible  into  land  on  demand 
might  have  been,  as  a contrivance  for  selling  rapidly  a great  quantity 
of  land  with  the  least  possible  sacrifice ; it  is  difficult  to  see  what 
advantage  it  would  have,  as  the  permanent  system  of  a country, 
over  a currency  convertible  into  coin  : while  it  is  not  at  all  difficult 
to  see  what  would  be  its  disadvantages ; since  land  is  far  more 
variable  in  value  than  gold  and  silver ; and  besides,  land,  to  most 
persons,  being  rather  an  encumbrance  than  a desirable  possession, 
except  to  be  converted  into  money,  people  would  submit  to  a 

* pJntil  the  6th  ed.  (1865)  the  paragraph  ended  with  “ five  hundred  francs 
to  pay  for  a cup  of  coffee.”] 


INCONVERTIBLE  PAPER  CURRENCY 


549 


much  greater  depreciation  before  demanding  land,  than  they  will 
before  demanding  gold  or  silver.*  i 

♦ Among  the  schemes  of  currency  to  which,  strange  to  say,  intelligent 
writers  have  been  found  to  give  their  sanction,  one  is  as  follows  ; that  the  state 
should  receive,  in  pledge  or  mortgage,  any  kind  or  amount  of  property,  such  as 
land,  stock,  &c.,  and  should  advance  to  the  owners  inconvertible  paper  money 
to  the  estimated  value.  Such  a currency  would  not  even  have  the  recom- 
mendations of  the  imaginary  assignats  supposed  in  the  text ; since  those  into 
whose  hands  the  notes  were  paid  by  the  persons  who  received  them,  could  not 
return  them  to  the  government,  and  demand  in  exchange  land  or  stock  which 
was  only  pledged,  not  alienated.  There  would  be  no  reflux  of  such  assignats 
as  these,  and  their  depreciation  would  be  indefinite. 

* [In  the  2nd  ed.  (1849)  was  inserted  the  following  section,  which  did  not 
disappear  till  the  5th  ed.  (1862) : 

“ § 4.  One  of  the  most  transparent  of  the  fallacies  by  which  the  principle 
of  the  convertibility  of  paper  money  has  been  assailed,  is  that  which  pervades 
a recent  work  by  Mr.  John  Gray,  Lectures  on  the  Nature  and  Use  of  Money  : 
the  author  of  the  most  ingenious,  and  least  exceptionable  plan  of  an  incon- 
vertible currency  which  I have  happened  to  meet  with.  This  writer  has 
seized  several  of  the  leading  doctrines  of  political  economy  with  no  ordinary 
grasp,  and  among  others,  the  important  one,  that  commodities  are  the  real 
market  for  commodities,  and  that  Production  is  essentially  the  cause  and 
measure  of  Demand.  But  this  proposition,  true  in  a state  of  barter,  he  affirms 
to  be  false  under  a monetary  system  regulated  by  the  precious  metals,  because 
if  the  aggregate  of  goods  is  increased  faster  than  the  aggregate  of  money,  prices 
must  fall,  and  all  producers  must  be  losers  ; now  neither  gold  nor  silver,  nor 
any  other  valuable  thing,  ‘ can  by  any  possibility  be  increased  ad  libitum, 
as  fast  as  all  other  valuable  things  put  together  ; ’ a limit,  therefore,  is  arbi- 
trarily set  to  the  amount  of  production  which  can  take  place  without  loss 
to  the  producers  : and  on  this  foundation  Mr.  Gray  accuses  the  existing 
system  of  rendering  the  produce  of  this  country  less  by  at  least  one  hundred 
million  pounds  annually,  than  it  would  be  under  a currency  which  admitted 
of  expansion  in  exact  proportion  to  the  increase  of  commodities. 

“But,  in  the  first  place,  what  hinders  gold,  or  any  other  commodity  whatever, 
from  being  ‘ increased  as  fast  as  all  other  valuable  things  put  together  ? ’ 
If  the  produce  of  the  world,  in  all  commodities  taken  together,  should  come 
to  be  doubled,  what  is  to  prevent  the  annual  produce  of  gold  from  being 
doubled  likewise  ? for  that  is  all  that  would  be  necessary,  and  not  (as  might 
be  inferred  from  Mr.  Gray’s  language)  that  it  should  be  doubled  as  many 
times  over  as  there  are  other  ‘ valuable  things  ’ to  compare  it  with.  Unless 
it  can  be  proved  that  the  production  of  bullion  cannot  be  increased  by  the 
application  of  increased  labour  and  capital,  it  is  evident  that  the  stimulus  of  an 
increased  value  of  the  commodity  will  have  the  same  effect  in  extending  the 
mining  operations,  as  it  is  admitted  to  have  in  all  other  branches  of  production. 

“ But,  secondly,  even  if  the  currency  could  not  be  increased  at  all,  and  if 
every  addition  to  the  aggregate  produce  of  the  country  must  necessarily  be 
accompanied  by  a proportional  diminution  of  general  prices ; it  is  incom- 
prehensible how  any  person  who  has  attended  to  the  subject  can  fail  to  see  that 
a fall  of  price,  thus  produced,  is  no  loss  to  producers  : they  receive  less  money  ; 
but  the  smaller  amount  goes  exactly  as  far,  in  all  expenditure,  whether  pro- 
ductive or  personal,  as  the  larger  quantity  did  before.  The  only  difference 
would  be  in  the  increased  burthen  of  fixed  money  payments ; and  of  that 
(coming,  as  it  wordd,  very  gradually)  a very  small  portion  would  fall  on  the 
productive  classes,  who  have  rarely  any  debts  of  old  standing,  and  who  would 


550 


BOOK  III.  CHAPTER  XIII.  § 4 


§ 4.  Another  of  the  fallacies  from  which  the  advocates  of  an 
inconvertible  currency  derive  support,  is  the  notion  that  an  increase 
of  the  currency  quickens  industry.  This  idea  was  set  afloat  by 
Hume,  in  his  Essay  on  Money,  and  has  had  many  devoted  adherents 
since ; witness  the  Birmingham  currency  school,  of  whom  Mr. 
Attwood  was  at  one  time  the  most  conspicuous  representative. 
Mr.  Attwood  maintained  that  a rise  of  prices,  produced  by  an  increase 
of  paper  currency,  stimulates  every  producer  to  his  utmost  exertions, 
and  brings  all  the  capital  and  labour  of  the  country  into  complete 
employment ; and  that  this  has  invariably  happened  in  all  periods 
of  rising  prices,  when  the  rise  was  on  a sufficiently  great  scale.  I 
presume,  however,  that  the  inducement  which,  according  to  Mr. 
Attwood,  excited  this  unusual  ardour  in  all  persons  engaged  in 
production,  must  have  been  the  expectation  of  getting  more  com- 
modities generally,  more  real  wealth,  in  exchange  for  the  produce 
of  their  labour,  and  not  merely  more  pieces  of  paper.  This  expecta- 
tion, however,  must  have  been,  by  the  very  terms  of  the  supposition, 
disappointed,  since,  aU  prices  being  supposed  to  rise  equally,  no 
one  was  reaUy  better  paid  for  his  goods  than  before.  Those  who 
agree  with  Mr.  Attwood  could  only  succeed  in  winning  people  on 
to  these  unwonted  exertions  by  a prolongation  of  what  would  in 
fact  be  a delusion ; contriving  matters  so,  that  by  a progressive 
rise  of  money  prices,  every  producer  shall  always  seem  to  be  in 
the  very  act  of  obtaining  an  increased  remuneration  which  he  never, 
in  reality,  does  obtain.  It  is  unnecessary  to  advert  to  any  other 
of  the  objections  to  this  plan  than  that  of  its  total  impracticability. 
It  calculates  on  finding  the  whole  world  persisting  for  ever  in  the 
belief  that  more  pieces  of  paper  are  more  riches,  and  never  discover- 
ing that,  with  all  their  paper,  they  cannot  buy  more  of  anything 
than  they  could  before.  No  such  mistake  was  made  during  any 
of  the  periods  of  high  prices,  on  the  experience  of  which  this  school 
lays  so  much  stress.  At  the  periods  which  Mr.  Attwood  mistook 
for  times  of  prosperity,  and  which  were  simply  (as  all  periods  of 
high  prices,  under  a convertible  currency,  must  be)  times  of  specula- 
tion, the  speculators  did  not  think  they  were  growing  rich  because 
the  high  prices  would  last,  but  because  they  would  not  last,  and 
because  whoever  contrived  to  realize  while  they  did  last,  would 
find  himself,  after  the  recoil,  in  possession  of  a greater  number  of 
pounds  sterling,  without  their  having  become  of  less  value.  If,  at 

sufier  almost  solely  in  the  increased  onerousness  of  their  contribution  to  the 
taxes  which  pay  the  interest  of  the  National  Debt.”] 


INCONVERTIBLE  PAPER  CURRENCY 


661 


the  close  of  the  speculation,  an  issue  of  paper  had  been  made, 
suflBicient  to  keep  prices  up  to  the  point  which  they  attained  when 
at  the  highest,  no  one  would  have  been  more  disappointed  than 
the  speculators  ; since  the  gain  which  they  thought  to  have  reaped 
by  realizing  in  time  (at  the  expense  of  their  competitors,  who  bought 
when  they  sold,  and  had  to  sell  after  the  revulsion)  would  have 
faded  away  in  their  hands,  and  instead  of  it  they  would  have  got 
nothing  except  a few  more  paper  tickets  to  count  by. 

Hume’s  version  of  the  doctrine  differed  in  a slight  degree  from 
Mr.  Attwood’s.  He  thought  that  all  commodities  would  not  rise 
in  price  simultaneously,  and  that  some  persons  therefore  would 
obtain  a real  gain,  by  getting  more  money  for  what  they  had  to 
sell,  while  the  things  which  they  wished  to  buy  might  not  yet  have 
risen.  And  those  who  would  reap  this  gain  would  always  be  (he 
seems  to  think)  the  first  comers.  It  seems  obvious,  however,  that 
for  every  person  who  thus  gains  more  than  usual,  there  is  necessarily 
some  other  person  who  gains  less.  The  loser,  if  things  took  place 
as  Hume  supposes,  would  be  the  seller  of  the  commodities  which 
are  slowest  to  rise  ; who,  by  the  supposition,  parts  with  his  goods 
at  the  old  prices,  to  purchasers  who  have  already  benefited  by  the 
new.  This  seller  has  obtained  for  his  commodity  only  the  accus- 
tomed quantity  of  money,  while  there  are  already  some  things  of 
which  that  money  will  no  longer  purchase  as  much  as  before.  If, 
therefore,  he  knows  what  is  going  on,  he  will  raise  his  price,  and 
then  the  buyer  wiU  not  have  the  gain,  which  is  supposed  to  stimulate 
his  industry.  But  if,  on  the  contrary,  the  seller  does  not  know 
the  state  of  the  case,  and  only  discovers  it  when  he  finds,  in  laying 
his  money  out,  that  it  does  not  go  so  far,  he  then  obtains  less  than 
the  ordinary  remuneration  for  his  labour  and  capital ; and  if  the 
other  dealer’s  industry  is  encouraged,  it  should  seem  that  his  must, 
from  the  opposite  cause,  be  impaired. 

§ 5.  There  is  no  way  in  which  a general  and  permanent  rise 
of  prices,  or  in  other  words,  depreciation  of  money,  can  benefit 
anybody,  except  at  the  expense  of  somebody  else.  The  substitu- 
tion of  paper  for  metallic  currency  is  a national  gain  : any  further 
increase  of  paper  beyond  this  is  but  a form  of  robbery. 

An  issue  of  notes  is  a manifest  gain  to  the  issuers,  who,  until 
the  notes  are  returned  for  payment,  ootain  the  use  of  them  as  if 
they  were  a real  capital : and  so  long  as  the  notes  are  no  permanent 
addition  to  the  currency,  out  merely  supersede  gold  or  silver  to 


652 


BOOK  III.  CHAPTER  XIII.  § 6 


the  same  amount,  the  gain  of  the  issuer  is  a loss  to  no  one ; it  is 
obtained  by  saving  to  the  community  the  expense  of  the  more 
costly  material.  But  if  there  is  no  gold  or  silver  to  be  superseded 
— if  the  notes  are  added  to  the  currency,  instead  of  being  substituted 
for  the  metallic  part  of  it — all  holders  of  currency  lose,  by  the  depre- 
ciation of  its  value,  the  exact  equivalent  of  what  the  issuer  gains. 
A tax  is  virtually  levied  on  them  for  his  benefit.  It  will  be  objected 
by  some,  that  gains  are  also  made  by  the  producers  and  dealers 
who,  by  means  of  the  increased  issue,  are  accommodated  with 
loans.  Theirs,  however,  is  not  an  additional  gain,  but  a portion 
of  that  which  is  reaped  by  the  issuer  at  the  expense  of  all  possessors 
of  money.  The  profits  arising  from  the  contribution  levied  upon  the 
public,  he  does  not  keep  to  himself,  but  divides  with  his  customers. 

But  besides  the  benefit  reaped  by  the  issuers,  or  by  others  through 
them,  at  the  expense  of  the  public  generally,  there  is  another  unjust 
gain  obtained  by  a larger  class,  namely  by  those  who  are  under 
fixed  pecuniary  obligations.  All  such  persons  are  freed,  by  a 
depreciation  of  the  currency,  from  a portion  of  the  burthen  of  their 
debts  or  other  engagements  : in  other  words,  part  of  the  property 
of  their  creditors  is  gratuitously  transferred  to  them.  On  a super- 
ficial view  it  may  be  imagined  that  this  is  an  advantage  to  industry ; 
since  the  productive  classes  are  great  borrowers,  and  generally  owe 
larger  debts  to  the  unproductive  (if  we  include  among  the  latter 
all  persons  not  actually  in  business)  than  the  unproductive  classes 
owe  to  them ; especially  if  the  national  debt  be  included.  It  is 
only  thus  that  a general  rise  of  prices  can  be  a source  of  benefit  to 
producers  and  dealers ; by  diminishing  the  pressure  of  their  fixed 
burthens.  And  this  might  be  accounted  an  advantage,  if  integrity 
and  good  faith  were  of  no  importance  to  the  world,  and  to  industry 
and  commerce  in  particular.  Not  many,  however,  have  been  found 
to  say  that  the  currency  ought  to  be  depreciated  on  the  simple 
ground  of  its  being  desirable  to  rob  the  national  creditor  and  private 
creditors  of  a part  of  what  is  in  their  bond.  The  schemes  which 
have  tended  that  way  have  almost  always  had  some  appearance  of 
special  and  circumstantial  justification,  such  as  the  necessity  of  com- 
pensating for  a prior  injustice  committed  in  the  contrary  direction. 

§ 6.  Thus  in  England,  for  many  years  subsequent  to  1819,  it 
was  pertinaciously  contended,  that  a large  portion  of  the  national 
debt  and^a  multitude  of  private  debts  still  in  existence,  were  con- 
tracted between  1797  and  1819,  when  the  Bank  of  England  was 


INCONVERTIBLE  PAPER  CURRENCY 


653 


exempted  from  giving  cash  for  its  notes  ; and  that  it  is  grossly 
unjust  to  borrowers  (that  is,  in  the  case  of  the  national  debt,  to 
all  tax-payers)  that  they  should  be  paying  interest  on  the  same 
nominal  sums  in  a currency  of  full  value,  which  were  borrowed  in 
a depreciated  one.^  The  depreciation,  according  to  the  views  and 
objects  of  the  particular  writer,  was  represented  to  have  averaged 
thirty,  fifty,  or  even  more  than  fifty  per  cent : and  the  conclusion 
was,  that  either  we  ought  to  return  to  this  depreciated  currency, 
or  to  strike  ofli  from  the  national  debt,  and  from  mortgages  or 
other  private  debts  of  old  standing,  a percentage  corresponding 
to  the  estimated  amount  of  the  depreciation. 

To  this  doctrine,  the  following  was  the  answer  usually  made. 
Granting  that,  by  returning  to  cash  payments  without  lowering 
the  standard,  an  injustice  was  done  to  debtors,  in  holding  them 
liable  for  the  same  amount  of  a currency  enhanced  in  value,  which 
they  had  borrowed  while  it  was  depreciated ; it  is  now  too  late  to 
make  reparation  for  this  injury.  The  debtors  and  creditors  of 
to-day  are  not  the  debtors  and  creditors  of  1819  : the  lapse  of  years 
has  entirely  altered  the  pecuniary  relations  of  the  community ; 
and  it  being  impossible  now  to  ascertain  the  particular  persons 
who  were  either  benefited  or  injured,  to  attempt  to  retrace  our 
steps  would  not  be  redressing  a wrong,  but  superadding  a second 
act  of  wide-spread  injustice  to  the  one  already  committed.  This 
argument  is  certainly  conclusive  on  the  practical  questibn ; but 
it  places  the  honest  conclusion  on  too  narrow  and  too  low  a ground. 
It  concedes  that  the  measure  of  1819,  called  Peel’s  BiU,  by  which 
cash  payments  were  resumed  at  the  original  standard  of  3^.  17s.  10J(?., 
was  really  the  injustice  it  was  said  to  be.  This  is  an  admission 
wholly  opposed  to  the  truth.  Parliament  had  no  alternative ; it 
was  absolutely  bound  to  adhere  to  the  acknowledged  standard ; 
as  may  be  shown  on  three  distinct  grounds,  two  of  fact,  and  one  of 
principle. 

The  reasons  of  fact  are  these.  In  the  first  place,  it  is  not  true  that 
the  debts,  private  or  public,  incurred  during  the  Bank  restriction, 
were  contracted  in  a currency  of  lower  value  than  that  in  which  the 
interest  is  now  paid.  It  is  indeed  true  that  the  suspension  of  the 
obhgation  to  pay  in  specie  did  put  it  in  the  power  of  the  Bank  to 
depreciate  the  currency.  It  is  true  also  that  the  Bank  really  exercised 

^ [Until  the  6th  ed.  (1862)  the  text  ran  : “ from  1819  to  the  present  time, 
it  has  been  . . . contended,”  and  “ the  answer  ” was  spoken  of  in  the  present 
tense.] 


654 


BOOK  III.  CHAPTER  Xlll.  § 6 


that  power,  though  to  a far  less  extent  than  is  often  pretended ; 
since  the  difference  between  the  market  price  of  gold  and  the  Mint 
valuation,  during  the  greater  part  of  the  interval,  was  very  trifling, 
and  when  it  was  greatest,  during  the  last  five  years  of  the  war, 
did  not  much  exceed  thirty  per  cent.  To  the  extent  of  that 
difference,  the  currency  was  depreciated,  that  is,  its  value  was 
below  that  of  the  standard  to  which  it  professed  to  adhere.  But  the 
state  of  Europe  at  that  time  was  such — there  was  so  unusual  an 
absorption  of  the  precious  metals,  by  hoarding,  and  in  the  military 
chests  of  the  vast  armies  which  then  desolated  the  Continent, 
that  the  value  of  the  standard  itself  was  very  considerably  raised : 
and  the  best  authorities,  among  whom  it  is  sufficient  to  name  Mr, 
Tooke,  have,  after  an  elaborate  investigation,  satisfied  themselves 
that  the  difference  between  paper  and  bullion  was  not  greater 
than  the  enhancement  in  value  of  gold  itself,  and  that  the  paper, 
though  depreciated  relatively  to  the  then  value  of  gold,  did  not 
sink  below  the  ordinary  value,  at  other  times,  either  of  gold  or  of 
a convertible  paper.  If  this  be  true  (and  the  evidences  of  the 
fact  are  conclusively  stated  in  Mr.  Tooke’s  History  of  Prices)  the 
foundation  of  the  whole  case  against  the  fundholder  and  other 
creditors  on  the  ground  of  depreciation  is  subverted. 

But,  secondly,  even  if  the  currency  had  really  been  lowered 
in  value  at  each  period  of  the  Bank  restriction,  in  the  same  degree 
in  which  it  was  depreciated  in  relation  to  its  standard,  we  must 
remember  that  a part  only  of  the  national  debt,  or  of  other  permanent 
engagements,  was  incurred  during  the  Bank  restriction.  A large 
part  had  been  contracted  before  1797  ; a still  larger  during  the  early 
years  of  the  restriction,  when  the  difference  between  paper  and  gold 
was  yet  small.  To  the  holders  of  the  former  part,  an  injury  was 
done,  by  paying  the  interest  for  twenty- two  years  in  a depreciated 
currency  : those  of  the  second,  suffered  an  injury  during  the  years 
in  which  the  interest  was  paid  in  a currency  more  depreciated  than 
that  in  which  the  loans  were  contracted.  To  have  resumed  cash 
payments  at  a lower  standard  would  have  been  to  perpetuate  the 
injury  to  these  two  classes  of  creditors,  in  order  to  avoid  giving  an 
undue  benefit  to  a third  class,  who  had  lent  their  money  during  the 
few  years  of  greatest  depreciation.  As  it  is,  there  was  an  underpay- 
ment to  one  set  of  persons,  and  an  overpayment  to  another.  The 
late  Mr.  Mushet  took  the  trouble  to  make  an  arithmetical  comparison 
between  the  two  amounts.  He  ascertained,  by  calculation,  that  if 
an  account  had  been  made  out  in  1819,  of  what  the  fundholders  had 


INCONVERTIBLE  PAPER  CURRENCY 


665 


gained  and  lost  by  the  variation  of  the  paper  currency  from  its 
standard,  they  would  have  been  found  as  a body  to  have  been  losers  ; 
so  that  if  any  compensation  was  due  on  the  ground  of  depreciation, 
it  would  not  be  from  the  fundholders  collectively,  but  to  them. 

Thus  it  is  with  the  facts  of  the  case.  But  these  reasons  of  fact 
are  not  the  strongest.  There  is  a reason  of  principle,  still  more 
powerful.  Suppose  that,  not  a part  of  the  debt  merely,  but  the 
whole,  had  been  contracted  in  a depreciated  currency,  depreciated 
not  only  in  comparison  with  its  standard,  but  with  its  own  value 
before  and  after  ; and  that  we  were  now  paying  the  interest  on  this 
debt  in  a currency  fifty  or  even  a hundred  per  cent  more  valuable 
than  that  in  which  it  was  contracted.  What  difference  would  this 
make  in  the  obligation  of  paying  it,  if  the  condition  that  it  should  be 
so  paid  was  part  of  the  original  compact  ? Now  this  is  not  only 
truth,  but  less  than  the  truth.  The  compact  stipulated  better  terms 
for  the  fundholder  than  he  has  received.  During  the  whole  con- 
tinuance of  the  Bank  restriction,  there  was  a parliamentary  pledge, 
by  which  the  legislature  was  as  much  bound  as  any  legislature  is 
capable  of  binding  itself,  that  cash  payments  should  be  resumed  on 
the  original  footing,  at  farthest  in  six  months  after  the  conclusion  of 
a general  peace.  This  was  therefore  an  actual  condition  of  every 
loan  ; and  the  terms  of  the  loan  were  more  favourable  in  considera- 
tion of  it.  Without  some  such  stipulation,  the  Government  could 
not  have  expected  to  borrow,  unless  on  the  terms  on  which  loans 
are  made  to  the  native  princes  of  India.  If  it  had  been  understood 
and  avowed  that,  after  borrowing  the  money,  the  standard  at  which 
it  was  commuted  might  be  permanently  lowered,  to  any  extent 
which  to  the  “ collective  wisdom  ” of  a legislature  of  borrowers 
might  seem  fit — who  can  say  what  rate  of  interest  would  have  been 
a sufficient  inducement  to  persons  of  common  sense  to  risk  their 
savings  in  such  an  adventure  ? However  much  the  fundholders  had 
gained  by  the  resumption  of  cash  payments,  the  terms  of  the  con- 
tract insured  their  giving  ample  value  for  it.  They  gave  value  for 
more  than  they  received  ; since  cash  payments  were  not  resumed  in 
six  months,  but  in  as  many  years,  after  the  peace.  So  that  waiving 
all  our  arguments  except  the  last,  and  conceding  all  the  facts  asserted 
on  the  other  side  of  the  question,  the  fundholders,  instead  of  being 
unduly  benefited,  are  the  injured  party  ; and  would  have  a claim  to 
compensation,  if  such  claims  were  not  very  properly  barred  by  the 
impossibility  of  adjudication,  and  by  the  salutary  general  maxim 
of  law  and  policy,  “ quod  interest  reipublicse  ut  sit  finis  litium.’* 


CHAPTER  XIV 


OF  EXCESS  OP  SUPPLY 

§ 1.  After  the  elementary  exposition  of  the  theory  of  money 
contained  in  the  last  few  chapters,  we  shall  return  to  a question  in 
the  general  theory  of  Value,  which  could  not  be  satisfactorily  dis- 
cussed until  the  nature  and  operations  of  Money  were  in  some  measure 
understood,  because  the  errors  against  which  we  have  to  contend 
mainly  originate  in  a misunderstanding  of  those  operations. 

We  have  seen  that  the  value  of  everything  gravitates  towards 
a certain  medium  point  (which  has  been  called  the  Natural  Value), 
namely,  that  at  which  it  exchanges  for  every  other  thing  in  the  ratio 
of  their  cost  of  production.  We  have  seen,  too,  that  the  actual  or 
market  value  coincides,  or  nearly  so,  with  the  natural  value  only  on 
an  average  of  years  ; and  is  continually  either  rising  above,  or  falling 
below  it,  from  alterations  in  the  demand,  or  casual  fluctuations  in  the 
supply  : but  that  these  variations  correct  themselves,  through  the 
tendency  of  the  supply  to  accommodate  itself  to  the  demand  which 
exists  for  the  commodity  at  its  natural  value.  A general  conver- 
gence thus  results  from  the  balance  of  opposite  divergences.  Dearth, 
or  scarcity,  on  the  one  hand,  and  over-supply,  or  in  mercantile 
language,  glut,  on  the  other,  are  incident  to  all  commodities.  In  the 
first  case,  the  commodity  afiords  to  the  producers  or  sellers,  while 
the  deficiency  lasts,  an  unusually  high  rate  of  profit : in  the  second, 
the  supply  being  in  excess  of  that  for  which  a demand  exists  at  such 
a value  ae  will  afford  the  ordinary  profit,  the  sellers  must  be  content 
with  less,  and  must,  in  extreme  cases,  submit  to  a loss. 

Because  this  phenomenon  of  over-supply,  and  consequent  incon- 
venience or  loss  to  the  producer  or  dealer,  may  exist  in  the  case 
of  any  one  commodity  whatever,  many  persons,  including  some 
distinguished  political  economists,  have  thought  that  it  may  exist 
with  regard  to  all  commodities  ; that  there  may  be  a general  over- 
production of  wealth ; a supply  of  commodities  in  the  aggregate, 


EXCESS  OF  SUPPLY 


667 


surpassing  the  demand  ; and  a consequent  depressed  condition  of 
all  classes  of  producers.  Against  this  doctrine,  of  which  Mr.  Malthus 
and  Dr.  Chalmers  in  this  country,  and  M.  de  Sismondi  on  the  Conti- 
nent, were  the  chief  apostles,  I have  already  contended  in  the  First 
Book  ; * but  it  was  not  possible,  in  that  stage  of  our  inquiry,  to  enter 
into  a complete  examination  of  an  error  (as  I conceive)  essentially 
grounded  on  a misunderstanding  of  the  phenomena  of  Value  and 
Price. 

The  doctrine  appears  to  me  to  involve  so  much  inconsistency 
in  its  very  conception,  that  I feel  considerable  difficulty  in  giving  any 
statement  of  it  which  shall  be  at  once  clear,  and  satisfactory  to  its 
supporters.  They  agree  in  maintaining  that  there  may  be,  and  some- 
times is,  an  excess  of  productions  in  general  beyond  the  demand  for 
them ; that  when  this  happens,  purchasers  cannot  be  found  at 
prices  which  will  repay  the  cost  of  production  with  a profit ; that 
there  ensues  a general  depression  of  prices  or  values  (they  are 
seldom  accurate  in  discriminating  between  the  two),  so  that  pro- 
ducers, the  more  they  produce,  find  themselves  the  poorer,  instead 
of  richer ; and  Dr.  Chalmers  accordingly  inculcates  on  capitalists  the 
practice  of  a moral  restraint  in  reference  to  the  pursuit  of  gain; 
while  Sismondi  deprecates  machinery,  and  the  various  inventions 
which  increase  productive  power.  They  both  maintain  that  accumu- 
lation of  capital  may  proceed  too  fast,  not  merely  for  the  moral,  but 
for  the  material,  interests  of  those  who  produce  and  accumulate ; 
and  they  enjoin  the  rich  to  guard  against  this  evil  by  an  ample 
unproductive  consumption. 

§ 2.  When  these  writers  speak  of  the  supply  of  commodities 
as  outrunning  the  demand,  it  is  not  clear  which  of  the  two  elements 
of  demand  they  have  in  view--the  desire  to  possess,  or^the  means  of 
purchase ; whether  their  meaning  is  that  there  are,  in  such  cases, 
more  consumable  products  in  existence  than  the  public  desires  to 
consume,  or  merely  more  than  it  is  able  to  pay  for.  In  this  uncer- 
tainty, it  is  necessary  to  exanaine  both  suppositions. 

First,  let  us  suppose  that  the  quantity  of  commodities  produced 
is  not  greater  than  the  community  would  be  glad  to  consume  : is 
it,  in  that  case,  possible  that  there  should  be  a deficiency  of  demand 
for  all  commodities  for  want  of  the  means  of  payment  ? Those  who 
think  so  cannot  have  considered  what  it  is  which  constitutes  the 
means  of  payment  for  commodities.  It  is  simply  commodities. 

* Supra,  pp.  66-8. 


658 


BOOK  III.  CHAPTER  XIV.  § 3 


Each  person’s  means  of  paying  for  the  productions  of  other  people 
consists  of  those  which  he  himself  possesses.  All  sellers  are  inevit- 
ably and  ex  vi  termini  buyers.  Could  we  suddenly  double  the 
productive  powers  of  the  country,  we  should  double  the  supply  of 
commodities  in  every  market ; but  we  should,  by  the  same  stroke, 
double  the  purchasing  power.  Everybody  would  bring  a double 
demand  as  well  as  supply  : everybody  would  be  able  to  buy  twice  as 
much,  because  every  one  would  have  twice  as  much  to  ofier  in  ex- 
change. It  is  probable,  indeed,  that  there  would  now  be  a superfluity 
of  certain  things.  Although  the  community  would  willingly  double 
its  aggregate  consumption,  it  may  already  have  as  much  as  it  desires 
of  some  commodities,  and  it  may  prefer  to  do  more  than  double  its 
consumption  of  others,  or  to  exercise  its  increased  purchasing  power 
on  some  new  thing.  If  so,  the  supply  will  adapt  itself  accordingly, 
and  the  values  of  things  will  continue  to  conform  to  their  cost 
of  production.  At  any  rate,  it  is  a sheer  absurdity  that  all  things 
should  fall  in  value,  and  that  all  producers  should,  in  consequence, 
be  insufficiently  remunerated.  If  values  remain  the  same,  what 
becomes  of  prices  is  immaterial,  since  the  remuneration  of  producers 
does  not  depend  on  how  much  money,  but  on  how  much  of  consum- 
able articles,  they  obtain  for  their  goods.  Besides,  money  is  a 
commodity  ; and  if  all  commodities  are  supposed  to  be  doubled  in 
quantity,  we  must  suppose  money  to  be  doubled  too,  and  then  prices 
would  no  more  fall  than  values  would. 

§ 3.  A general  over-supply,  or  excess  of  all  commodities 
above  the  demand,  so  far  as  demand  consists  in  means  of  payment, 
is  thus  shown  to  be  an  impossibility.  But  it  may  perhaps  be  sup- 
posed that  it  is  not  the  ability  to  purchase,  but  the  desire  to  possess, 
that  falls  short,  and  that  the  general  produce  of  industry  may  be 
greater  than  the  community  desires  to  consume — the  part,  at  least, 
of  the  community  which  has  an  equivalent  to  give.  It  is  evident 
enough  that  produce  makes  a market  for  produce,  and  that  there  is 
wealth  in  the  country  with  which  to  purchase  all  the  wealth  in  the 
country  ; but  those  who  have  the  means  may  not  have  the  wants, 
and  those  who  have  the  wants  may  be  without  the  means.  A 
portion,  therefore,  of  the  commodities  produced  may  be  unable 
to  find  a market  from  the  absence  of  means  in  those  who  have 
the  desire  to  consume,  and  the  want  of  desire  in  those  who  have 
the  means. 

This  is  much  the  most  plausible  form  of  the  doctrine,  and  does 


EXCESS  OF  SUPPLY 


559 


not,  like  that  which  we  first  examined,  involve  a contradiction. 
There  may  easily  be  a greater  quantity  of  any  particular  commodity 
than  is  desired  by  those  who  have  the  ability  to  purchase,  and  it  is 
abstractedly  conceivable  that  this  might  be  the  case  with  all  com- 
modities. The  error  is  in  not  perceiving  that  though  all  who  have 
an  equivalent  to  give  might  be  fully  provided  with  every  consumable 
article  which  they  desire,  the  fact  that  they  go  on  adding  to  the 
production  proves  that  this  is  not  actually  the  case.  Assume  the 
most  favourable  hypothesis  for  the  purpose,  that  of  a limited  com- 
munity, every  member  of  which  possesses  as  much  of  necessaries 
and  of  all  known  luxuries  as  he  desires  : and  since  it  is  not  conceiv- 
able that  persons  whose  wants  were  completely  satisfied  would  labour 
and  economise  to  obtain  what  they  did  not  desire,  suppose  that  a 
foreigner  arrives  and  produces  an  additional  quantity  of  something 
of  which  there  was  already  enough.  Here,  it  will  be  said,  is  over- 
production : true,  I reply ; over-production  of  that  particular 
article  : the  community  wanted  no  more  of  that,  but  it  wanted 
something.  The  old  inhabitants,  indeed,  wanted  nothing  ; but  did 
not  the  foreigner  himself  want  something  ? When  he  produced 
the  superfluous  article,  was  he  labouring  without  a motive  ? He  has 
produced,  but  the  wrong  thing  instead  of  the  right.  He  wanted, 
perhaps,  food,  and  has  produced  watches,  with  which  everybody  was 
sufiiciently  supplied.  The  new  comer  brought  with  him  into  the 
country  a demand  for  commodities,  equal  to  all  that  he  could  produce 
by  his  industry,  and  it  was  his  business  to  see  that  the  supply  he 
brought  should  be  suitable  to  that  demand.  If  he  could  not  produce 
something  capable  of  exciting  a new  want  or  desire  in  the  community, 
for  the  satisfaction  of  which  some  one  would  grow  more  food  and  give 
it  to  him  in  exchange,  he  had  the  alternative  of  growing  food  for 
himself ; either  on  fresh  land,  if  there  was  any  unoccupied,  or  as  a 
tenant,  or  partner,  or  servant,  of  some  former  occupier,  willing  to  be 
partially  relieved  from  labour.  He  has  produced  a thing  not  wanted 
instead  of  what  was  wanted ; and  he  himself,  perhaps,  is  not  the 
kind  of  producer  who  is  wanted  ; but  there  is  no  over-production  ; 
production  is  not  excessive,  but  merely  ill  assorted.  We  saw  before, 
that  whoever  brings  additional  commodities  to  the  market,  brings 
an  additional  power  of  purchase ; we  now  see  that  he  brings  also 
an  additional  desire  to  consume ; since  if  he  had  not  that  desire, 
he  would  not  have  troubled  himself  to  produce.  Neither  of  the 
elements  of  demand,  therefore,  can  be  wanting,  when  there  is  an 
additional  supply  ; though  it  is  perfectly  possible  that  the  demand 


660  BOOK  III.  CHAPTER  XIV.  § 4 

may  be  for  one  thing,  and  the  supply  may  unfortunately  consist  of 
another. 

Driven  to  his  last  retreat,  an  opponent  may  perhaps  allege  that 
there  are  persons  who  produce  and  accumulate  from  mere  habit ; 
not  because  they  have  any  object  in  growing  richer,  or  desire  to  add 
in  any  respect  to  their  consumption,  but  from  vis  inertice.  They 
continue  producing  because  the  machine  is  ready  mounted,  and  save 
and  re-invest  their  savings  because  they  have  nothing  on  which  they 
care  to  expend  them.  I grant  that  this  is  possible,  and  in  some  few 
instances  probably  happens  ; but  these  do  not  in  the  smallest  degree 
affect  our  conclusion.  For,  what  do  these  persons  do  with  their 
savings  ? They  invest  them  productively  ; that  is,  expend  them  in 
employing  labour.  In  other  words,  having  a purchasing  power 
belonging  to  them,  more  than  they  know  what  to  do  with,  they  make 
over  the  surplus  of  it  for  the  general  benefit  of  the  labouring  class. 
Now,  will  that  class  also  not  know  what  to  do  with  it  ? Are  we  to 
suppose  that  they  too  have  their  wants  perfectly  satisfied,  and  go  on 
labouring  from  mere  habit  ? Until  this  is  the  case  ; until  the  work- 
ing classes  have  also  reached  the  point  of  satiety — there  will  be  no 
want  of  demand  for  the  produce  of  capital,  however  rapidly  it  may 
accumulate  ; since,  if  there  is  nothing  else  for  it  to  do,  it  can  always 
find  employment  in  producing  the  necessaries  or  luxuries  of  the 
labouring  class.  And  when  they  too  had  no  further  desire  for 
necessaries  or  luxuries,  they  would  take  the  benefit  of  any  further 
increase  of  wages  by  diminishing  their  work ; so  that  the  over- 
production which  then  for  the  first  tiifie  would  be  possible  in  idea, 
could  not  even  then  take  place  in  fact,  for  want  of  labourers. 
Thus,  in  whatever  manner  the  question  is  looked  at,  even  though 
we  go  to  the  extreme  verge  of  possibihty  to  invent  a supposition 
favourable  to  it,  the  theory  of  general  over-production  imphes  an 
absurdity. 

§ 4.  What  then  is  it  by  which  men  who  have  reflected  much  on 
economical  phenomena,  and  have  even  contributed  to  throw  new 
fight  upon  them  by  original  speculations,  have  been  led  to  embrace 
so  irrational  a doctrine  ? I conceive  them  to  have  been  deceived 
by  a mistaken  interpretation  of  certain  mercantile  facts.  They 
imagined  that  the  possibility  of  a general  over-supply  of  commodities 
was  proved  by  experience.  They  believed  that  they  saw  this 
phenomenon  in  certain  conditions  of  the  markets,  the  true  explana- 
tion of  which  is  totally  different. 


EXCESS  OF  SUPPLY 


661 


I have  already  described  the  state  of  the  markets  for  commodities 
which  accompanies  what  is  termed  a commercial  crisis.  At  such 
times  there  is  really  an  excess  of  all  commodities  above  the  money 
demand  : in  other  words,  there  is  an  under-supply  of  money.  From 
the  sudden  annihilation  of  a great  mass  of  credit,  every  one  dislikes 
to  part  with  ready  money,  and  many  are  anxious  to  procure  it  at 
any  sacrifice.  Almost  everybody  therefore  is  a seller,  and  there  are 
scarcely  any  buyers  ; so  that  there  may  really  be,  though  only  while 
the  crisis  lasts,  an  extreme  depression  of  general  prices,  from  what 
may  be  indiscriminately  called  a glut  of  commodities  or  a dearth  of 
money.  But  it  is  a great  error  to  suppose,  with  Sismondi,  that  a 
commercial  crisis  is  the  effect  of  a general  excess  of  production. 
It  is  simply  the  consequence  of  an  excess  of  speculative  purchases. 
It  is  not  a gradual  advent  of  low  prices,  but  a sudden  recoil  from 
prices  extravagantly  high  : its  immediate  cause  is  a contraction 
of  credit,  and  the  remedy  is,  not  a diminution  of  supply,  but  the 
restoration  of  confidence.  It  is  also  evident  that  this  temporary 
derangement  of  markets  is  an  evil  only  because  it  is  temporary. 
The  fall  being  solely  of  money  prices,  if  prices  did  not  rise  again  no 
dealer  would  lose,  since  the  smaller  price  would  be  worth  as  much  to 
him  as  the  larger  price  was  before.  In  no  manner  does  this  pheno- 
menon answer  to  the  description  which  these  celebrated  economists 
have  given  of  the  evil  of  over-production.  The  permanent  decline 
in  the  circumstances  of  producers,  for  want  of  markets,  which  those 
writers  contemplate,  is  a conception  to  which  the  nature  of  a com- 
mercial crisis  gives  no  supporl. 

The  other  phenomenon  from  which  the  notion  of  a general  excess  of 
wealth  and  superfluity  of  accumulation  seems  to  derive  countenance, 
is  one  of  a more  permanent  nature,  namely,  the  fall  of  profits  and 
interest  which  naturally  takes  place  with  the  progress  of  population 
and  production.  The  cause  of  this  decline  of  profit  is  the  increased 
cost  of  maintaining  labour,  which  results  from  an  increase  of  popula- 
tion and  of  the  demand  for  food,  outstripping  the  advance  of  agri- 
cultural improvement.  This  important  feature  in  the  economical 
progress  of  nations  will  receive  full  consideration  and  discussion  in 
the  succeeding  Book.*  It  is  obviously  a totally  different  thing 
from  a want  of  market  for  commodities,  though  often  confounded 
with  it  in  the  complaints  of  the  producing  and  trading  classes. 
The  true  interpretation  of  the  modern  or  present  state  of  industrial 
economy  is  that  there  is  hardly  any  amount  of  business  which  may 
* Infra,  book  iv.  chap.  4. 


662 


BOOK  m.  CHAPTER  XIV.  f 4 


not  be  done,  if  people  will  be  content  to  do  it  on  small  profits  ; and 
this  all  active  and  intelligent  persons  in  business  perfectly  well  know ; 
but  even  those  who  comply  with  the  necessities  of  their  time,  grumble 
at  what  they  comply  with,  and  wish  that  there  were  less  capital, 
or,  as  they  express  it,  less  competition,  in  order  that  there  might  be 
greater  profits.  Low  profits,  however,  are  a different  thing  from 
deficiency  of  demand ; and  the  production  and  accumulation 
which  merely  reduce  profits,  cannot  be  called  excess  of  supply 
or  of  production.  What  the  phenomenon  really  is,  and  its  effects 
and  necessary  limits,  will  be  seen  when  we  treat  of  that  express 
subject. 

I know  not  of  any  economical  facts,  except  the  two  I have  speci- 
fied, which  can  have  given  occasion  to  the  opinion  that  a general 
over-production  of  commodities  ever  presented  itself  in  actual  experi- 
ence. I am  convinced  that  there  is  no  fact  in  commercial  affairs 
which,  in  order  to  its  explanation,  stands  in  need  of  that  chimerical 
supposition. 

The  point  is  fundamental ; any  difference  of  opinion  on  it  involves 
radically  different  conceptions  of  Political  Economy,  especially  in 
its  practical  aspect.  On  the  one  view,  we  have  only  to  consider  how 
a sufficient  production  may  be  combined  with  the  best  possible 
distribution  ; but,  on  the  other,  there  is  a third  thing  to  be  considered 
— how  a market  can  be  created  for  produce,  or  how  production  can 
be  limited  to  the  capabilities  of  the  market.  Besides,  a theory  so 
essentially  self-contradictory  cannot  intrude  itself  without  carrying 
confusion  into  the  very  heart  of  the  subject,  and  making  it  impossible 
even  to  conceive  with  any  distinctness  many  of  the  more  compli- 
cated economical  workings  of  society.  This  error  has  been,  I 
conceive,  fatal  to  the  systems,  as  systems,  of  the  three  distinguished 
economists  to  whom  I before  referred,  Malthus,  Chalmers,  and  Sis- 
mondi ; all  of  whom  have  admirably  conceived  and  explained  several 
of  the  elementary  theorems  of  political  economy,  but  this  fatal 
misconception  has  spread  itself  like  a veil  between  them  and  the  more 
difficult  portions  of  the  subject,  not  suffering  one  ray  of  light  to  pene- 
trate. Still  more  is  this  same  confused  idea  constantly  crossing  and 
bewildering  the  speculations  of  minds  inferior  to  theirs.  It  is  but 
justice  to  two  eminent  names  to  call  attention  to  the  fact,  that  the 
merit  of  having  placed  this  most  important  point  in  its  true  light 
belongs  principally,  on  the  Continent,  to  the  judicious  J.  B.  Say, 
and  in  this  country  to  Mr.  [James]  Mill ; who  (besides  the  conclusive 
exposition  which  he  gave  of  the  subject  in  his  Elements  of  Political 


EXCESS  OF  SUPPLY 


663 


Economy)  had  set  forth  the  correct  doctrine  with  great  force  and 
clearness  in  an  early  pamphlet,  called  forth  by  a temporary  contro- 
versy, and  entitled  Commerce  Defended;  the  first  of  his  writings 
which  attained  any  celebrity,  and  which  he  prized  more  as  having 
been  his  first  introduction  to  the  friendship  of  David  Ricardo,  the 
most  valued  and  most  intimate  friendship  of  his  life. 


CHAPTEK  XV 


OP  A MEASURE  OP  VALUE 

§ 1.  There  lias  been  much  discussion  among  political  econo- 
mists respecting  a Measure  of  Value.  An  importance  has  been 
attached  to  the  subject  greater  than  it  deserved,  and  what  has 
been  written  respecting  it  has  contributed  not  a HtMe  to  the  reproach 
of  logomachy,  which  is  brought,  with  much  exaggeration,  but  not 
altogether  without  ground,  against  the  speculations  of  political 
economists.  It  is  necessary,  however,  to  touch  upon  the  subject,  if 
only  to  show  how  little  there  is  to  be  said  on  it. 

A Measure  of  Value,  in  the  ordinary  sense  of  the  word  measure, 
would  mean  something  by  comparison  with  which  we  may  ascer- 
tain what  is  the  value  of  any  other  thing.  When  we  consider  farther, 
that  value  itself  is  relative,  and  that  two  things  are  necessary  to 
constitute  it,  independently  of  the  third  thing  which  is  to  measure  it ; 
we  may  define  a Measure  of  Value  to  be  something,  by  comparing 
with  which  any  two  other  things,  we  may  infer  their  value  in  relation 
to  one  another. 

In  this  sense,  any  commodity  will  serve  as  a measure  of  value  at 
a given  time  and  place ; since  we  can  always  in|er  the  proportion  in 
which  things  exchange  for  one  another,  when  we  know  the  propor- 
tion in  which  each  exchanges  for  any  third  thing.  To  serve  as  a 
convenient  measure  of  value  is  one  of  the  functions  of  the  commodity 
selected  as  a medium  of  exchange.  It  is  in  that  commodity  that  the 
values  of  all  other  things  are  habitually  estimated.  We  say  that  one 
thing  is  worth  2Z.,  another  3?. ; and  it  is  then  known,  without  express 
statement,  that  one  is  worth  two-thirds  of  the  other,  or  that  the 
things  exchange  for  one  another  in  the  proportion  of  2 to  3.  Money 
is  a complete  measure  of  their  value. 

But  the  desideratum  sought  by  political  economists  is  not  a 
measure  of  the  value  of  things  at  the  same  time  and  place,  but  a 
measure  of  the  value  of  the  same  thing  at  different  times  and  places : 


MEASURE  OF  VALUE 


666 


something  by  comparison  with  which  it  may  be  known  whether  any 
given  thing  is  of  greater  or  less  value  now  than  a century  ago,  or  in 
this  country  than  in  America  or  China.  And  for  this  also,  money, 
or  any  other  commodity,  will  serve  quite  as  well  as  at  the  same  time 
and  place,  provided  we  can  obtain  the  same  data  ; provided  we  are 
able  to  compare  with  the  measure  not  one  commodity  only,  but  the 
two  or  more  which  are  necessary  to  the  idea  of  value.  If  wheat  is 
now  [1852]  40s.  the  quarter,  and  a fat  sheep  the  same,  and  if  in  the 
time  of  Henry  the  Second  wheat  was  20s.,  and  a sheep  10s.,  we  know 
that  a quarter  of  wheat  was  then  worth  two  sheep,  and  is  now  only 
worth  one,  and  that  the  value  therefore  of  a sheep,  estimated  in 
wheat,  is  twdce  as  great  as  it  was  then  ; quite  independently  of  the 
value  of  money  at  the  two  periods,  either  in  relation  to  those  two 
articles  (in  respect  to  both  of  which  we  suppose  it  to  have  fallen),  or 
to  other  commodities  in  respect  to  which  we  need  not  make  any 
supposition. 

What  seems  to  be  desired,  however,  by  writers  on  the  subject,  is 
some  means  of  ascertaining  the  value  of  a commodity  by  merely 
comparing  it  with  the  measure,  without  referring  it  specially  to  any 
other  given  commodity.  They  would  wish  to  be  able,  from  the  mere 
fact  that  wheat  is  now  40s.  the  quarter,  and  was  formerly  20s.,  to 
decide  whether  wheat  has  varied  in  its  value,  and  in  what  degree, 
without  selecting  a second  commodity,  such  as  a sheep,  to  compare 
it  with  ; because  they  are  desirous  of  knowing,  not  how  much 
wheat  has  varied  in  value  relatively  to  sheep,  but  how  much  it  has 
varied  relatively  to  things  in  general. 

The  first  obstacle  arises  from  the  necessary  indefiniteness  of  the 
idea  of  general  exchange  value — value  in  relation  not  to  some  one 
commodity,  but  to  commodities  at  large.  Even  if  we  knew  exactly 
how  much  a quarter  of  wheat  would  have  purchased,  at  the  earlier 
period,  of  every  marketable  article  considered  separately,  and  that 
it  will  now  purchase  more  of  some  things  and  less  of  others,  we  should 
often  find  it  impossible  to  say  whether  it  had  risen  or  fallen  in  rela- 
tion to  things  in  general.  How  much  more  impossible,  when  we 
only  know  how  it  has  varied  in  relation  to  the  measure.  To  enable 
the  money  price  of  a thing  at  two  different  periods  to  measure  the 
quantity  of  things  in  general  which  it  will  exchange  for,  the  same 
sum  of  money  must  correspond  at  both  periods  to  the  same  quantity 
of  things  in  general,  that  is,  money  must  always  have  the  same 
exchange  value,  the  same  general  purchasing  power.  Now,  not 
only  is  this  not  true  of  money,  or  of  any  other  commodity,  but  we 


666  BOOK  III.  CHAPTER  XV.  § 2 

cannot  even  suppose  any  state  of  circumstances  in  wHch  it  would 
be  true. 

§ 2.  A measure  of  exchange  value,  therefore,  being  impossible, 
writers  have  formed  a notion  of  something,  under  the  name  of  a 
measure  of  value,  which  would  be  more  properly  termed  a in<^ure  of 
eost  of  production.  They  have  imagined  a commodity  invariably 
produced  by  the  same  quantity  of  labour ; to  which  supposition  it 
is  necessary  to  add,  that  the  fixed  capital  employed  in  the  production 
must  bear  always  the  same  proportion  to  the  wages  of  the  immediate 
labour,  and  must  be  always  of  the  same  durability  : in  short,  the 
same  capital  must  be  advanced  for  the  same  length  of  time,  so  that 
the  element  of  value  which  consists  of  profits,  as  well  as  that  which 
consists  of  wages,  may  be  unchangeable.  We  should  then  have  a 
commodity  always  produced  under  one  and  the  same  combination 
of  all  the  circumstances  which  affect  permanent  value.  Such  a 
commodity  would  be  by  no  means  constant  in  its  exchange  value ; 
for  (even  without  reckoning  the  temporary  fluctuations  arising  from 
supply  and  demand)  its  exchange  value  would  be  altered  by  every 
change  in  the  circumstances  of  production  of  the  things  against 
which  it  was  exchanged.  But  if  there  existed  such  a commodity, 
we  should  derive  this  advantage  from  it,  that  whenever  any  other 
thing  varied  permanently  in  relation  to  it,  we  should  know  that  the 
cause  of  variation  was  not  in  it,  but  in  the  other  thing.  It  would 
thus  be  suited  to  serve  as  a measure,  not  indeed  of  the  value  of  other 
things,  but  of  their  cost  of  production.  If  a commodity  acquired  a 
greater  permanent  purchasing  power  in  relation  to  the  invariable 
commodity,  its  cost  of  production  must  have  become  greater ; and 
in  the  contrary  case,  less.  This  measure  of  cost  is  what  political 
economists  have  generally  meant  by  a measure  of  value. 

But  a measure  of  cost,  though  perfectly  conceivable,  can  no 
more  exist  in  fact,  than  a measure  of  exchange  value.  There  is  no 
commodity  which  is  invariable  in  its  cost  of  production.  Gold  and 
silver  are  the  least  variable,  but  even  these  are  liable  to  changes  in 
their  cost  of  production,  from  the  exhaustion  of  old  sources  of  supply, 
the  discovery  of  new,  and  improvements  in  the  mode  of  working. 
If  we  attempt  to  ascertain  the  changes  in  the  cost  of  production  of 
any  commodity  from  the  changes  in  its  money  price,  the  conclusion 
will  require  to  be  corrected  by  the  best  allowance  we  can  make  for  the 
intermediate  changes  in  the  cost  of  the  production  of  money  itself. 

Adam  Smith  fancied  that  there  were  two  commodities  peculiarly 


MEASURE  OF  VALUE 


667 


fitted  to  serve  as  a measure  of  value  : corn,  and  labour.  Of  com, 
he  said  that  although  its  value  fluctuates  much  from  year  to  year,  it 
does  not  vary  greatly  from  century  to  century.  This  we  now  know 
to  be  an  error  : corn  tends  to  rise  in  cost  of  production  with  every 
increase  of  population,  and  to  fall  with  every  improvement  in  agri- 
culture, either  in  the  country  itself,  or  in  any  foreign  country  from 
which  it  draws  a portion  of  its  supplies.  The  supposed  constancy 
of  the  cost  of  the  production  of  corn  depends  on  the  maintenance  of 
a complete  equipoise  between  these  antagonizing  forces,  an  equipoise 
which,  if  ever  realized,  can  only  be  accidental.  With  respect  to 
labour  as  a measure  of  value,  the  language  of  Adam  Smith  is  not 
uniform.  He  sometimes  speaks  of  it  as  a good  measure  only  for 
short  periods,  saying  that  the  value  of  labour  (or  wages)  does  not 
vary  much  from  year  to  year,  though  it  does  from  generation  to 
generation.  On  other  occasions  he  speaks  as  if  labour  were  intrinsi- 
cally the  most  proper  measure  of  value,  on  the  ground  that  one  day’s 
ordinary  muscular  exertion  of  one  man,  may  be  looked  upon  as 
always,  to  him,  the  same  amount  of  effort  or  sacrifice.  But  this 
proposition,  whether  in  itself  admissible  or  not,  discards  the  idea  of 
exchange  value  altogether,  substituting  a totally  different  idea, 
more  analogous  to  value  in  use.  If  a day’s  labour  will  purchase 
in  America  twice  as  much  of  ordinary  consumable  articles  as  in 
England,  it  seems  a vain  subtlety  to  insist  on  saying  that  labour  is 
of  the  same  value  in  both  countries,  and  that  it  is  the  value  of  the 
other  things  which  is  different.  Labour,  in  this  case,  may  be  cor- 
rectly said  to  be  twice  as  valuable,  both  in  the  market  and  to  the 
labourer  himself,  in  America  as  in  England. 

If  the  object  were  to  obtain  an  approximate  measure  by  which 
to  estimate  value  in  use,  perhaps  nothing  better  could  be  chosen 
than  one  day’s  subsistence  of  an  average  man,  reckoned  in  the 
ordinary  food  consumed  by  the  class  of  unskilled  labourers.  If  in 
any  country  a pound  of  maize  fiour  will  support  a labouring  man  for 
a day,  a thing  might  be  deemed  more  or  less  valuable  in  proportion 
to  the  number  of  pounds  of  maize  flour  it  exchanged  for.  If  one 
thing,  either  by  itself  or  by  what  it  would  purchase,  could  maintain 
a labouring  man  for  a day,  and  another  could  maintain  him  for  a 
week,  there  would  be  some  reason  in  saying  that  the  one  was  worth, 
for  ordinary  human  uses,  seven  times  as  much  as  the  other.  But  this 
would  not  measure  the  worth  of  the  thing  to  its  possessor  for  his  own 
purposes,  which  might  be  greater  to  any  amount,  though  it  could  not 
be  less,  than  the  worth  of  the  food  which  the  thing  would  purchase. 


668 


BOOK  III.  CHAPTER  XV.  § 2 


The  idea  of  a Measure  of  Value  must  not  be  confounded  with  the 
idea  of  the  regulator,  or  determining  principle,  of  value.  When  it  is 
said  by  Kicardo  and  others,  that  the  value  of  a thing  is  regulated 
by  quantity  of  labour,  they  do  not  mean  the  quantity  of  labour  for 
which  the  thing  will  exchange,  but  the  quantity  required  for  pro- 
ducing it.  This,  they  mean  to  affirm,  determines  its  value  ; causes 
it  to  be  of  the  value  it  is,  and  of  no  other.  But  when  Adam  Smith 
and  Malthus  say  that  labour  is  a measure  of  value,  they  do  not 
mean  the  labour  by  which  the  thing  was  or  can  be  made,  but  the 
quantity  of  labour  which  it  will  exchange  for,  or  purchase  ; in  other 
words,  the  value  of  the  thing  estimated  in  labour.  And  they  do  not 
mean  that  this  regulates  the  general  exchange  value  of  the  thing,  or 
has  any  effect  in  determining  what  that  value  shall  be,  but  only 
ascertains  what  it  is,  and  whether  and  how  much  it  varies  from  time 
to  time  and  from  place  to  place.  To  confound  these  two  ideas 
would  be  much  the  same  thing  as  to  overlook  the  distinction  between 
the  thermometer  and  the  fire. 


CHAPTER  XVI 


OF  SOME  PECULIAR  CASES  OP  VALUE 

§ 1.  The  general  laws  of  value,  in  all  the  more  important 
cases  of  the  interchange  of  commodities  in  the  same  country,  have 
now  been  investigated.  We  examined,  first,  the  case  of  monopoly, 
in  which  the  value  is  determined  by  either  a natural  or  an  artificial 
hmitation  of  quantity,  that  is,  by  demand  and  supply ; secondly, 
the  case  of  free  competition,  when  the  article  can  be  produced  in 
indefinite  quantity  at  the  same  cost ; in  which  case  the  permanent 
value  is  determined  by  the  cost  of  production,  and  only  the  fluctua- 
tions by  supply  and  demand;  thirdly,  a mixed  case,  that  of  the 
articles  which  can  be  produced  in  indefinite  quantity,  but  not  at  the 
same  cost ; in  which  case  the  permanent  value  is  determined  by 
the  greatest  cost  which  it  is  necessary  to  incur  in  order  to  obtain 
the  required  supply.  And  lastly,  we  have  found  that  money  itself 
is  a commodity  of  the  third  class ; that  its  value,  in  a state  of 
freedom,  is  governed  by  the  same  laws  as  the  values  of  other  com- 
modities of  its  class  ; and  that  prices,  therefore,  follow  the  same 
laws  as  values. 

From  this  it  appears  that  demand  and  supply  govern  the  fluctua- 
tions of  values  and  prices  in  all  cases,  and  the  permanent  values  and 
prices  of  all  things  of  which  the  supply  is  determined  by  any  agency 
other  than  that  of  free  competition  : but  that,  under  the  regime  of 
competition,  things  are,  on  the  average,  exchanged  for  each  other 
at  such  values,  and  sold  at  such  prices,  as  afford  equal  expecta- 
tion of  advantage  to  all  classes  of  producers  ; which  can  only  be 
when  things  exchange  for  one  another  in  the  ratio  of  their  cost  of 
production. 

It  is  now,  however,  necessary  to  take  notice  of  certain  cases,  to 
which,  from  their  peculiar  nature,  this  law  of  exchange  value  is 
inapplicable. 

It  sometimes  happens  that  two  different  commodities  have  what 


670 


BOOK  III.  CHAPTER  XVI.  § 1 


may  be  termed  a joint  cost  of  production.  They  are  both  products 
of  the  same  operation,  or  set  of  operations,  and  the  outlay  is  incurred 
for  the  sake  of  both  together,  not  part  for  one  and  part* for  the  other. 
The  same  outlay  would  have  to  be  incurred  for  either  of  the  two,  if 
the  other  were  not  wanted  or  used  at  all.  There  are  not  a few  in- 
stancee  of  commodities  thus  associated  in  their  production : for 
example,  coke  and  coal-gas  are  both  produced  from  the  same 
material,  and  by  the  same  operation.  In  a more  partial  sense, 
mutton  and  wool  are  an  example  : beef,  hides,  and  tallow  : calves 
and  dairy  produce : chickens  and  eggs.  Cost  of  production  can 
have  nothing  to  do  with  deciding  the  value  of  the  associated  com- 
modities relatively  to  each  other.  It  only  decides  their  joint  value. 
The  gas  and  the  coke  together  have  to  repay  the  expenses  of  their 
production,  with  the  ordinary  profit.  To  do  this,  a given  quantity 
of  gas,  together  with  the  coke  which  is  the  residuum  of  its  manufac- 
ture, must  exchange  for  other  things  in  the  ratio  of  their  joint  cost 
of  production.  But  how  much  of  the  remuneration  of  the  producer 
shall  be  derived  from  the  coke,  and  how  much  from  the  gas,  remains 
to  be  decided.  Cost  of  production  does  not  determine  their  prices, 
but  the  sum  of  their  prices.  A principle  is  wanting  to  apportion 
the  expenses  of  production  between  the  two. 

Since  cost  of  production  here  fails  us,  we  must  revert  to  a law  of 
value  anterior  to  cost  of  production,  and  more  fundamental,  the  law 
of  demand  and  supply.  The  law  is,  that  the  demand  for  a com- 
modity varies  with  its  value,  and  that  the  value  adjusts  itself  so  that 
the  demand  shall  be  equal  to  the  supply.  This  supplies  the  principle 
of  repartition  which  we  are  in  quest  of. 

Suppose  that  a certain  quantity  of  gas  is  produced  and  sold  at  a 
certain  price,  and  that  the  residuum  of  coke  is  offered  at  a price  which, 
together  with  that  of  the  gas,  repays  the  expenses  with  the  ordinary 
rate  of  profit.  Suppose,  too,  that  at  the  price  put  upon  the  gas  and 
coke  respectively,  the  whole  of  the  gas  finds  an  easy  market,  without 
either  surplus  or  deficiency,  but  that  purchasers  cannot  be  found 
for  all  the  coke  corresponding  to  it.  The  coke  will  be  offered  at  a 
lower  price  in  order  to  force  a market.  But  this  lower  price,  to- 
gether with  the  price  of  the  gas,  will  not  be  remunerating : the 
manufacture,  as  a whole,  will  not  pay  its  expenses  with  the  ordinary 
profit,  and  will  not,  on  these  terms,  continue  to  be  carried  on.  The 
gas,  therefore,  must  be  sold  at  a higher  price,  to  make  up  for  the 
deficiency  on  the  coke.  The  demand  consequently  contracting,  the 
production  will  be  somewhat  reduced  ; and  prices  will  become 


SOME  PECULIAR  CASES  OF  VALUE 


671 


stationary  when,  by  the  joint  effect  of  the  rise  of  gas  and  the  fall  of 
coke,  so  much  less  of  the  first  is  sold,  and  so  much  more  of  the  second, 
that  there  is  now  a market  for  all  the  coke  which  results  from  the 
existing  extent  of  the  gas  manufacture. 

Or  suppose  the  reverse  case ; that  more  coke  is  wanted  at  the 
present  prices,  than  can  be  supplied  by  the  operations  required  by 
the  existing  demand  for  gas.  Coke,  being  now  in  deficiency,  will 
rise  in  price.  The  whole  operation  will  yield  more  than  the  usual 
rate  of  profit,  and  additional  capital  will  be  attracted  to  the  manu- 
facture. The  unsatisfied  demand  for  coke  will  be  supplied  ; but  this 
cannot  be  done  without  increasing  the  supply  of  gas  too  ; and  as  the 
existing  demand  was  fully  supplied  already,  an  increased  quantity 
can  only  find  a market  by  lowering  the  price.  The  result  will  be 
that  the  two  together  will  yield  the  return  required  by  their  joint 
cost  of  production,  but  that  more  of  this  return  than  before  will  be 
furnished  by  the  coke,  and  less  by  the  gas.  Equilibrium  will  be 
attained  when  the  demand  for  each  article  fits  so  well  with  the 
demand  for  the  other,  that  the  quantity  required  of  each  is  exactly 
as  much  as  is  generated  in  producing  the  quantity  required  of  the 
other.  If  there  is  any  surplus  or  deficiency  on  either  side  ; if  there 
is  a demand  for  coke,  and  not  a demand  for  all  the  gas  produced  along 
with  it,  or  vice  versd  ; the  values  and  prices  of  the  two  things  will  so 
readjust  themselves  that  both  shall  find  a market. 

When,  therefore,  two  or  more  commodities  have  a joint  cost  of 
production,  their  natural  values  relatively  to  each  other  are  those 
which  will  create  a demand  for  each,  in  the  ratio  of  the  quantities  in 
which  they  are  sent  forth  by  the  productive  process.  This  theorem 
is  not  in  itself  of  any  great  importance  : but  the  illustration  it  affords 
of  the  law  of  demand,  and  of  the  mode  in  which,  when  cost  of  pro- 
duction fails  to  be  applicable,  the  other  principle  steps  in  to  supply 
the  vacancy,  is  worthy  of  particular  attention,  as  we  shall  find  in  the 
next  chapter  but  one  that  something  very  similar  takes  place  in 
cases  of  much  greater  moment. 

§ 2.  Another  case  of  value  which  merits  attention,  is  that  of 
the  different  kinds  of  agricultural  produce.  This  is  rather  a more 
complex  question  than  the  last,  and  requires  that  attention  should 
be  paid  to  a greater  number  of  influencing  circumstances. 

The  case  would  present  nothing  peculiar,  if  different  agricultural 
products  were  either  grown  indiscriminately  and  with  equal  advan- 
tage on  the  same  soils,  or  wholly  on  different  soils.  The  difficulty 


672 


BOOK  III.  CHAPTER  XVI.  § 2 


arises  from  two  things  : first,  that  most  soils  are  fitter  for  one  kind 
of  produce  than  another,  without  being  absolutely  unfit  for  any ! 
and  secondly,  the  rotation  of  crops. 

For  simplicity  we  will  confine  our  supposition  to  two  kinds  of 
agricultural  produce ; for  instance,  wheat  and  oats.  If  all  soils 
were  equally  adapted  for  wheat  and  for  oats,  both  would  be 
grown  indiscriminately  on  all  soils,  and  their  relative  cost  of  produc- 
tion, being  the  same  everywhere,  would  govern  their  relative  value 
If  the  same  labour  which  grows  three  quarters  of  wheat  on  any  given 
soil,  would  always  grow  on  that  soil  five  quarters  of  oats,  the  three 
and  the  five  quarters  would  be  of  the  same  value.  If,  again,  wheat 
and  oats  could  not  be  grown  on  the  same  soil  at  all,  the  value  of  each 
would  be  determined  by  its  pecuhar  cost  of  production  on  the  least 
favourable  of  the  soils  adapted  for  it  which  the  existing  demand 
required  a recourse  to.  The  fact,  however,  is  that  both  wheat  and 
oats  can  be  grown  on  almost  any  soil  which  is  capable  of  producing 
either  : but  some  soils,  such  as  the  stiff  clays,  are  better  adapted  for 
wheat,  while  others  (the  light  sandy  soils)  are  more  suitable  for  oats. 
There  might  be  some  soils  which  would  yield,  to  the  same  quantity 
of  labour,  only  four  quarters  of  oats  to  three  of  wheat ; others 
perhaps  less  than  three  of  wheat  to  five  quarters  of  oats.  Among 
these  diversities,  what  determines  the  relative  value  of  the  two 
things  ? 

It  is  evident  that  each  grain  will  be  cultivated  in  preference 
on  the  soils  which  are  better  adapted  for  it  than  for  the  other  ; and 
if  the  demand  is  supphed  from  these  alone,  the  values  of  the  two 
grains  will  have  no  reference  to  one  another.  But  when  the  demand 
for  both  is  such  as  to  require  that  each  should  be  grown  not  only  on 
the  soils  peculiarly  fitted  for  it,  but  on  the  medium  soils  which, 
without  being  specifically  ^adapted  to  either,  are  about  equally  suited 
for  both,  the  cost  of  production  on  those  medium  soils  will  determine 
the  relative  value  of  the  two  grains ; while  the  rent  of  the  soils 
specifically  adapted  to  each  will  be  regulated  by  their  productive 
power,  considered  with  reference  to  that  one  alone  to  which  they  are 
pecuharly  applicable.  Thus  far  the  question  presents  no  difficulty 
to  any  one  to  whom  the  general  principles  of  value  are  familiar. 

It  may  happen,  however,  that  the  demand  for  one  of  the  two, 
as  for  example  wheat,  may  so  outstrip  the  demand  for  the  other,  as 
not  only  to  occupy  the  soils  specially  suited  for  wheat,  but  to  engross 
entirely  those  equally  suitable  to  both,  and  even  encroach  upon  those 
which  are  better  adapted  to  oats.  To  create  an  inducement  for  this 


SOME  PECULIAR  CASES  OF  VALUE 


673 


unequal  apportionment  of  the  cultivation,  wheat  must  be  relatively 
dearer,  and  oats  cheaper,  than  according  to  the  cost  of  their  produc- 
tion on  the  medium  land.  Their  relative  value  must  be  in  proportion 
to  the  cost  on  that  quality  of  land,  whatever  it  may  be,  on  which  the 
comparative  demand  for  the  two  grains  requires  that  both  of  them 
should  be  grown.  If,  from  the  state  of  the  demand,  the  two  cultiva- 
tions meet  on  land  more  favourable  to  one  than  to  the  other,  that 
one  will  be  cheaper  and  the  other  dearer,  in  relation  to  each  other 
and  to  things  in  general,  than  if  the  proportional  demand  were  as  we 
at  first  supposed. 

Here,  then,  we  obtain  a fresh  illustration,  in  a somewhat  different 
manner,  of  the  operation  of  demand,  not  as  an  occasional  disturber 
of  value,  but  as  a permanent  regulator  of  it,  conjoined  with,  or 
supplementary  to,  cost  of  production. 

The  case  of  rotation  of  crops  does  not  require  separate  analysis, 
being  a case  of  joint  cost  of  production,  like  that  of  gas  and  coke. 
If  it  were  the  practice  to  grow  white  and  green  crops  on  all  lands  in 
alternate  years,  the  one  being  necessary  as  much  for  the  sake  of  the 
other  as  for  its  own  sake  ; the  farmer  would  derive  his  remuneration 
for  two  years’  expenses  from  one  white  and  one  green  crop,  and  the 
prices  of  the  two  would  so  adjust  themselves  as  to  create  a demand 
which  would  carry  off  an  equal  breadth  of  white  and  of  green  crops. 

There  would  be  Httle  difficulty  in  finding  other  anomalous 
cases  of  value,  which  it  might  be  a useful  exercise  to  resolve  : but  it 
is  neither  desirable  nor  possible,  in  a work  like  the  present,  to  enter 
more  into  details  than  is  necessary  for  the  elucidation  of  principles. 
I now  therefore  proceed  to  the  only  part  of  the  general  theory  of 
exchange  which  has  not  yet  been  touched  upon,  that  of  International 
Exchanges,  or,  to  speak  more  generally,  exchanges  between  distant 
places. 


CHAPTER  XVII 


ON  INTERNATIONAL  TRALE 

$ 1.  The  causes  which  occasion  a commodity  to  be  brought 
from  a distance,  instead  of  being  produced,  as  convenience  would 
seem  to  dictate,  as  near  as  possible  to  the  market  where  it  is  to  be 
sold  for  consumption,  are  usually  conceived  in  a rather  superficial 
manner.  Some  things  it  is  physically  impossible  to  produce,  except 
in  particular  circumstances  of  heat,  soil,  water,  or  atmosphere. 
But  there  are  many  things  which,  though  they  could  be  produced  at 
home  without  difficulty,  and  in  any  quantity,  are  yet  imported  from 
a distance.  The  explanation  which  would  be  popularly  given  of 
this  would  be,  that  it  is  cheaper  to  import  than  to  produce  them : 
and  this  is  the  true  reason.  But  this  reason  itself  requires  that  a 
reason  be  given  for  it.  Of  two  things  produced  in  the  same  place, 
if  one  is  cheaper  than  the  other,  the  reason  is  that  it  can  be  produced 
with  less  labour  and  capital,  or,  in  a word,  at  less  cost.  Is  this  also 
the  reason  as  between  things  produced  in  different  places  ? Are 
things  never  imported  but  from  places  where  they  can  be  produced 
with  less  labour  (or  less  of  the  other  element  of  cost,  time)  than  in  the 
place  to  which  they  are  brought  ? Doeg  the  law,  that  permanent 
value  is  proportioned  to  cost  of  production,  told  good  between 
commodities  produced  in  distant  places,  as  it  does  between  those 
produced  in  adjacent  places  ? 

We  ^aU  find  ttatit  doeo^^  A thing  may  sometimes  be  sold 
cheapest,  by  being  produced  in  some  other  place  than  that  at  which 
it  can  be  produced  with  the  smallest  amount  of  labour  and  abstin- 
ence. England  might  import  corn  from  Poland  and  pay  for  it  in 
cloth,  even  though  England  had  a decided  advantage  over  Poland 
in  the  production  of  both  the  one  and  the  other.  England  might 
send  cottons  to  Portugal  in  exchange  for  wine,  although  Portugal 
might  be  able  to  produce  cottons  with  a less  amount  of  labour  and 
capital  than  England  could. 


INTERNATIONAL  TRADE 


675 


This  could  not  happen  between  adjacent  places.  If  the  north 
bank  of  the  Thames  possessed  an  advantage  over  the  south  bank 
in  the  production  of  shoes,  no  shoes  would  be  produced  on  the  south 
side ; the  shoemakers  would  remove  themselves  and  their  capitals 
to  the  north  bank,  or  would  have  established  themselves  there 
originally  ; for  being  competitors  in  the  same  market  with  those  on 
the  north  side,  they  could  not  compensate  themselves  for  their  dis- 
advantage at  the  expense  of  the  consumer  : the  amount  of  it  would 
fall  entirely  on  their  profits  ; and  they  would  not  long  content  them- 
selves with  a smaller  profit,  when,  by  simply  crossing  a river,  they 
could  increase  it.  But  between  distant  places,  and  especially 
between  diSerent  countries,  profits  may  continue  different ; because 
persons  do  not  usually  remove  themselves  or  their  capitals  to  a 
distant  place  without  a very  strong  motive.  If  capital  removed  to 
remote  parts  of  the  world  as  readily,  and  for  as  small  an  inducement, 
as  it  moves  to  another  quarter  of  the  same  town ; if  people  would 
transport  their  manufactories  to  America  or  China  whenever  they 
could  save  a small  percentage  in  their  expenses  by  it ; profits  would 
be  alike  (or  equivalent)  all  over  the  world,  and  all  things  would  be 
produced  in  the  places  where  the  same  labour  and  capital  would 
produce  them  in  greatest  quantity  and  of  best  quality.  A tendency 
may,  even  now,  be  observed  towards  such  a state  of  things  ; capital 
is  becoming  more  and  more  cosmopolitan  ; there  is  so  much  greater 
similarity  of  manners  and  institutions  than  formerly,  and  so  much 
less  alienation  of  feeling,  among  the  more  civilized  countries,  that 
both  population  and  capital  now  move  from  one  of  those  countries 
to  another  on  much  less  temptation  than  heretofore.  But  there  are 
still  extraordinary  differences,  both  of  wages  and  of  profits,  between 
different  parts  of  the  world.  It  needs  but  a small  motive  to  trans- 
plant capital,  or  even  persons,  from  Warwickshire  to  Yorkshire  ; 
but  a much  greater  to  make  them  remove  to  India,  the  colonies,  or 
Ireland.  To  France,  Germany,  or  Switzerland,  capital  moves  perhaps 
almost  as  readily  as  to  the  colonies  ; the  differences  of  language  and 
government  being  scarcely  so  great  a hindrance  as  climate  and 
distance.  To  countries  still  barbarous,  or,  like  Russia  or  Turkey, 
only  beginning  to  be  civilized,  capital  will  not  migrate,  unless  under 
the  inducement  of  a very  great  extra  profit. 

Between  all  distant  places  therefore  in  some  degree,  but  especially 
between  different  countries  (whether  under  the  same  supreme 
government  or  not),  there  may  exist  great  inequalities  in  the  return 
to  labour  and  capital,  without  causing  them  to  move  from  one  place 


676 


BOOK  III.  CHAPTER  XVIL  § 2 


to  the  other  in  such  quantity  as  to  level  those  inequalities.  The 
capital  belonging  to  a country  will,  to  a great  extent,  remain  in  the 
country,  even  if  there  be  no  mode  of  employing  it  in  which  it  would 
not  be  more  productive  elsewhere.  Yet  even  a country  thus  cir- 
cumstanced might,  and  probably  would,  carry  on  trade  with  other 
countries.  It  would  export  articles  of  some  sort,  even  to  places 
which  could  make  them  with  less  labour  than  itself ; because  those 
countries,  supposing  them  to  have  an  advantage  over  it  in  all  pro- 
ductions, would  have  a greater  advantage  in  some  things  than  in 
others,  and  would  find  it  their  interest  to  import  the  articles  in  which 
their  advantage  was  smallest,  that  they  might  employ  more  of  their 
labour  and  capital  on  those  in  which  it  was  greatest. 

§ 2.  As  I have  said  elsewhere*  after  Eicardo  (the  thinker  who 
has  done  most  towards  clearing  up  this  subjectpf  “ it  is  not  a difference 
in  the  ^solut&JiQSt  ot  production,  which  determines  the  interchange, 
but  a difference  in  the  co^aratim^^.  It  may  be  to  our  advantage 
to  procure  iron  from  Sweden  m exchange  for  cottons,  even  although 
the  mines  of  England  as  well  as  her  manufactories  should  be  more 
productive  than  those  of  Sweden ; for  if  we  have  an  advantage  of 
one-half  in  cottons,  and  only  an  advantage  of  a quarter  in  iron,  and 
could  sell  our  cottons  to  Sweden  at  the  price  which  Sweden  must 
pay  for  them  if  she  produced  them  herself,  we  should  obtain  our  iron 
with  an  advantage  of  one-half  as  well  as  our  cottons.  We  may  often, 
by  trading  with  foreigners,  obtain  their  commodities  at  a smaller 
expense  of  labour  and  capital  than  they  cost  to  the  foreigners  them- 
selves. The  bargain  is  still  advantageous  to  the  foreigner,  because 
the  commodity  which  he  receives  in  exchange,  though  it  has  cost  us 
less,  would  have  cost  him  more.” 

To  illustrate  the  cases  in  which  interchange  of  commodities 
will  not,  and  those  in  which  it  will,  take  place  between  two  countries, 
Mr.  [James]  Mill,  in  his  Elements  of  Political  Economy makes  the 
supposition  that  Poland  has  an  advantage  over  England  in  the  pro- 
duction both  of  cloth  and  of  com.  He  first  supposed  the  advantage 

* Essays  on  some  Unseized  Questions  of  Political  Economy,  Essay  I. 

t [1862]  I at  one  time  believed  Mr.  Ricardo  to  have  been  the  sole  author  of 
the  doctrine  now  universally  received  by  political  economists,  on  the  nature  and 
measure  of  the  benefit  which  a country  derives  from  foreign  trade.  But  Colonel 
Torrens,  by  the  republication  of  one  of  his  early  writings.  The  Economists 
Refuted,  has  established  at  least  a joint  claim  with  Mr.  Ricardo  to  the  origination 
of  the  doctrine,  and  an  exclusive  one  to  its  earliest  publication. 

% Third  ed.  p.  120. 


INTERNATIONAL  TRADE 


677 


to  be  of  equal  amount  in  both  commodities ; the  cloth  and  the  com, 
each  of  which  required  100  days’  labour  in  Poland,  requiring  each 
150  days’  labour  in  England.  “ It  would  follow,  that  the  cloth  of 
150  days’  labour  in  England,  if  sent  to  Poland,  would  be  equal  to  the 
cloth  of  100  days’  labour  in  Poland  ; if  exchanged  for  corn,  therefore, 
it  would  exchange  for  the  corn  of  only  100  days’  labour.  But  the 
corn  of  100  days’  labour  in  Poland  was  supposed  to  bo  the  same 
quantity  with  that  of  150  days’  labour  in  England.  With  150  days’ 
labour  in  cloth,  therefore,  England  would  only  get  as  much  com  in 
Poland,  as  she  could  raise  with  150  days’  labour  at  home  ; and  she 
would,  in  importing  it,  have  the  cost  of  carriage  besides.  In  these 
circumstances  no  exchange  would  take  place.”  In_this  case  the 
comparative  cost  of  the  two  articles  in  England  and  in  Poland  were 
supposed  to  be  the  same,  though  the  absolute  costs  were  different ; 
on -which  supposition  we  see  that  there. would  b^  no  . labour  saved  to 
either  country  by  confining  its  industry  to  one  of  the  two  produc- 
tions^^ importing  the  other. 

It  is  otherwise  when  the  comparative,  and  not  merely  the  absolute 
costs  of  the  two  articles  are  different  in  the  two  countries.  “If,” 
continues  the  same  author,  “ while  the  cloth  produced  with  100  days’ 
labour  in  Poland  was  produced  with  150  days’  labour  in  England, 
the  corn  which  was  produced  in  Poland  with  100  days’  labour  could 
not  be  produced  in  England  with  less  than  200  days’  labour ; an 
adequate  motive  to  exchange  would  immediately  arise.  With  a 
quantity  of  cloth  which  England  produced  with  150  days’  labour, 
she  would  be  able  to  purchase  as  much  corn  in  Poland  as  was  there 
produced  with  100  days’  labour ; but  the  quantity  which  was  there 
produced  with  100  days’  labour,  would  be  as  great  as  the  quantity 
produced  in  England  with  200  days’  labour.”  By  importing  corn, 
therefore,  from  Poland,  and  paying  for  it  with  cloth,  England  would 
obtaiu_fpr  150  days’  labour  what  would  otherwise  cost  her  200^^ 
being  a saving  of  50  days’  labour  on  each  repetition  of  the  trans- 
actioELJ  .and  not  merely  a saving  to  England,  but  a saving  absolutely  ; 
lorit  is  not  obtained  at  the  expense  of  Poland,  who,  with  corn  that 
costs  her  100  days’  labour,  has  purchased  cloth  which,  if  produced  at 
home,  would  have  cost  her  the  same.  Poland,  therefore,  on  this 
supposition,  loses  nothing  ; but  also  she  derives  no  advantage  from 
the  trade,  the  imported  cloth  costing  her  as  much  as  if  it  were  made 
at  home.  To  enable  Poland  to  gain  anything  by  the  interchange, 
something  must  be  abated  from  the  gain  of  England  : the  corn  pro- 
duced in  Poland  by  100  days’  labour  must  be  able  to  purchase  from 

o 


578 


BOOK  III.  CHAPTER  XVII.  § 4 


England  more  clotli  than  Poland  could  produce  by  that  amount  of 
labour ; more  therefore  than  England  could  produce  by  150  days’ 
labour,  England  thus  obtaining  the  corn  which  would  have  cost  her 
200  days,  at  a cost  exceeding  150,  though  short  of  200.  England 
therefore  no  longer  gains  the  whole  of  the  labour  which  is  saved 
to  the  two  jointly  by  trading  with  one  another. 

§ 3.  From  this  exposition  we  perceive  in  what  consists  the 
benefit  of  international  exchange,  or,  in  other  words,  foreign  com- 
merce. Setting  aside  its  enabling  countries  to  obtain  commodities 
which  they  could  not  themselves  produce  at  all ; its  advantage 
consists  in  a more  e£BLcient  employment  of  the  jproductiv^ 
the  world.  If  two  countries  which  trade  together  attempted,'  as 
faTaFr^as  physically  possible,  to  produce  for  themselves  what  they 
now  import  from  one  another,  the  labour  and  capital  of  the  two 
countries  would  not  be  so  productive,  the  two  together  would  not 
«)btain  from  their  industry  so  great  a quantity  of  commodities,  as 
when  each  employs  itself  in  producing,  both  for  itself  and  for  the 
other,  the  things  in  which  its  labour  is  relatively  most  efficient. 
The  addition^^.jJiu8,miLda  ±a  the  produce  of  the  twa^combined^  con- 
si^utes  the  advantage  of  the  trade.  It  is  possible  that  one  of  the 
two  countries  may  be  altogether  inferior  to  the  other  in  productive 
capacities,  and  that  its  labour  and  capital  could  be  employed  to 
greatest  advantage  by  being  removed  bodily  to  the  other.  The 
labour  and  capital  which  have  been  sunk  in  rendering  Holland 
habitable,  would  have  produced  a much  greater  return  if  transported 
to  America  or  Ireland.  The  produce  of  the  whole  world  would  be 
greater,  or  the  labour  less,  than  it  is,  if  everything  were  produced 
where  there  is  the  greatest  absolute  facility  for  its  production.  But 
nations  do  not,  at  least  in  modern  times,  emigrate  en  masse  ; and 
while  the  labour  and  capital  of  a country  remain  in  the  country, 
they  are  most  beneficially  employed  in  producing,  for  foreign  markets 
as  well  as  for  its  own,  the  things  in  which  it  lies  under  the  least 
disadvantage,  if  there  be  none  in  which  it  possesses  an  advantage 

§ 4,  Before  proceeding  further,  let  us  contrast  this  view  of  the 
benefits  of  international  commerce  with  other  theories  which  have 
prevailed,  and  which  to  a certain  extent  still  prevail,  on  the  same 
subject. 

According  to  the  doctrine  now  stated,  the  only  direct  advantage 
of  foreign  commerce  consists  in  the  imports.  A country  obtains 


INTERNATIONAL  TRADE 


67d 


things  which  it  either  could  not  have  produced  at  all,  or  which  it  must 
have  produced  at  a greater  expense  of  capital  and  labour  than  the 
cost  of  the  things  which  it  exports  to  pay  for  them.  It  thus  obtains 
a more  ample  supply  of  the  commodities  it  wants,  for  the  same  labour 
and  capital ; or  the  same  supply,  for  less  labour  and  capital,  leaving 
the  surplus  disposable  to  produce  other  things.  The  vulgar  theory 
disregards  this  benefit,  and  deems  the  advantage  of  commerce 
to  reside  in  the  exports  : as  if  not  what  a country  obtains,  but  what 
it  parts  with,  by  its  foreign  trade,  was  supposed  to  constitute  the  gain 
to  it.  An  extended  market  for  its  produce — an  abundant  consump- 
tion for  its  goods — a vent  for  its  surplus — are  the  phrases  by  which 
it  has  been  customary  to  designate  the  uses  and  recommendations 
of  commerce  with  foreign  countries.  This  notion  is  intelligible,  when 
we  consider  that  the  authors  and  leaders  of  opinion  on  mercantile 
questions  have  always  hitherto  been  the  selling  class.  It  is  in  truth 
a surviving  rehc  of  the  Mercantile  Theory,,  according  to  which, 
money  being  the  only  wealth,  selling,  or,  in  other  words,  exchanging 
goods  for  money,  was  (to  countries  without  mines  of  their  own) 
the  only  way  of  growing  rich — and  importation  of  goods,  that  is  to 
say,  parting  with  money,  was  so  much  subtracted  from  the  benefit. 

The  notion  that  money  alone  is  wealth  has  been  long  defunct, 
but  it  has  left  many  of  its  progeny  behind  it ; and  even  its  destroyer 
Adam  Smith,  retained  some  opinions  which  it  is  impossible  to  trace 
to  any  other  origin.  Adam  Smith’s  theory  of  the  benefit  of  foreign 
trade_was  that  it  afforded  an  outlet  for  the  surplus  produce  of  a 
country,  and  enabled  a portion  of  the  capital  of  the  country  to 
replace  itself  with  a profit.  These  expressions  suggest  ideas  incon- 
sistent with  a clear  conception  of  the  phenomena.  The  expression, 
surplus  produce,  seems  to  imply  that  a country  is  under  some  Mnd 
of  necessity  of  producing  the  corn  or  cloth  which  it  exports  ; so  that 
the  portion  which  it  does  not  itself  consume,  if  not  wanted  and  con- 
sumed elsewhere,  would  either  be  produced  in  sheer  waste,  or,  if  it 
were  not  produced,  the  corresponding  portion  of  capital  would  remain 
idle,  and  the  mass  of  productions  in  the  country  would  be  diminished 
by  so  much.  Either  of  these  suppositions  would  be  entirely  erro- 
neous. The  country  produces  an  exportable  article  in  excess  of  its 
own  wants  from  no  inherent  necessity,  but  as  the  cheapest  mode  of 
supplying  itself  with  other  things.  If  prevented  from  exporting  this 
surplus,  it  would  cease  to  produce  it,  and  would  no  longer  import 
anything,  being  unable  to  give  an  equivalent ; but  the  labour  and 
capital  which  had  been  employed  in  producing  with  a view  to 


680 


BOOK  III.  CHAPTER  XVII.  § 4 


exportation,  would  find  employment  in  producing  those  desir- 
able objects  which  were  pre\dously  brought  from  abroad : or,  if 
some  of  them  could  not  be  produced,  in  producing  substitutes  for 
them.  These  articles  would  of  course  be  produced  at  a greater  cost 
than  that  of  the  things  with  which  they  had  previously  been  pur- 
chased from  foreign  countries.  But  the  value  and  price  of  the 
articles  would  rise  in  proportion ; and  the  capital  would  just  as 
much  be  replaced,  with  the  ordinary  profit  from  the  returns,  as  it 
was  when  employed  in  producing  for  the  foreign  market.  The  only 
losers  (after  the  temporary  inconvenience  of  the  change)  would  be 
the  consumers  of  the  heretofore  imported  articles ; who  would  be 
obliged  either  to  do  without  them,  consuming  in  heu  of  them  some- 
thing which  they  did  not  like  as  well,  or  to  pay  a higher  price  for  them 
than  before. 

There  is  much  misconception  in  the  common  notion  of  what 
commerce  does  for  a country.  When  commerce  is  spoken  of  as 
a source  of  national  wealth,  the  imagination  fixes  itself  upon  the  large 
fortunes  acquired  by  merchants,  rather  than  upon  the  saving  of 
price  to  consumers.  But  the  gains  of  merchants,  when  they  enjoy 
no  exclusive  privilege,  are  no  greater  than  the  profits  obtained  by  the 
employment  of  capital  in  the  country  itself.  If  it  be  said  that  the 
capital  now  employed  in  foreign  trade  could  not  find  employment 
in  supplying  the  home  market,  I might  reply,  that  this  is  the  fallacy 
of  general  over-production,  discussed  in  a former  chapter  : but  the 
thing  is  in  this  particular  case  too  evident  to  require  an  appeal  to 
any  general  theory.  We  not  only  see  that  the  capital  of  the  merchant 
would  find  employment,  but  we  see  what  employment.  There  would 
be  employment  created  equal  to  that  which  would  be  taken  away. 
Exportation  ceasingjimportation  to  an  equal  value  would  cease  also, 
and  all  that  part  of  the  income  of  the  country  which  had  been  ex- 
pended in  imported  commodities,  would  be  ready  to  expend  itself 
onjhe  same  things  produced  at  home,  or  on  others  instead  of  them. 
Coipmerce  Ts  virtually  a mode  of  cheapening  production  ; and  in  aU 
such  cases  the  consumer  is  the  person  ultimately  benefited  ; the 
dealer,  in  the  end,  is  sure  to  get  his  profit,  whether  the  buyer  obtains 
much  or  little  for  his  money.  This  is  said  without  prejudice  to  the 
effect  (already  touched  upon,  and  to  be  hereafter  fully  discussed) 
which  the  cheapening  of  commodities  may  have  in  raising  profits ; 
in  the  case  when  the  comnmdity  cheapened,  being  one  of  those 
consumed  by  labourers,  enters  into  the  cost  of  labour,  by  which  the 
rate  of  profits  is  determined. 


INTERNATIONAL  TRADE 


5dl 

§ 5.  Such,  then,  is  the  direct  economical  advantage  of  foreign 
trade.  But  there  are,  besides,  indirect  effects,  which  must  be  counted 
as  benefits  of  a high  order.  On^  is,  the  tendency,  of  every  extension 
of  the  market  to  improve  the  processes  of  production.  A country 
which  produces  for  a larger  market  than  its  own,  can  introduce  a 
more  extended  division  of  labour,  can  make  greater  use  of  machinery, 
and  is  more  hkely  to  make  inventions  and  improvements  in  the 
processes  of  production.  Whatever  causes  a greater  quantity  of 
anything  to  be  produced  in  the  same  place,  tends  to  the  general 
increase  of  the  productive  powers  of  the  world.*  There  is  another 
consideration,  principally  applicable  to  an  early  stage  of  industrial 
advancement.  A people  may  be  in  a quiescent,  indolent,  unculti- 
vated state,  with  all  their  tastes  either  fully  satisfied  or  entirely 
undeveloped,  and  they  may  fail  to  put  forth  the  whole  of  their  pro- 
ductive energies  for  want  of  any  sufficient  object  of  desire.  The 
opening  of  a foreign  trade,  by  making  them  acquainted  with  new 
objects,  or  tempting  them  by  the  easier  acquisition  of  things  which 
they  had  not  previously  thought  attainable,  sometimes  works  a sort 
of  industrial  revolution  in  a country  whose  resources  were  previously 
undeveloped  for  want  of  energy  and  ambition  in  the  people : inducing 
those  who  were  satisfied  with  scanty  comforts  and  little  work,  to 
work  harder  for  the  gratification  of  their  new  tastes,  and  even  to  save, 
and  accumulate  capital,  for  the  still  more  complete  satisfaction  of 
those  tastes  at  a future  time. 

But  the  economical  advantages  of  commerce  are  surpassed  in 
importance  by  those  of  its  efiects  which  are  intellectual  and  moral. 
It  is  hardly  possible  to  overrate  the  value,  in  the  present  low  state 
of  human  improvement,  of  placing  human  beings  in  contact  with 
persons  dissimilar  to  themselves,  and  with  modes  of  thought  and 
action  unhke  those  with  which  they  are  famihar.  jCammerce  is 
now  what  war  once  was,  the  principal  source  of  this  contact.  Com- 
mercial adventurers  from  more  advanced  countries  have  generally 
been  the  first  civilizers  of  barbarians.  And  commerce  is  the  purpose 
of  the  far  greater  part  of  the  communication  which  takes  place 
between  civilized  nations.  Such  communication  has  always  been, 
and  is  pecuharly  in  the  present  age,  one  of  the  primary  sources  of 
progress.  To  human  beings,  who,  as  hitherto  educated,  can  scarcely 
cultivate  even  a good  quality  without  running  it  into  a fault,  it 
is  indispensable  to  be  perpetually  comparing  their  own  notions  and 


Vide  supra,  bouk  i.  chap.  ix.  § 1. 


C82 


BOOK  III.  CHAPTER  XVII.  § 5 


customs  with  the  experience  and  example  of  persons  in  different 
circumstances  from  themselves  : and  there  is  no  nation  which  does 
not  need  to  borrow  from  others,  not  merely  particular  arts  or 
practices,  but  essential  points  of  character  in  which  its  own  type 
is  inferior.  Finally,  commerce  first  taught  nations  to  seejwith ^pd 
will  the  wealth  and  prosperity  of  one  another.  Before,  the  patriot, 
unless  sufficiently  advanced  in  culture  to  feel  the  world  his  country, 
wished  all  countries  weak,  poor,  and  ill-governed,  but  his  own  : 
he  now  sees  in  their  wealth  and  progress  a direct  source  of  wealth 
and  progress  to  his  own  country.  It  is  commerce  which  is  rapidly 
rendering  war  obsolete,  by  strengthening  and  multiplying  the 
personal  interests  which  are  in  natural  opposition  to  it.  And  it 
may  be  said  without  exaggeration  that  the  great  extent  and  rapid 
increase  of  international  trade,  in  being  the  principal  guarantee 
of  the  peace  of  the  world,  is  the  great  permanent  security  for  the 
uninterrupted  progress  of  the  ideas,  the  institutions,  and  the 
character  of  the  human  race. 


CHAPTER  XVIII 


OF  INTERNATIONAL  VALUES 

§ 1.  The  values  of  commodities  produced  at  the  same  place, 
or  in  places  sufficiently  adjacent  for  capital  to  move  freely  between 
them — let  us  say,  for  simplicity,  of  commodities  produced  in  the 
same  country — depend  (temporary  fluctuations  apart)  upon  their 
cost  of  production.  But  the  value  of  a commodity  brought  from 
a distant  place,  especially  from  a foreign  country,  does  not  depend 
on  its  cost  of  production  in  the  place  from  whence  it  comes.  On 
what,  then,  does  it  depend  ? The  value  of  a thing  in  any  place 
depends  on  the  cost  of  its  acquisition  in  that  place ; which,  in  the 
case  of  an  imported  article,  means  the  cost  of  production  of  the 
thing  which  is  exported  to  pay  for  it. 

Since  all  trade  is  in  reahty  barter,  money  being  a mere  instrument 
for  exchanging  things  against  one  another,  we  will,  for  simplicity, 
begin  by  supposing  the  international  trade  to  be  in  form,  what  it 
always  is  in  reahty,  an  actual  trucking  of  one  commodity  against 
another.  As  far  as  we  have  hitherto  proceeded,  we  have  found 
all  the  laws  of  interchange  to  be  essentially  the  same,  whether  money 
is  used  or  not ; money  never  governing,  but  always  obeying,  those 
general  laws. 

If,  then,  England  imports  wine  from  Spain,  giving  for  every 
pipe  of  wine  a bale  of  cloth,  the  exchange  value  of  a pipe  of  wine 
in  England  will  not  depend  upon  what  the  production  of  the  wine 
may  have  cost  in  Spain,  but  upon  what  the  production  of  the  cloth 
has  cost  in  England.  Though  the  wine  may  have  cost  in  Spain 
the  equivalent  of  only  ten  days’  labour,  yet,  if  the  cloth  costs  in 
England  twenty  days’  labour,  the  wine,  when  brought  to  England, 
will  exchange  for  the  produce  of  twenty  days’  Enghsh  labour,  jilus 
the  cost  of  carriage ; including  the  usual  profit  on  the  importer’s 
capital,  during  the  time  it  is  locked  up,  and  withheld  from  othei 
employment. 


584 


BOOK  III.  CHAPTER  KVIII.  § 2 


Theo^alue,  then,  in  any  country,  ojjjoreign  commodity,  depends 
on  the^iffi^y  of  hom^roduce  which  must  be  given  to  the  foreign 
country  in  exchange  for  it.  In  other  words,  thfiL  YjaKfiSL  of  ^f^gh 
comi^dities  dejpj^d'on  tSL  of  international  exchan^.  What, 
then,  do  these  depend  upon  ? What  is  it  which,  in  the  case  sup- 
posed, causes  a pipe  of  wine  from  Spain  to  be  exchanged  with 
England  for  exactly  that  quantity  of  cloth  ? We  have  seen  that 
it  is  not  their  cost  of  production.  If  the  cloth  and  the  wine  were 
both  made  in  Spain,  they  would  exchange  at  their  cost  of  production 
in  Spain  ; if  they  were  both  made  in  England,  they  would  exchange 
at  their  cost  of  production  in  England : but  all  the  cloth  being 
made  in  England,  and  all  the  wine  in  Spain,  they  are  in  circumstances 
to  which  we  have  already  determined  that  the  law  of  cost  of  pro- 
duction is  not  apphcable.  We  must  accordingly,  as  we  have  done 
before  in  a similar  embarrassment,  fall  back  upon  an  antecedent 
law,  that  of  supply  and  demand : and  in  this  we  shall  again  find 
the  solution  of  our  difficulty. 

I have  discussed  this  question  in  a separate  Essay,  already  once 
referred  to  ; and  a quotation  of  part  of  the  exposition  then  given 
will  be  the  best  introduction  to  my  present  view  of  the  subject. 
I must  give  notice  that  we  are  now  in  the  region  of  the  most  compli- 
cated questions  which  political  economy  affords ; that  the  subject 
is  one  which  cannot  possibly  be  made  elementary  ; and  that  a more 
continuous  effort  of  attention  than  has  yet  been  required  will  be 
necessary  to  follow  the  series  of  deductions.  The  thread,  however, 
which  we  are  about  to  take  in  hand,  is  in  itself  very  simple  and 
manageable ; the  only  difficulty  is  in  following  it  through  the 
windings  and  entanglements  of  complex  international  transactions. 

§ 2.  “ When  the  trade  is  established  between  the  two  countries, 
the  two  commodities  will  exchange  for  each  other  at  the  same  rate 
of  interchange  in  both  countries — bating  the  cost  of  carriage,  of 
which,  for  the  present,  it  will  be  more  convenient  to  omit  the  con- 
sideration. Supposing,  therefore,  for  the  sake  of  argument,  that 
the  carriage  of  the  commodities  from  one  country  to  the  other 
could  be  effected  without  labour  and  without  cost,  no  sooner  would 
the  trade  be  opened  than  the  value  of  the  two  commodities, 
estimated  in  each  other,  would  come  to  a level  in  both  countries. 

**  Suppose  that  10  yards  of  broadcloth  cost  in  England  as  much 
labour  as  15  yards  of  hnen,  and  in  Germany  as  much  as  20.”  in 
common  with  most  of  my  predecessors,  I find  it  advisable,  in 


INTERNATIONAL  VALUES 


686 


these  intricate  investigations,  to  give  distinctness  and  fixity  to  the 
conception  by  numerical  examples.  These  examples  must  some- 
times, as  in  the  present  case,  be  purely  supposititious.  I should 
have  preferred  real  ones  ; but  all  that  is  essential  is,  that  the  numbers 
should  be  such  as  admit  of  being  easily  followed  through  the  subse- 
quent combinations  into  which  they  enter. 

This  supposition  then  being  made,  it  would  be  the  interest  of 
England  to  import  linen  from  Germany,  and  of  Germany  to  import 
cloth  from  England.  “ When  each  country  produced  both  com- 
modities for  itself,  10  yards  of  cloth  exchanged  for  15  yards  of 
hnen  in  England,  and  for  20  in  Germany.  They  wiU  now 
exchange  for  the  same  number  of  yards  of  linen  in  both.  For  what 
number  ? If  for  15  yards,  England  will  be  just  as  she  was,  and 
Germany  will  gain  all.  If  for  20  yards,  Germany  will  be  as 
before,  and  England  will  derive  the  whole  of  the  benefit.  If  for 
any  number  intermediate  between  15  and  20,  the  advantage  will 
be  shared  between  the  two  countries.  If,  for  example,  10 
yards  of  cloth  exchange  for  18  of  hnen,  England  will  gain  an 
advantage  of  3 yards  on  every  15,  Germany  will  save  2 out  of 
every  20.  The  problem  is,  what  are  the  causes  which  determine 
the  proportion  in  which  the  cloth  of  England  and  the  hnen  of 
Germany  will  exchange  for  each  other. 

**  As  exchange  value,  in  this  case  as  in  every  other,  is  proverbiahy 
fluctuating,  it  does  not  matter  what  we  suppose  it  to  be  when  we 
begin : we  shall  soon  see  whether  there  be  any  fixed  point  above 
which  it  osciUates,  which  it  has  a tendency  always  to  approach  to, 
and  to  remain  at.  Let  us  suppose,  then,  that  by  the  effect  of  what 
Adam  Smith  calls  the  higgling  of  the  market,  10  yards  of  cloth 
in  both  countries  exchange  for  17  yards  of  hnen. 

“ The  demand  for  a commodity,  that  is,  the  quantity  of  it  which 
can  find  a purchaser,  varies,  as  we  have  before  remarked,  according 
to  the  price.  In  Germany  the  price  of  10  yards  of  cloth  is  now 
17  yards  of  hnen,  or  whatever  quantity  of  money  is  equivalent 
in  Germany  to  17  yards  of  hnen.  Now,  that  being  the  price, 
there  is  some  particular  number  of  yards  of  cloth,  which  will 
be  in  demand,  or  will  find  purchasers,  at  that  price.  There  is 
some  given  quantity  of  cloth,  more  than  which  could  not  be  disposed 
of  at  that  price ; less  than  which,  at  that  price,  would  not  fuUy 
satisfy  the  demand.  Let  us  suppose  this  quantity  to  be  1000  times 
10  yards. 

“ Let  us  now  turn  our  attention  to  England.  There,  the  price 


586 


BOOK  m.  CHAPTER  XVni.  § 2 


of  17  yards  of  linen  is  10  yards  of  cloth,  or  whatever  quantity 
of  money  is  equivalent  in  England  to  10  yards  of  cloth.  There  is 
some  particular  number  of  yards  of  linen  which,  at  that  price,  will 
exactly  satisfy  the  demand,  and  no  more.  Let  us  suppose  that 
this  number  is  1000  times  17  yards. 

“ As  17  yards  of  linen  are  to  10  yards  of  cloth,  so  are  1000 
times  17  yards  to  1000  times  10  yards.  At  the  existing  ex- 
change value,  the  linen  which  England  requires  will  exactly  pay 
for  the  quantity  of  cloth  which,  on  the  same  terms  of  interchange, 
Germany  requires.  The  demand  on  each  side  is  precisely  sufficient 
to  carry  ofi  the  supply  on  the  other.  The  conditions  required  by 
the  principle  of  demand  and  supply  are  fulfilled,  and  the  two  com- 
modities will  continue  to  be  interchanged,  as  we  supposed  them 
to  be,  in  the  ratio  of  17  yards  of  linen  for  10  yards  of  cloth. 

“ But  our  suppositions  might  have  been  different.  Suppose  that, 
at  the  assumed  rate  of  interchange,  England  has  been  disposed  to 
consume  no  greater  quantity  of  linen  than  800  times  17  yards  : 
it  is  evident  that,  at  the  rate  supposed,  this  would  not  have  sufficed 
to  pay  for  the  1000  times  10  yards  of  cloth  which  we  have  supposed 
Germany  to  require  at  the  assumed  value.  Germany  would  be  able 
to  procure  no  more  than  800  times  10  yards  at  that  price.  To 
procure  the  remaining  200,  which  she  would  have  no  means  of  doing 
but  by  bidding  higher  for  them,  she  would  ofier  more  than  17 
yards  of  hnen  in  exchange  for  10  yards  of  cloth  : let  us  suppose 
her  to  ofier  18.  At  this  price,  perhaps,  England  would  be 
inclined  to  purchase  a greater  quantity  of  hnen.  She  would 
consume,  possibly,  at  that  price,  900  times  18  yards.  On  the 
other  hand,  cloth  having  risen  in  price,  the  demand  of  Germany 
for  it  would  probably  have  diminished.  If,  instead  of  1000  times 
10  yards,  she  is  now  contented  with  900  times  10  yards,  these  will 
exactly  pay  for  the  900  times  18  yards  of  hnen  which  England 
is  wilhng  to  take  at  the  altered  price : the  demand  on  each  side 
will  again  exactly  suffice  to  take  ofi  the  corresponding  supply  ; and 
10  yards  for  18  wiU  be  the  rate  at  which,  in  both  countries, 
cloth  will  exchange  for  hnen. 

“ The  converse  of  all  this  would  have  happened,  if,  instead  of 
800  times  17  yards,  we  had  supposed  that  England,  at  the 
rate  of  10  for  17,  would  have  taken  1200  times  17  yards  of 
hnen.  In  this  case,  it  is  England  whose  demand  is  not  fully 
supphed ; it  is  England  who,  by  bidding  for  more  hnen,  wiU  alter 
the  rate  of  interchange  to  her  own  disadvantage ; and  10  yards 


INTERNATIONAL  VALUES 


687 


of  cloth  will  fall,  in  both  countries,  below  the  value  of  17 
yards  of  linen.  By  this  fall  of  cloth,  or,  what  is  the  same  thing, 
this  rise  of  linen,  the  demand  of  Germany  for  cloth  will  increase, 
and  the  demand  of  England  for  linen  will  diminish,  till  the  rate  of 
interchange  has  so  adjusted  itself  that  the  cloth  and  the  hnen  will 
exactly  pay  for  one  another  ; and  when  once  this  point  is  attained, 
values  will  remain  without  further  alteration. 

**  It  may  be  considered,  therefore,  as  established,  that  when  two 
countries  trade  together  in  two  commodities,  the  exchange  value  of 
these  commodities  relatively  to  each  other  will  adjust  itself  to  the 
inclinations  and  circumstances  of  the  consumers  on  both  sides,  in 
such  manner  that  the  quantities  required  by  each  country,  of  the 
articles  which  it  imports  from  its  neighbour,  shall  be  exactly  sufficient 
to  pay  for  one  another.  As  the  inclinations  and  circumstances  of 
consumers  cannot  be  reduced  to  any  rule,  so  neither  can  the  pro- 
portions in  which  the  two  commodities  will  be  interchanged.  We 
know  that  the  limits,  within  which  the  variation  is  confined,  are 
the  ratio  between  their  costs  of  production  in  the  one  country, 
and  the  ratio  between  their  costs  of  production  in  the  other.  Ten 
yards  of  cloth  cannot  exchange  for  more  than  20  yards  of  linen, 
nor  for  less  than  15.  But  they  may  exchange  for  any  inter- 
mediate number.  The  ratios,  therefore,  in  which  the  advantage  of 
the  trade  may  be  divided  between  the  two  nations  are  various. 
The  circumstances  on  which  the  proportionate  share  of  each 
country  more  remotely  depends,  admit  only  of  a very  general 
indication. 

“ It  is  even  possible  to  conceive  an  extreme  case,  in  which  the 
whole  of  the  advantage  resulting  from  the  interchange  would  be 
reaped  by  one  party,  the  other  country  gaining  nothing  at  all. 
There  is  no  absurdity  in  the  hypothesis  that,  of  some  given  com- 
modity, a certain  quantity  is  all  that  is  wanted  at  any  price  ; and 
that,  when  that  quantity  is  obtained,  no  fall  in  the  exchange  value 
would  induce  other  consumers  to  come  forward,  or  those  who  are 
already  supphed  to  take  more.  Let  us  suppose  that  this  is  the  case 
in  Germany  with  cloth.  Before  her  trade  with  England  commenced, 
when  10  yards  of  cloth  cost  her  as  much  labour  as  20  yards 
of  linen,  she  nevertheless  consumed  as  much  cloth  as  she  wanted 
under  any  circumstances,  and,  if  she  could  obtain  it  at  the  rate  of 
10  yards  of  cloth  for  15  of  hnen,  she  would  not  consume  more. 
Let  this  fixed  quantity  be  1000  times  10  yards.  At  the  rate, 
however,  of  10  for  20,  England  would  want  more  linen  than 


588 


BOOK  III.  CHAPTER  XVIII.  § 3 


would  be  equivalent  to  this  quantity  of  cloth.  She  would,  conse- 
quently, offer  a higher  value  for  hnen  ; or,  what  is  the  same  thing, 
she  would  offer  her  cloth  at  a cheaper  rate.  But,  as  by  no  lowering 
of  the  value  could  she  prevail  on  Germany  to  take  a greater  quantity 
of  cloth,  there  would  be  no  limit  to  the  rise  of  linen  or  fall  of  cloth, 
until  the  demand  of  England  for  linen  was  reduced  by  the  rise  of 
its  value,  to  the  quantity  which  1000  times  10  yards  of  cloth  would 
purchase.  It  might  be,  that  to  produce  this  diminution  of  the 
demand  a less  fall  would  not  suffice  than  that  which  would  make 
10  yards  of  cloth  exchange  for  15  of  linen.  Germany  would 
then  gain  the  whole  of  the  advantage,  and  England  would  be 
exactly  as  she  was  before  the  trade  commenced.  It  would  be  for 
the  interest,  however,  of  Germany  herself  to  keep  her  linen  a little 
below  the  value  at  which  it  could  be  produced  in  England,  in  order 
to  keep  herself  from  being  supplanted  by  the  home  producer. 
England,  therefore,  would  always  benefit  in  some  degree  by  the 
existence  of  the  trade,  though  it  might  be  a very  trifling  one.” 
In  this  statement,  I conceive,  is  contained  the  first  elementary 
principle  of  International  Values.  I have,  as  is  indispensable  in  such 
abstract  and  hypothetical  cases,  supposed  the  circumstances  to  be 
much  less  complex  than  they  really  are  : in  the  first  place,  by  sup- 
pressing the  cost  of  carriage  ; next,  by  supposing  that  there  are  only 
two  countries  trading  together ; and  lastly,  that  they  trade  only  in 
two  commodities.  To  render  the  exposition  of  the  principle  complete 
it  is  necessary  to  restore  the  various  circumstances  thus  temporarily 
left  out  to  simplify  the  argument.  Those  who  are  accustomed  to 
any  kind  of  scientific  investigation  wiU  probably  see,  without  formal 
proof,  that  the  introduction  of  these  circumstances  cannot  alter  the 
theory  of  the  subject.  Trade  among  any  number  of  countries,  and 
in  any  number  of  commodities,  must  take  place  on  the  same  essential 
principles  as  trade  between  two  countries  and  in  two  commodities. 
Intiodiicing  a greater  number  of  agents  precisely  similar  cannot, 
change  the  law  of  their  action,  no  more  than  putting  additional 
weights  into  the  two  scales  of  a balance  alters  the  law  of  gravitation. 
It  alters  nothing  but  the  numerical  results.  For  more  complete 
satisfaction,  however,  we  'will  enter  into  the  complex  cases  with 
the  same  particularity  with  which  we  have  stated  the  simpler 
one. 


§ 3.  First,  let  us  introduce  the  element  of  cost  of  carriage. 
The  chief  difference  will  then  be,  that  the  cloth  and  the  linen  will 


INTERNATIONAL  VALUES 


5B9 


no  longer  exchange  for  each  other  at  precisely  the  same  rate  in  both 
countries.  Linen,  having  to  be  carried  to  England,  will  be  dearer 
there  by  its  cost  of  carriage ; and  cloth  will  be  dearer  in  Germany 
by  the  cost  of  carrying  it  from  England.  Linen,  estimated  in  cloth, 
will  be  dearer  in  England  than  in  Germany,  by  the  cost  of  carriage 
of  both  articles : and  so  will  cloth  in  Germany,  estimated  in  linen. 
Suppose  that  the  cost  of  carriage  of  each  is  equivalent  to  one  yard 
of  linen  ; and  suppose  that,  if  they  could  have  been  carried  without 
cost,  the  terms  of  interchange  would  have  been  10  yards  of  cloth 
for  17  of  linen.  It  may  seem  at  first  that  each  country  will  pay 
its  own  cost  of  carriage ; that  is,  the  carriage  of  the  article  it  im- 
ports ; that  in  Germany  10  yards  of  cloth  will  exchange  for  18  of 
linen,  namely,  the  original  17,  and  1 to  cover  the  cost  of  carriage  of 
the  cloth ; while  in  England,  10  yards  of  cloth  will  only  purchase 
16  of  linen,  1 yard  being  deducted  for  the  cost  of  carriage  of  the  linen. 
This,  however,  cannot  be  affirmed  with  certainty ; it  will  only  be 
true,  if  the  linen  which  the  English  consumers  would  take  at  the 
price  of  10  for  16,  exactly  pays  for  the  cloth  which  the  German 
consumers  would  take  at  10  for  18.  The  values,  whatever  they  are, 
must  establish  this  equilibrium.  No  absolute  rule,  therefore,  can 
be  laid  down  for  the  division  of  the  cost,  no  more  than  for  the  divi- 
sion of  the  advantage  : and  it  does  not  follow  that  in  whatever 
ratio  the  one  is  divided,  the  other  will  be  divided  in  the  same.  It 
is  impossible  to  say,  if  the  cost  of  carriage  could  be  annihilated, 
whether  the  producing  or  the  importing  country  would  be  most 
benefited.  This  would  depend  on  the  play  of  international 
demand. 

Cost  of  carriage  has  one  effect  more.  But  for  it,  every  com- 
modity would  (if  trade  be  supposed  free)  be  either  regularly  im- 
ported or  regularly  exported.  A country  would  make  nothing  for 
itself  which  it  did  not  also  make  for  other  countries.  But  in  conse- 
quence of  cost  of  carriage  there  are  many  things,  especially  bulky 
articles,  which  every,  or  almost  every,  country  produces  within 
itself.  After  exporting  the  things  in  which  it  can  employ  itself  most 
advantageously,  and  importing  those  in  which  it  is  under  the 
greatest  disadvantage,  there  are  many  lying  between,  of  which  the 
relative  cost  of  production  in  that  and  in  other  countries  differs  so 
little,  that  the  cost  of  carriage  would  absorb  more  than  the  whole 
saving  in  cost  of  production  which  would  be  obtained  by  importing 
one  and  exporting  another.  This  is  the  case  with  numerous  com- 
modities of  common  consumption ; including  the  coarser  quahties 


500 


BOOK  III.  CHAPTER  XVIII.  § 4 


of  many  articles  of  food  and  manufacture,  of  which  the  finer  kinds 
are  the  subject  of  extensive  international  trafiic. 

§ 4.  Let  us  now  introduce  a greater  number  of  commodities 
than  the  two  we  have  hitherto  supposed.  Let  cloth  and  linen, 
however,  be  still  the  articles  of  which  the  comparative  cost  of  pro- 
duction in  England  and  in  Germany  differs  the  most;  so  that,  if  they 
were  confined  to  two  commodities,  these  would  be  the  two  which  it 
would  be  most  their  interest  to  exchange.  We  will  now  again  omit 
cost  of  carriage,  which,  having  been  shown  not  to  affect  the  essentials 
of  the  question,  does  but  embarrass  unnecessarily  the  statement  of  it. 
Let  us  suppose,  then,  that  the  demand  of  England  for  hnen  is  either 
so  much  greater  than  that  of  Germany  for  cloth,  or  so  much  more 
extensible  by  cheapness,  that  if  England  had  no  commodity  but 
cloth  which  Germany  would  take,  the  demand  of  England  would 
force  up  the  terms  of  interchange  to  10  yards  of  cloth  for  only  16  of 
linen,  so  that  England  would  gam  only  the  difference  between  15  and 
16,  Germany  the  difference  between  16  and  20.  But  let  us  now 
suppose  that  England  has  also  another  commodity,  say  iron,  which 
is  in  demand  in  Germany,  and  that  the  quantity  of  iron  which  is 
of  equal  value  in  England  with  10  yards  of  cloth,  (let  us  call  this 
quantity  a hundredweight)  will,  if  produced  in  Germany,  cost  as 
much  labour  as  18  yards  of  linen,  so  that  if  offered  by  England  for  17 
it  will  undersell  the  German  producer.  In  these  circumstances, 
linen  will  not  be  forced  up  to  the  rate  of  16  yards  for  10  of 
cloth,  but  will  stop,  suppose  at  17 ; for  although,  at  that  rate  of 
interchange,  Germany  will  not  take  enough  cloth  to  pay  for  all  the 
linen  required  by  England,  she  will  take  iron  for  the  remainder,  and 
it  is  the  same  thing  to  England  whether  she  gives  a hundredweight 
of  iron  or  10  yards  of  cloth,  both  being  made  at  the  same  cost.  If 
we  now  superadd  coals  or  cottons  on  the  side  of  England,  and  wine, 
or  corn,  or  timber,  on  the  side  of  Germany,  it  will  make  no  difference 
in  the  principle.  The  exports  of  each  country  must  exactly  pay  for 
the  imports ; meaning  now  the  aggregate  exports  and  imports,  not 
those  of  particular  commodities  taken  singly.  The  produce  of  fifty 
days’  English  labour,  whether  in  cloth,  coals,  iron,  or  any  other 
exports,  will  exchange  for  the  produce  of  forty,  or  fifty,  or  sixty  days* 
German  labour,  in  linen,  wine,  corn,  or  timber,  according  to  the 
international  demand.  There  is  some  proportion  at  which  the 
demand  of  the  two  countries  for  each  other’s  products  will  exactly 
correspond : so  that  the  things  supplied  by  England  to  Germany 


INTERNATIONAL  VALUES 


691 


will  be  completely  paid  for,  and  no  more,  by  those  supplied  by 
Germany  to  England.  This  accordingly  will  be  the  ratio  in  which 
the  produce  of  English  and  the  produce  of  German  labour  will 
exchange  for  one  another. 

If,  therefore,  it  be  asked  what  country  draws  to  itself  the  greatest 
share  oi  the  advantage  of  any  trade  it  carries  on,  the  answer  is,  the 
country  for  whose  productions  there  is  in  other  countries  the  greatest 
demand,  and  a demand  the  most  susceptible  of  increase  from  addi- 
tional cheapness.  In  so  far  as  the  productions  of  any  country 
possess  this  property,  the  country  obtains  all  foreign  commodities 
at  less  cost.  It  gets  its  imports  cheaper,  the  greater  the  intensity  of 
the.  demand  in  foreign  countries  Tor 'its  exports.  It  also  gets  its 
imports  cheaper,  the  less  the  extent  and  intensity  of  its  own  demand 
for  them.  The  market  is  cheapest  to  those  whose  demand  is  small. 
A^untry  which  desires  few  foreign  productions,  and  only  a limited 
quantity  of  them,  while  its  own  commodities  are  in  great  request  in 
foreign^ountries,  will  obtain  its  limited  imports  at  extremely  small 
cost,  that  is,  in  exchange  for  the  produce  of  a very  small  quantity  of 
its  labour  and  capital. 

Lastly,  having  introduced  more  than  the  original  two  commodities 
into  the  hypothesis,  let  us  also  introduce  more  than  the  original  two 
countries.  After  the  demand  of  England  for  the  linen  of  Germany 
has  raised  the  rate  of  interchange  to  10  yards  of  cloth  for  16  of  hnen, 
suppose  a trade  opened  between  England  and  some  other  country 
which  also  exports  linen.  And  let  us  suppose  that,  if  England  had 
no  trade  but  with  the  third  country,  the  play  of  international  demand 
would  enable  her  to  obtain  from  it,  for  10  yards  of  cloth  or  its  equiva- 
lent, 17  yards  of  linen.  She  evidently  would  not  go  on  buying  linen 
from  Germany  at  the  former  rate : Germany  would  be  undersold, 
and  must  consent  to  give  17  yards,  like  the  other  country.  In  this 
case,  the  circumstances  of  production  and  of  demand  in  the  third 
country  are  supposed  to  be  in  themselves  more  advantageous  to 
England  than  the  circumstances  of  Germany ; but  this  supposition 
is  not  necessary  : we  might  suppose  that  if  the  trade  with  Germany 
did  not  exist,  England  would  be  obliged  to  give  to  the  other  country 
the  same  advantageous  terms  which  she  gives  to  Germany ; 10  yards 
of  cloth  for  16,  or  even  less  than  16,  of  linen.  Even  so,  the  opening 
of  the  third  country  makes  a great  difference  in  favour  of  England. 
There  is  now  a double  market  for  English  export,  while  the  demand 
of  England  for  linen  is  only  what  it  was  before.  This  necessarily 
obtains  for  England  more  advantageous  terms  of  interchange.  The 


592 


BOOK  m.  CHAPTER  KVIIL  § 4 


two  countries,  requiring  much  more  of  her  produce  than  was  required 
by  either  alone,  must,  in  order  to  obtain  it,  force  an  increased  demand 
for  their  exports,  by  ofiering  them  at  a lower  value. 

It  deserves  notice,  that  this  effect  in  favour  of  England  from  the 
opening  of  another  market  for  her  exports,  will  equally  be  produced 
even  though  the  country  from  which  the  demand  comes  should  have 
nothing  to  sell  which  England  is  willing  to  take.  Suppose  that  the 
third  country,  though  requiring  cloth  or  iron  from  England,  pro- 
duces no  linen,  nor  any  other  article  which  is  in  demand  there.  She 
however  produces  exportable  articles,  or  she  would  have  no  means 
of  paying  for  imports  : her  exports,  though  not  suitable  to  the 
English  consumer,  can  find  a market  somewhere.  As  we  are  only 
supposing  three  countries,  we  must  assume  her  to  find  this  market 
in  Germany,  and  to  pay  for  what  she  imports  from  England  by  orders 
on  her  German  customers.  Germany,  therefore,  besides  having  to 
pay  for  her  own  imports,  now  owes  a debt  to  England  on  account  of 
the  third  country,  and  the  means  for  both  purposes  must  be  derived 
from  her  exportable  produce.  She  must  therefore  tender  that 
produce  to  England  on  terms  sufficiently  favourable  to  force  a demand 
equivalent  to  this  double  debt.  Everything  will  take  place  precisely 
as  if  the  third  country  had  bought  Gesman  produce  with  her  own 
goods,  and  offered  that  produce  to  England  in  exchange  for  hers. 
There  is  an  increased  demand  for  English  goods,  for  which  German 
goods  have  to  furnish  the  payment ; and  this  can  only  be  done  by 
forcing  an  increased  demand  for  them  in  England,  that  is,  by  lowering 
their  value.  Thus  an  increase  of  demand  for  a country’s  exports  in 
any  foreign  country  enables  her  to  obtain  more  cheaply  even  those 
imports  which  she  procures  from  other  quarters.  And  conversely, 
an  increase  of  her  own  demand  for  any  foreign  commodity  compels 
her,  cceteris  'paribus,  to  pay  dearer  for  all  foreign  commodities. 

The  law  which  we  have  now  illustrated,  may  be  appropriately 
named,  the  Eqmtion.oi  IntexiiationalJ)emand»  It  may  be  concisely 
stated  as  follows.  The  produce  of  a country  exchanges  for  the  pro- 
duce of  other  countries,  at  such  values  as  are  required  in  order  that 
the  whole  of  her  exports  may  exactly  pay  for  the  whole  of  her  imports. 
This  law  of  International  Values  is  but  an  extension  of  the  more 
general  law  of  Value,  which  we  called  the  Equation  of  Supply  and 
Demand.*  We  have  seen  that  the  value  of  a commodity  always  so 
adjusts  itself  as  to  bring  the  demand  to  the  exact  level  of  the  supply. 

* Supra,  book  iii.  chap.  ii.  $ 4. 


INTERNATIONAL  VALUES 


693 


But  all  trade,  either  between  nations  or  individuals,  is  an  interchange 
of  commodities,  in  which  the  things  that  they  respectively  have  to 
sell  constitute  also  their  means  of  purchase  : the  supply  brought  by 
the  one  constitutes  his  demand  for  what  is  brought  by  the  other. 
So  that  supply  and  demand  are  but  another  expression  for  reciprocal 
demand  : and  to  say  that  value  will  adjust  itself  so  as  to  equalize 
demand  with  supply,  is  in  fact  to  say  that  it  will  adjust  itself  so  as 
to  equalize  the  demand  on  one  side  with  the  demand  on  the  other. 

§ 6.  To  trace  the  consequences  of  this  law  of  International 
Values  through  their  wide  ramifications,  would  occupy  more  space 
than  can  be  here  devoted  to  such  a purpose.^  But  there  is  one  of 
its  applications  which  I will  notice,  as  being  in  itself  not  unimportant, 
as  bearing  on  the  question  which  will  occupy  us  in  the  next  chapter, 
and  especially  as  conducing  to  the  more  full  and  clear  understanding 
of  the  law  itself. 

We  have  seen  that  the  value  at  which  a country  purchases  a 
foreign  commodity  does  not  conform  to  the  cost  of  production  in 
the  country  from  which  the  commodity  comes.  Suppose  now  a 
change  in  that  cost  of  production ; an  improvement,  for  example, 
in  the  process  of  manufacture.  Will  the  benefit  of  the  improvement 
be  fully  participated  in  by  other  countries  ? Will  the  commodity 
be  sold  as  much  cheaper  to  foreigners,  as  it  is  produced  cheaper 
at  home  ? This  question,  and  the  considerations  which  must  be 
entered  into  in  order  to  resolve  it,  are  well  adapted  to  try  the  worth 
of  the  theory. 

Let  us  first  suppose,  that  the  improvement  is  of  a nature  to  create 
a new  branch  of  export : to  make  foreigners  resort  to  the  country 
for  a commodity  which  they  had  previously  produced  at  home. 
On  this  supposition,  the  foreign  demand  for  the  productions  of  the 
country  is  increased ; which  necessarily  alters  the  international 
values  to  its  advantage,  and  to  the  disadvantage  of  foreign  countries, 
who,  therefore,  though  they  participate  in  the  benefit  of  the  new 
product,  must  purchase  that  benefit  by  paying  for  all  the  other 

* [Here  was  omitted  in  the  3rd  ed.  (1852)  the  following  passage  of 
the  original ; “ Several  of  those  consequences  were  indicated  in  the  Essay 
already  quoted ; and  others  have  been  pointed  out  in  the  writings  of  Colonel 
Torrens,  who  appears  to  me  substantially  correct  in  his  general  view  of 
the  subject,  and  who  has  supported  it  with  great  closeness  and  consecutive- 
ness of  reasoning,  though  his  conclusions  are  occasionally  pushed  much  beyond 
what  appear  to  me  the  proper  limits  of  the  principle  on  which  they  are 
grounded.”] 


594 


BOOK  III.  CHAPTER  XVIII.  § 5 


productions  of  the  country  at  a dearer  rate  than  before.  How  much 
dearer,  will  depend  on  the  degree  necessary  for  re-estabhshing,  under 
these  new  conditions,  the  Equation  of  International  Demand. 
These  consequences  follow  in  a very  obvious  manner  from  the  law 
of  international  values,  and  I shall  not  occupy  space  in  illustrating 
them,  but  shall  pass  to  the  more  frequent  case,  of  an  improvement 
which  does  not  create  a new  article  of  export,  but  lowers  the  cost  of 
production  of  something  which  the  country  already  exported. 

It  being  advantageous,  in  discussions  of  this  comphcated  nature, 
to  employ  definite  numerical  amounts,  we  shall  return  to  our  original 
example.  Ten  yards  of  cloth,  if  produced  in  Germany,  would 
require  the  same  amount  of  labour  and  capital  as  twenty  yards  of 
linen ; but  by  the  play  of  international  demand,  they  can  be  ob- 
tained from  England  for  seventeen.  Suppose  now,  that  by  a mecha- 
nical improvement  made  in  Germany,  and  not  capable  of  being 
transferred  to  England,  the  same  quantity  of  labour  and  capital 
which  produced  twenty  yards  of  linen,  is  enabled  to  produce  thirty. 
Linen  falls  one-third  in  value  in  the  German  market,  as  compared 
■with  other  commodities  produced  in  Germany.  Will  it  also  fall 
one-third  as  compared  with  Enghsh  cloth,  thus  giving  to  England, 
in  common  with  Germany,  the  full  benefit  of  the  improvement  ? 
Or  (ought  we  not  rather  to  say),  since  the  cost  to  England  of  ob- 
taining linen  was  not  regulated  by  the  cost  to  Germany  of  producing 
it,  and  since  England,  accordingly,  did  not  get  the  entire  benefit 
even  of  the  twenty  yards  which  Germany  could  have  given  for  ten 
yards  of  cloth,  but  only  obtained  seventeen — why  should  she  now 
obtain  more,  merely  because  this  theoretical  limit  is  removed  ten 
degrees  further  off  ? 

It  is  evident  that,  in  the  outset,  the  improvement  will  lower  the 
value  of  hnen  in  Germany,  in  relation  to  all  other  commodities  in  the 
German  market,  including,  among  the  rest,  even  the  imported 
commodity,  cloth.  If  10  yards  of  cloth  previously  exchanged  for 
17  yards  of  linen,  they  will  now  exchange  for  half  as  much  more,  or 
25J  yards.  But  whether  they  will  continue  to  do  so  will  depend  on 
the  efiect  which  this  increased  cheapness  of  linen  produces  on  the 
international  demand.  The  demand  for  linen  in  England  could 
scarcely  fail  to  be  increased.  But  it  might  be  increased  either  in 
proportion  to  the  cheapness,  or  in  a greater  proportion  than  the 
cheapness,  or  in  a less  proportion. 

If  the  demand  was  increased  in  the  same  proportion  with  the 
cheapness,  England  would  take  as  many  times  25J  yards  of  hnen,  as 


INTERNATIONAL  VALUES 


695 


the  number  of  times  17  yards  which  she  took  previously.  She  would 
expend  in  linen  exactly  as  much  of  cloth,  or  of  the  equivalents  of 
cloth,  as  much  in  short  of  the  collective  income  of  her  people,  as  she 
did  before.  Germany,  on  her  part,  would  probably  require,  at  that 
rate  of  interchange,  the  same  quantity  of  cloth  as  before,  because  it 
would  in  reality  cost  her  exactly  as  much  ; 25J  yards  of  linen  being 
now  of  the  same  value  in  her  market  as  17  yards  were  before.  In 
this  case,  therefore,  10  yards  of  cloth  for  25J  of  linen  is  the  rate  of 
interchange  which  under  these  new  conditions  would  restore  the 
equation  of  international  demand  ; and  England  would  obtain  linen 
one-third  cheaper  than  before,  being  the  same  advantage  as  was 
obtained  by  Germany. 

It  might  happen,  however,  that  this  great  cheapening  of  linen 
would  increase  the  demand  for  it  in  England  in  a greater  ratio  than 
the  increase  of  cheapness  ; and  that,  if  she  before  wanted  1000  times 
17  yards,  she  would  now  require  more  than  1000  times  25 J yards  to 
satisfy  her  demand.  If  so,  the  equation  of  international  demand 
cannot  establish  itself  at  that  rate  of  interchange ; to  pay  for  the 
linen  England  must  offer  cloth  on  more  advantageous  terms ; say, 
for  example,  10  yards  for  21  of  linen  ; so  that  England  will  not  have 
the  full  benefit  of  the  improvement  in  the  production  of  linen,  while 
Germany,  in  addition  to  that  benefit,  will  also  pay  less  for  cloth. 
But  again,  it  is  possible  that  England  might  not  desire  to  increase 
her  consumption  of  linen  in  even  so  great  a proportion  as  that  of  the 
increased  cheapness ; she  might  not  desire  so  great  a quantity  as 
1000  times  25J  yards  : and  in  that  case  Germany  must  force  a demand 
by  offering  more  than  25J  yards  of  linen  for  10  of  cloth ; linen  will 
be  cheapened  in  England  in  a still  greater  degree  than  in  Germany  ; 
while  Germany  will  obtain  cloth  on  more  unfavourable  terms  ; and 
at  a higher  exchange  value  than  before. 

After  what  has  already  been  said,  it  is  not  necessary  to  particu- 
larize the  manner  in  which  these  results  might  be  modified  by  intro- 
ducing into  the  hypothesis  other  countries  and  other  commodities. 
There  is  a further  circumstance  by  which  they  may  also  be  modified. 
In  the  case  supposed  the  consumers  of  Germany  have  had  a part  of 
their  incomes  set  at  liberty  by  the  increased  cheapness  of  linen,  which 
they  may  indeed  expend  in  increasing  their  consumption  of  that 
article,  but  which  they  may  likewise  expend  in  other  articles,  and 
among  others,  in  cloth  or  other  imported  commodities.  This  would 
be  an  additional  element  in  the  international  demand,  and  would 
modify  more  or  less  the  terms  of  interchange. 


596 


BOOK  m.  CHAPTER  XVIII.  § 6 


Of  tlie  three  possible  varieties  in  the  influence  of  cheapness  on 
demand,  which  is  the  more  probable — that  the  demand  would  be 
increased  more  than  the  cheapness,  as  much  as  the  cheapness,  or  loss 
than  the  cheapness  ? This  depends  on  the  nature  of  the  particular 
commodity,  and  on  the  tastes  of  purchasers.  When  the  commodity 
is  one  in  general  request,  and  the  fall  of  its  price  brings  it  within 
reach  of  a much  larger  class  of  incomes  than  before,  the  demand  is 
often  increased  in  a greater  ratio  than  the  fall  of  price,  and  a larger 
sum  of  money  is  on  the  whole  expended  in  the  article.  Such  was 
the  case  with  coffee,  when  its  price  was  lowered  by  successive 
reductions  of  taxation  ; and  such  would  probably  be  the  case  with 
sugar,  wine,  and  a large  class  of  commodities  which,  though  not 
necessaries,  are  largely  consumed,  and  in  which  many  consumers 
indulge  when  the  articles  are  cheap  and  economize  when  they  are 
dear.  But  it  more  frequently  happens  that  when  a commodity  falls 
in  price,  less  money  is  spent  in  it  than  before  : a greater  quantity  is 
consumed,  but  not  so  great  a value.  The  consumer  who  saves  money 
by  the  cheapness  of  the  article,  will  be  likely  to  expend  part  of  the 
saving  in  increasing  his  consumption  of  other  things  : and  unless  the 
low  price  attracts  a large  class  of  new  purchasers  who  were  either 
not  customers  of  the  article  at  all,  or  only  in  small  quantity  and 
occasionally,  a less  aggregate  sum  will  be  expended  on  it.  Speaking 
generally,  therefore,  the  third  of  our  three  cases  is  the  most  probable  : 
and  an  improvement  in  an  exportable  article  is  likely  to  be  as  bene- 
ficial (if  not  more  beneficial)  to  foreign  countries,  as  to  the  country 
where  the  article  is  produced. 

§ 6.1  Thus  far  had  the  theory  of  international  values  been 
carried  in  the  first  and  second  editions  of  this  work.  But  intelligent 
criticisms  (chiefly  those  of  my  friend  Mr.  William  Thornton),  and 
subsequent  further  investigation,  have  shown  that  the  doctrine 
stated  m the  preceding  pages,  though  correct  as  far  as  it  goes,  is  not 
yet  the  complete  theory  of  the  subject  matter. 

It  has  been  shown  that  the  exports  and  imports  between  the  two 
countries  (or,  if  we  suppose  more  than  two,  between  each  country 
and  the  world)  must  in  the  aggregate  pay  for  each  other,  and  must 
therefore  be  exchanged  for  one  another  at  such  values  as  will  be 
compatible  with  the  equation  of  international  demand.  That  this, 
however,  does  not  furnish  the  complete  law  of  the  phenomenon, 
appears  from  the  following  consideration : that  several  different 
* [§§  6-8  were  inserted  in  the  3rd  ed.  (1852).] 


INTERNATIONAL  VALUES 


697 


rates  of  international  value  may  all  equally  fulfil  the  conditions  of 
this  law. 

The  supposition  was,  that  England  could  produce  10  yards  of 
cloth  with  the  same  labour  as  15  of  linen,  and  Germany  with  the 
same  labour  as  20  of  linen  ; that  a trade  was  opened  between  the  two 
countries ; that  England  thenceforth  confined  her  production  to 
cloth,  and  Germany  to  linen ; and,  that  if  10  yards  of  cloth  should 
thenceforth  exchange  for  17  of  linen,  England  and  Germany  would 
exactly  supply  each  other’s  demand  : that,  for  instance,  if  England 
wanted  at  that  price  17,000  yards  of  linen,  Germany  would  want 
exactly  the  10,000  yards  of  cloth,  which,  at  that  price,  England 
would  be  required  to  give  for  the  linen.  Under  these  suppositions 
it  appeared,  that  10  cloth  for  17  linen  would  be,  in  point  of  fact,  the 
international  values. 

But  it  is  quite  possible  that  some  other  rate,  such  as  10  cloth  for 
18  linen,  might  also  fulfil  the  conditions  of  the  equation  of  inter- 
national demand.  Suppose  that,  at  this  last  rate,  England  would 
want  more  linen  than  at  the  rate  of  10  for  17,  but  not  in  the  ratio  of 
the  cheapness  ; that  she  would  not  want  the  18,000  which  she  could 
now  buy  with  10,000  yards  of  cloth,  but  would  be  content  with 
17,500,  for  which  she  would  pay  (at  the  new  rate  of  10  for  18)  9722 
yards  of  cloth.  Germany,  again,  having  to  pay  dearer  for  cloth  than 
when  it  could  be  bought  at  10  for  17,  would  probably  reduce  her 
consumption  to  an  amount  below  10,000  yards,  perhaps  to  the  very 
same  number,  9722.  Under  these  conditions  the  Equation  of  Inter- 
national Demand  would  still  exist.  Thus,  the  rate  of  10  for  17,  and 
that  of  10  for  18,  would  equally  satisfy  the  Equation  of  Demand : and 
many  other  rates  of  interchange  might  satisfy  it  in  like  manner.  It 
is  conceivable  that  the  conditions  might  be  equally  satisfied  by  every 
numerical  rate  which  could  be  supposed.  There  is  still  therefore  a 
portion  of  indeterminateness  in  the  rate  at  which  the  international 
values  would  adjust  themselves ; showing  that  the  whole  of  the 
influencing  circumstances  cannot  yet  have  been  taken  into  account. 

§ 7.  It  will  be  found  that,  to  supply  this  deficiency,  we  must 
take  into  consideration  not  only,  as  we  have  already  done,  the 
quantities  demanded  in  each  country  of  the  imported  commodities  ; 
but  also  the  extent  of  the  means  of  supplying  that  demand  which  are 
set  at  liberty  in  each  country  by  the  change  in  the  direction  of  its 
industry. 

To  illustrate  this  point  it  will  be  necessary  to  choose  more 


598 


BOOK  III.  CHAPTER  XVIII.  § 7 


convenient  numbers  than  those  which  we  have  hitherto  employed. 
Let  it  be  supposed  that  in  England  100  yards  of  cloth,  previously 
to  the  trade,  exchanged  for  100  of  linen,  but  that  in  Germany  100 
of  cloth  exchanged  for  200  of  linen.  When  the  trade  was  opened, 
England  would  supply  cloth  to  Germany,  Germany  linen  to  England, 
at  an  exchange  value  which  would  depend  partly  on  the  element 
already  discussed,  viz.  the  comparative  degree  in  which,  in  the  two 
countries,  increased  cheapness  operates  in  increasing  the  demand ; 
and  partly  on  some  other  element  not  yet  taken  into  account. 
In  order  to  isolate  this  unknown  element,  it  will  be  necessary  to 
make  some  definite  and  invariable  supposition  in  regard  to  the  known 
element.  Let  us  therefore  assume,  that  the  influence  of  cheapness 
on  demand  conforms  to  some  simple  law,  common  to  both  countries 
and  to  both  commodities.  As  the  simplest  and  most  convenient, 
let  us  suppose  that  in  both  countries  any  given  increase  of  cheapness 
produces  an  exactly  proportional  increase  of  consumption ; or,  in 
other  words,  that  the  value  expended  in  the  commodity,  the  cost 
incurred  for  the  sake  of  obtaining  it,  is  always  the  same,  whether 
that  cost  affords  a greater  or  a smaller  quantity  of  the  commodity. 

Let  us  now  suppose  that  England,  previously  to  the  trade, 
required  a million  of  yards  of  linen,  which  were  worth,  at  the  Enghsh 
cost  of  production,  a million  yards  of  cloth.  By  turning  all  the 
labour  and  capital  with  which  that  linen  was  produced  to  the  pro- 
duction of  cloth,  she  would  produce  for  exportation  a miUion  yards 
of  cloth.  Suppose  that  this  is  the  exact  quantity  which  Germany 
is  accustomed  to  consume.  England  can  dispose  of  all  this  cloth 
in  Germany  at  the  German  price  ; <he  must  consent  indeed  to  take 
a little  less  until  she  has  driven  the  German  producer  from  the 
market,  but  as  soon  as  this  is  effected,  she  can  sell  her  million  of 
cloth  for  two  milhons  of  Hnen  ; being  the  quantity  that  the  German 
clothiers  are  enabled  to  make  by  transferring  their  whole  labour  and 
capital  from  cloth  to  hnen.  Thus  England  would  gain  the  whole 
benefit  of  the  trade,  and  Germany  nothing.  This  would  be  perfectly 
consistent  with  the  equation  of  international  demand : since  Eng- 
land (according  to  the  hypothesis  in  the  preceding  paragraph)  now 
requires  two  milhons  of  hnen  (being  able  to  get  them  at  the  same 
cost  at  which  she  previously  obtained  only  one),  while,  the  prices 
in  Germany  not  being  altered,  Germany  requires  as  before  exactly 
a milhon  of  cloth,  and  can  obtain  it  by  employing  the  labour  and 
capital  set  at  hberty  from  the  production  of  cloth,  in  producing  the 
two  milhons  of  hnen  required  by  England. 


INTERNATIONAL  VALUES 


o9» 

Thus  far  we  have  supposed  that  the  additional  cloth  which 
England  could  make,  by  transferring  to  cloth  the  whole  of  the  capital 
previously  employed  in  making  linen,  was  exactly  sufficient  to  supply 
the  whole  of  Germany’s  existing  demand.  But  suppose  next  that 
it  is  more  than  sufficient.  Suppose  that  while  England  could  make 
with  her  liberated  capital  a million  yards  of  cloth  for  exportation, 
the  cloth  which  Germany  had  heretofore  required  was  800,000  yards 
only,  equivalent  at  the  German  cost  of  production  to  1,600,000 
yards  of  linen.  England  therefore  could  not  dispose  of  a whole 
million  of  cloth  in  Germany  at  the  German  prices.  Yet  she  wants, 
whether  cheap  or  dear  (by  our  supposition),  as  much  linen  as  can  be 
bought  for  a million  of  cloth  : and  since  this  can  only  be  obtained 
from  Germany,  or  by  the  more  expensive  process  of  production  at 
home,  the  holders  of  the  million  of  cloth  will  be  forced  by  each  other’s 
competition  to  offer  it  to  Germany  on  any  terms  (short  of  the 
English  cost  of  production)  which  will  induce  Germany  to  take  the 
whole.  What  these  terms  would  be,  the  supposition  we  have  made 
enables  us  exactly  to  define.  The  800,000  yards  of  cloth  which 
Germany  consumed,  cost  her  the  equivalent  of  1,600,000  linen, 
and  that  invariable  cost  is  what  she  is  willing  to  expend  in  cloth, 
whether  the  quantity  it  obtains  for  her  be  more  or  less.  England 
therefore,  to  induce  Germany  to  take  a million  of  cloth,  must  offer 
it  for  1,600,000  of  linen.  The  international  values  will  thus  be  100 
cloth  for  160  linen,  intermediate  between  the  ratio  of  the  costs  of 
production  in  England,  and  that  of  the  costs  of  production  in 
Germany  : and  the  two  countries  will  divide  the  benefit  of  the  trade, 
England  gaining  in  the  aggregate  600,000  yards  of  linen,  and 
Germany  being  richer  by  200,000  additional  yards  of  cloth. 

Let  us  now  stretch  the  last  supposition  still  farther,  and  suppose 
that  the  cloth  previously  consumed  by  Germany,  was  not  only  less 
than  the  million  yards  which  England  is  enabled  to  furnish  by 
discontinuing  her  production  of  linen,  but  less  in  the  full  proportion 
of  England’s  advantage  in  the  production,  that  is,  that  Germany 
only  required  half  a million.  In  this  case,  by  ceasing  altogether 
to  produce  cloth,  Germany  can  add  a million,  but  a million  only, 
to  her  production  of  linen ; and  this  million,  being  the  equivalent 
of  what  the  half  million  previously  cost  her,  is  all  that  she  can  be 
induced  by  any  degree  of  cheapness  to  expend  in  cloth.  England 
will  be  forced  by  her  own  competition  to  give  a whole  million  of 
cloth  for  this  million  of  Hnen,  just  as  she  was  forced  in  the  preceding 
case  to  give  it  for  1,600,000.  But  England  could  have  produced  at 


600 


BOOK  III.  CHAPTER  XVni.  § 7 


the  same  cost  a million  yards  of  linen  for  herself.  England  therefore 
derives,  in  this  case,  no  advantage  from  the  international  trade. 
Germany  gains  the  whole ; obtaining  a million  of  cloth  instead  of 
half  a million,  at  what  the  half  million  previously  cost  her.  Germany, 
in  short,  is,  in  this  third  case,  exactly  in  the  same  situation  as 
England  was  in  the  first  case ; which  may  easily  be  verified  by 
reversing  the  figures. 

As  the  general  result  of  the  three  cases,  it  may  be  laid  down  as  a 
theorem,  that  under  the  supposition  we  have  made  of  a demand 
exactly  in  proportion  to  the  cheapness,  the  law  of  international 
values  will  be  as  follows  : — 

The  whole  of  the  cloth  which  England  can  make  with  the  capital 
previously  devoted  to  linen,  will  exchange  for  the  whole  of  the  linen 
which  Germany  can  make  with  the  capital  previously  devoted  to 
cloth. 

Or,  still  more  generally. 

The  ^wholcL  of  the  commodities  which  the  two  countries  can 
respectively  make  for  exportation,  with  the  labour  and  capital 
thrown  out  of  employment  by  importation,  will  exchange  against 
one  another. 

This  law,  and  the  three  different  possibihties  arising  from  it  in 
respect  to  the  division  of  the  advantage,  may  be  conveniently 
generahzed  by  means  of  algebraical  symbols,  as  follows  : — 

Let  the  quantity  of  cloth  which  England  can  make  with  the 
labour  and  capital  withdrawn  from  the  production  of  linen,  be  = w. 

Let  the  cloth  previously  required  by  Germany  (at  the  German 
cost  of  production)  be  = m. 

Then  n of  cloth  will  always  exchange  for  exactly  2m  of  linen. 

Consequently  if  w = m,  the  whole  advantage  will  be  on  the  side 
of  England. 

lin—  2m,  the  whole  advantage  will  be  on  the  side  of  Germany. 

If  n be  greater  than  m,  but  less  than  2m,  the  two  countries 
will  share  the  advantage ; England  getting  2m  of  linen  where  she 
before  got  only  n ; Germany  getting  n of  cloth  where  she  before 
got  only  m. 

It  is  almost  superfluous  to  observe  that  the  figure  2 stands  where 
it  does  only  because  it  is  the  figure  which  expresses  the  advantage 
of  Germany  over  England  in  linen  as  estimated  in  cloth,  and 
(what  is  the  same  thing)  of  England  over  Germany  in  cloth  as  esti- 
mated in  linen.  If  we  had  supposed  that  in  Germany,  before  the 
trade,  100  of  cloth  exchanged  for  1000  instead  of  200  of  linen. 


INTERNATIONAL  VALUES 


601 


then  n (after  the  trade  commenced)  would  have  exchanged  for  10m 
instead  of  2m.  If  instead  of  1000  or  200  we  had  supposed  only 
150,  n would  have  exchanged  for  only  |m.  If  (in  fine)  the  cost  value 
of  cloth  (as  estimated  in  linen)  in  Germany  exceeds  the  cost  value 
similarly  estimated  in  England,  in  the  ratio  of  p to  q,  then  will  n, 

after  the  opening  of  the  trade,  exchange  for  - m,* 


§ 8.  We  have  now  arrived  at  what  seems  a law  of  International 
Values  of  great  simplicity  and  generality.  But  we  have  done  so  by 
setting  out  from  a purely  arbitrary  hypothesis  respecting  the  relation 
between  demand  and  cheapness.  We  have  assumed  their  relation 
to  be  fixed,  though  it  is  essentially  variable.  We  have  supposed  that 
every  increase  of  cheapness  produces  an  exactly  proportional  exten- 
sion of  demand ; in  other  words,  that  the  same  invariable  value 
is  laid  out  in  a commodity  whether  it  be  cheap  or  dear ; and  the 


* It  may  be  asked,  why  we  have  supposed  the  number  n to  have  as  its 
extreme  limits,  m and  2m  (or  ^m)  ? why  may  not  n be  less  than  m,  or  greater 

than  2m ; and  if  so,  what  will  be  the  result  ? 

This  we  shall  now  examine ; and,  when  we  do  so,  it  will  appear  that  n is 
always,  practically  speaking,  confined  within  these  limits. 

Suppose,  for  example,  that  n is  less  than  m ; or,  reverting  to  our  former 
figures,  that  the  million  yards  of  cloth,  which  England  can  make,  will  not  satisfy 
the  whole  of  Germany’s  pre-existing  demand  ; that  demand  being  (let  us  sup- 
pose) for  1,200,000  yards.  It  would  then,  at  first  sight,  appear  that  England 
would  supply  Germany  with  cloth  up  to  the  extent  of  a million  ; that  Germany 
would  continue  to  supply  herself  with  the  remaining  200,000  by  home  produc- 
tion : that  this  portion  of  the  supply  would  regulate  the  price  of  the  whole  ; 
that  England  therefore  would  be  able  permanently  to  sell  her  million  of  cloth  at 
the  German  cost  of  production  (viz.  for  two  millions  of  linen)  and  would  gain 
the  whole  advantage  of  the  trade,  Germany  being  no  better  off  than  before. 

That  such,  however,  would  not  be  the  practical  result,  will  soon  be  evident. 
The  residuary  demand  of  Germany  for  200,000  yards  of  cloth  furnishes  a 
resource  to  England  for  purposes  of  foreign  trade  of  which  it  is  still  her  interest 
to  avail  herself  ; and  though  she  has  no  more  labour  and  capital  which  she  can 
withdraw  from  linen  for  the  production  of  this  extra  quantity  of  cloth,  there 
must  be  some  other  commodities  in  which  Germany  has  a relative  advantage 
over  her  (though  perhaps  not  so  great  as  in  linen) ; these  she  will  now  import, 
instead  of  producing,  and  the  labour  and  capital  formerly  employed  in  pro- 
ducing them  will  be  transferred  to  cloth,  until  the  required  amount  is  made  up. 
If  this  transfer  just  makes  up  the  200,000,  and  no  more,  this  augmented  n will 
now  be  equal  to  m ; England  will  sell  the  whole  1,200,000  at  the  German  values  : 
and  will  still  gain  the  whole  advantage  of  the  trade.  But  if  the  transfer  makes 
up  more  than  the  200,000,  England  will  have  more  cloth  than  1,200,000  yards 
to  offer  ; n will  become  greater  than  m,  and  England  must  part  with  enough  of 
the  advantage  to  induce  Germany  to  take  the  surplus.  Thus  the  case,  which 
seemed  at  first  sight  to  be  beyond  the  limits,  is  transformed  practically  into  a 
case  either  coinciding  with  one  of  the  limits  or  between  them.  And  so  with 
every  other  ease  which  can  be  supposed 


602 


BOOK  III.  CHAPTER  XVm.  § 8 


law  wliicli  we  have  investigated  holds  good  only  on  this  hypothesis, 
or  some  other  practically  equivalent  to  it.  Let  us  now,  therefore, 
combine  the  two  variable  elements  of  the  question,  the  variations 
of  each  of  which  we  have  considered  separately.  Let  us  suppose  the 
relation  between  demand  and  cheapness  to  vary,  and  to  become  such 
as  would  prevent  the  rule  of  interchange  laid  down  in  the  last  theorem 
from  satisfying  the  conditions  of  the  Equation  of  International 
Demand.  Let  it  be  supposed,  for  instance,  that  the  demand  of 
England  for  linen  is  exactly  proportional  to  the  cheapness,  but  that 
of  Germany  for  cloth,  not  proportional.  To  revert  to  the  second  of 
our  three  cases,  the  case  in  which  England  by  discontinuing  the 
production  of  linen  could  produce  for  exportation  a million  yards  of 
cloth,  and  Germany  by  ceasing  to  produce  cloth  could  produce  an 
additional  1,600,000  yards  of  linen.  If  the  one  of  these  quantities 
exactly  exchanged  for  the  other,  the  demand  of  England  would  on 
our  present  supposition  be  exactly  satisfied,  for  she  requires  all  the 
linen  which  can  be  got  for  a million  yards  of  cloth  : but  Germany 
perhaps,  though  she  required  800,000  cloth  at  a cost  equivalent 
to  1,600,000  linen,  yet  when  she  can  get  a million  of  cloth  at  the  same 
cost,  may  not  require  the  whole  million  ; or  may  require  more  than 
a milhon.  First,  let  her  not  require  so  much  ; but  only  as  much  as 
she  can  now  buy  for  1 ,500,000  linen.  England  will  still  offer  a million 
for  these  1,500,000  ; but  even  this  may  not  induce  Germany  to  take 
so  much  as  a million  ; and  if  England  continues  to  expend  exactly  the 
same  aggregate  cost  on  linen  whatever  be  the  price,  she  will  have  to 
submit  to  take  for  her  million  of  cloth  any  quantity  of  linen  (not  less 
than  a million)  which  may  be  requisite  to  induce  Germany  to  take 
a million  of  cloth.  Suppose  this  to  be  1,400,000  yards.  England 
has  now  reaped  from  the  trade  a gain  not  of  600,000  but  only  of 

400.000  yards ; while  Germany,  besides  having  obtained  an  extra 

200.000  yards  of  cloth,  has  obtained  it  with  only  seven-eighths  of 
the  labour  and  capital  which  she  previously  expended  in  supplying 
herself  with  cloth,  and  may  expend  the  remainder  in  increasing 
her  own  consumption  of  linen,  or  of  any  other  commodity. 

Suppose  on  the  contrary  that  Germany,  at  the  rate  of  a million 
cloth  for  1,600,000  linen,  requires  more  than  a million  yards  of 
cloth.  England  having  only  a million  which  she  can  give  without 
trenching  upon  the  quantity  she  previously  reserved  for  herself, 
Germany  must  bid  for  the  extra  cloth  at  a higher  rate  than  160  for 
100,  until  she  reaches  a rate  (say  170  for  100)  which  will  either  bring 
down  her  own  demand  for  cloth  to  the  limit  of  a million,  or  else 


INTERNATIONAL  VALUES 


003 


tempt  England  to  part  with  some  of  the  cloth  she  previously 
consumed  at  home. 

Let  us  next  suppose  that  the  proportionality  of  demand  to 
cheapness,  instead  of  holding  good  in  one  country  but  not  in  the  other, 
does  not  hold  good  in  either  country,  and  that  the  deviation  is  of  the 
same  kind  in  both ; that,  for  instance,  neither  of  the  two  increases 
its  demand  in  a degree  equivalent  to  the  increase  of  cheapness. 
On  this  supposition,  at  the  rate  of  one  million  cloth  for  1,600,000 
linen,  England  will  not  want  so  much  as  1,600,000  linen,  nor  Germany 
so  much  as  a million  cloth : and  if  they  fall  short  of  that  amount  in 
exactly  the  same  degree : if  England  only  wants  linen  to  the  amount 
of  nine-tenths  of  1,600,000  (1,440,000),  and  Germany  only  nine 
hundred  thousand  of  cloth,  the  interchange  will  continue  to  take 
place  at  the  same  rate.  And  so  if  England  wants  a tenth  more  than 
1,600,000,  and  Germany  a tenth  more  than  a million.  This  coinci- 
dence (which,  it  is  to  be  observed,  supposes  demand  to  extend 
cheapness  in  a corresponding,  but  not  in  an  equal  degree  *)  evidently 
could  not  exist  unless  by  mere  accident : and,  in  any  other  case,  the 
equation  of  international  demand  would  require  a different  adjust- 
ment of  international  values. 

The  only  general  law,  then,  which  can  be  laid  down,  is  this. 
The  values  at  which  a country  exchanges  its  produce  with  foreign 
countries  depend  on  two  things  : first,  on  the  amount  and  exten- 
sibilify  of  their  demand  for  its  commodities,  compared  with  its  de- 
mand for  theirs  ; and  secondly,  oij  the  capital  which  it  has  to  spare 
from  the  production  of  domestic  commodities  for  its  own  consump- 
tion. The  more  the  foreign  demand  for  its  commodities  exceeds  its 
demand  for  foreign  commodities,  and  the  less  capital  it  can  spare 
to  produce  for  foreign  markets,  compared  with  what  foreigners 
spare  to  produce  for  its  markets,  the  more  favourable  to  it  will  be 
the  terms  of  interchange  : that  is,  the  more  it  will  obtain  of  foreign 
commodities  in  return  for  a given  quantity  of  its  own. 

But  these  two  influencing  circumstances  are  in  reality  reducible 
to  one  : for  the  capital  which  a country  has  to  spare  from  the 
production  of  domestic  commodities  for  its  own  use  is  in  proportion 
to  its  own  demand  for  foreign  commq^ties  : whatever  proportion 
of  its  collective  income  it  expends  in  purchases  from  abroad,  that 

* The  increase  of  demand  from  800,000  to  900,000,  and  that  from  a million 
to  1,440,000,  are  neither  equal  in  themselves,  nor  bear  an  equal  proportion  to 
the  increase  of  cheapness.  Germany’s  demand  for  cloth  has  increased  one- 
eighth,  while  the  cheapness  is  increased  one-fourth.  England’s  demand  for 
linen  is  increased  44  per  cent,  while  the  cheapness  is  increased  60  per  cent. 


604 


BOOK  m.  CHAPTER  XVIIL  § 9 


same  proportion  of  its  capital  is  left  without  a home  market  for  its 
productions.  The  new  element,  therefore,  which  for  the  sake  of 
scientific  correctness  we  have  introduced  into  the  theory  of  inter- 
national  values,  does  not  seem  to  make  any  very  material  difierence 
in  the  practical  result.  It  stiU  appears,  thaiLj^^ountries  which 
carry  on  their  foreign  trade  on  the  most  advantageous  terms,  are 
those  whose  cormnpdities  are  most  in  demand  by  foreign  cmintriea, 
and  which  have  themselves  the  least  demand  for  foreign  commodities. 
From  which,  among  other  consequences,  it  follows,  that  the  richest 
countries,  ccBteris  'paribus^  gain  the  least  by  a given  amount  of  foreign 
commerce  : since,  having  a greater  demand  for  commodities  gener- 
ally, they  are  likely  to  have  a greater  demand  for  foreign  com- 
modities, and  thus  modify  the  terms  of  interchange  to  their  own 
disadvantage.  Their  aggregate  gains  by  foreign  trade,  doubtless, 
are  generally  greater  than  those  of  poorer  countries,  since  they  carry 
on  a greater  amount  of  such  trade,  and  gain  the  benefit  of  cheapness 
on  a larger  consumption  : but  their  gain  is  less  on  each  individual 
article  consumed. 

§ 9.  We  now  pass  to  another  essential  part  of  the  theory  of 
the  subject.  There  are  two  senses  in  which  a country  obtains  com- 
modities cheaper  by  foreign  trade  ; ^ the  sense  of  Valu^  and  in  the 
sei^  of  Cost.  It  gets  them  cheaper  in  the  first  sense,  by  their  falling 
in  value  relatively  to  other  things  : the  same  quantity  of  them 
exchanging,  in  the  country,  for  a smaller  quantity  than  before 
of  the  other  produce  of  the  country.  To  revert  to  our  original 
figures  ; in  England,  all  consumers  of  hnen  obtained,  after  the  trade 
was  opened,  17  or  some  greater  number  of  yards  for  the  same 
quantity  of  all  other  things  for  which  they  before  obtained  only  15. 
The  degree  of  cheapness,  in  this  sense  of  the  term,  depends  on  the 
laws  of  International  Demand,  so  copiously  illustrated  in  the 
preceding  sections.  But  in  the  other  sense,  that  of  Cost,  a country 
gets  a commodity  cheaper  when  it  obtains  a greater  quantity  of  the 
commodity  with  the  same  expenditure  of  labour  and  capitaL  In 
this  sense  of  the  term,  cheapness  in  a great  measure  d^enda  i^on  a 
cause  of  a different  nature  county  gets  its  imports  clmaper, 
in  proportion  to  the  general  productiveness  of  its  c^mestic  industry  : 
tdlifLe'  general  efficiency  of  itnahour.  The  labour  of  one  country 
may  be,  as  a whole,  much  more  efficient  than  that  of  another ; all 
or  most  of  the  commodities  capable  of  being  produced  in  both  may 
be  produced  in  one  at  less  absolute  cost  than  in  the  other ; which, 


INTERNATIONAL  VALUES 


606 


as  we  have  seen,  will  not  necessarily  prevent  the  two  countries  from 
exchanging  commodities.  The  things  which  the  more  favoured 
country  will  import  from  others,  are  of  course  those  in  which  it  is 
least  superior ; but  by  importing  them  it  acquires,  even  in  those 
commodities,  the  same  advantage  which  it  possesses  in  the  articles 
it  gives  in  exchange  for  them.  Thus  the  countries  which  obtain  their 
own  productions  at  least  cost,  also  get  their  imports  at  least  cost. 

This  will  be  made  still  more  obvious  if  we  suppose  two  competing 
countries.  England  sends  cloth  to  Germany,  and  gives  10  yards  of  it 
for  17  yards  of  linen,  or  for  something  else  which  in  Germany  is  the 
equivalent  of  those  17  yards.  Another  country,  as  for  example 
France,  does  the  same.  The  one  giving  10  yards  of  cloth  for  a certain 
quantity  of  German  commodities,  so  must  the  other : if,  therefore, 
in  England,  these  10  yards  are  produced  by  only  half  as  much  labour 
as  that  by  which  they  are  produced  in  France,  the  hnen  or  other 
commodities  of  Germany  will  cost  to  England  only  half  the  amount  of 
labour  which  they  wiU  cost  to  France.  England  would  thus  obtain 
her  imports  at  less  cost  than  France,  in  the  ratio  of  the  greater 
efficiency  of  her  labour  in  the  production  of  cloth  : which  might  be 
taken,  in  the  case  supposed,  as  an  approximate  estimate  of  the 
efficiency  of  her  labour  generally  ; since  France,  as  well  as  England, 
by  selecting  cloth  as  her  article  of  export,  would  have  shown  that  with 
her  also  it  was  the  commodity  in  which  labour  was  relatively  the 
most  efficient.  It.  follows,  therefore,  that  every  country  gets  its 
imports  at  less  cost,  in  proportion  to  the  general  efficiency  of  its 
labour. 

This  proposition  was  first  clearly  seen  and  expounded  by  Mr. 
Senior,*  but  only  as  applicable  to  the  importation  of  the  precious 
metals.  I think  it  important  to  point  out  that  the  proposition 
holds  equally  true  of  all  other  imported  commodities  ; and  further, 
that  it  is  only  a portion  of  the  truth.  For,  in  the  case  supposed, 
the  cost  to  England  of  the  linen  which  she  pays  for  with  ten  yards  of 
cloth,  does  not  depend  solely  upon  the  cost  to  herseK  of  ten  yards  of 
cloth,  but  partly  also  upon  how  many  yards  of  linen  she  obtains  in 
exchange  for  them.  What  her  imports  cost  to  her  is  a function  of 
two  variables  ; the  quantity  of  her  own  commodities  which  she  gives 
for  them,  and  the  cost  of  those  commodities.  Of  these,  the  last  alone 
depends  on  the  efficiency  of  her  labour  : the  first  depends  on  the  law 
of  international  values ; that  is,  on  the  intensity  and  extensibility 

* Three  Lectures  on  the  Cost  of  Obtaining  Money* 


606 


BOOK  III.  CHAPTER  XVIII.  § 9 


of  the  foreign  demand  for  her  commodities,  compared  with  her 
demand  for  foreign  commodities. 

In  the  case  just  now  supposed,  of  a competition  between  England 
and  France,  the  state  of  international  values  affected  both  competi- 
tors alike,  since  they  were  supposed  to  trade  with  the  same  country, 
and  to  export  and  import  the  same  commodities.  The  difference, 
therefore,  in  what  their  imports  cost  them,  depended  solely  on  the 
other  cause,  the  unequal  efficiency  of  their  labour.  They  gave  the 
same  quantities  ; the  difference  could  only  be  in  the  cost  of  produc- 
tion. But  if  England  traded  to  Germany  with  cloth,  and  France  with 
iron,  the  comparative  demand  in  Germany  for  those  two  commodi- 
ties would  bear  a share  in  determining  the  comparative  cost,  in 
labour  and  capital,  with  which  England  and  France  would  obtain 
German  products.  If  iron  were  more  in  demand  in  Germany  than 
cloth,  France  would  recover,  through  that  channel,  part  of  her 
disadvantage  ; if  less,  her  disadvantage  would  be  increased.  The 
efficiency,  therefore,  of  a country’s  labour,  is  not  the  only  thing  which 
determines  even  the  cost  at  which  that  country  obtains  imported 
commodities — while  it  has  no  share  whatever  in  determining  either 
their  exchange  valuCy  or,  as  we  shall  presently  see,  their  price.^ 


* [See  Appendix  V.  Inizmational  Values.'] 


CHAPTER  XIX 


ON  MONEY,  CONSIDERED  AS  AN  IMPORTED  COMMODITY 

§ 1.  The  degree  of  progress  which  we  have  now  made  in  the 
theory  of  Foreign  Trade,  puts  it  in  our  power  to  supply  what  was 
previously  deficient  in  our  view  of  the  theory  of  Money  ; and  this, 
when  completed,  will  in  its  turn  enable  us  to  conclude  the  subject  of 
Foreign  Trade. 

Money,  or  the  material  of  which  it  is  composed,  is,  in  Great 
Britain,  and  in  most  other  countries,  a foreign  commodity.  Its 
value  and  distribution  must  therefore  be  regulated,  not  by  the  law 
of  value  which  obtains  in  adjacent  places,  but  by  that  which  is 
apphcable  to  imported!  commodities — the  law  of  International 
Values. 

In  the  discussion  into  which  we  are  now  about  to  enter,  I shall 
use  the  terms  Money  and  the  Precious  Metals  indiscriminately. 
This  may  be  done  without  leading  to  any  error ; it  having  been 
shown  that  the  value  of  money,  when  it  consists  of  the  precious 
metals,  or  of  a paper  currency  convertible  into  them  on  demand, 
is  entirely  governed  by  the  value  of  the  metals  themselves  : from 
which  it  never  permanently  differs,  except  by  the  expense  of 
coinage  when  this  is  paid  by  the  individual  and  not  by  the 
state. 

Money  is  brought  into  a country  in  two  different  ways.  It  is 
imported  (chiefly  in  the  form  of  bullion)  like  any  other  merchandize, 
as  being  an  advantageous  article  of  commerce.  It  is  also  imported 
in  its  other  character  of  a medium  of  exchange,  to  pay  some  debt 
due  to  the  country,  either  for  goods  exported  or  on  any  other  account. 
There  are  other  ways  in  which  it  may  be  introduced  casually ; 
these  are  the  two  in  which  it  is  received  in  the  ordinary  course  of 
business  and  which  determine  its  value.  The  existence  of  these 
two  distinct  modes  in  which  money  flows  into  a country,  while 
other  commodities  are  habitually  introduced  only  in  the  first  of 


608 


BOOK  ItL  CHAPTER  XIX.  § 2 


these  modes,  occasions  somewhat  more  of  complexity  and  obscurity 
than  exists  in  the  case  of  other  commodities,  and  for  this  reason 
only  is  any  special  and  minute  exposition  necessary. 

§ 2.  In  so  far  as  thoprecious  metals  are  imported  in  the  ordinary 
way  of  commerce,  their  value  must  depend  on  the  same  causes, 
and  conform  to  the  same  laws,  as  the  value  of  any  other  foreign 
production.  It  is  in  this  mode  chiefly  that  gold  and  silver  diffuse 
themselves  from  the  mining  countries  into  all  other  parts  of  the 
commercial  world.  They  are  the  staple  commodities  of  those 
countries,  or  at  least  are  among  their  great  articles  of  regular  export ; 
and  are  shipped  on  speculation,  in  the  same  manner  as  other  export- 
able commodities.  The  quantity,  therefore,  which  a country  (say 
England)  will  give  of  its  own  produce,  for  a certain  quantity  of 
bullion,  wiU  depend,  if  we  suppose  only  two  countries  and  two 
commodities,  upon  the  demand  in  England  for  bullion,  compared 
with  the  demand  in  the  mining  country  (which  we  will  call  Brazil) 
for  what  England  has  to  give.  They  must  exchange  in  such  pro- 
portions as  wiU  leave  no  unsatisfied  demand  on  either  side,  to  alter 
values  by  its  competition.  The  bullion  required  by  England  must 
exactly  pay  for  the  cottons  or  other  Enghsh  commodities  required 
by  Brazil.  If,  however,  we  substitute  for  this  simplicity  the  degree 
of  complication  which  reaUy  exists,  the  equation  of  intemationaj 
demand  must  be  established  not  between  the  bullion  wanted  in 
England  and  the  cottons  or  broadcloth  wanted  in  Brazil,  but  between 
the  whole  of  the  imports  of  England  and  the  whole  of  her  exports. 
The  demand  in  foreign  countries  for  English  products  must  be 
brought  into  equilibrium  with  the  demand  in  England  for  the 
products  of  foreign  countries  ; and  all  foreign  commodities,  bullion 
among  the  rest,  must  be  exchanged  against  English  products  in 
such  proportions  as  will,  by  the  effect  they  produce  on  the  demand, 
establish  this  equilibrium. 

There  is  nothing  in  the  peculiar  nature  or  uses  of  the  precious 
metals  which  should  make  them  an  exception  to  the  general 
principles  of  demand.  So  far  as  they  are  wanted  for  purposes  of 
luxury  or  the  arts,  the  demand  increases  with  the  cheapness,  in 
the  same  irregular  way  as  the  demand  for  any  other  commodity. 
So  far  as  they  are  required  for  money,  the  demand  increases  with 
the  cheapness  in  a perfectly  regular  way,  the  quantity  needed 
being  always  in  inverse  proportion  to  the  value.  This  is  the  only 
real  difference,  in  respect  to  demand,  between  money  and  other 


MONEY  AS  AN  IMPORTED  COMMODITY 


609 


things ; and  for  the  present  purpose  it  is  a difference  altogether 
immaterial. 

Money,  then,  if  imported  solely  as  a merchandize,  will,  like 
other  imported  commodities,  be  of  lowest  value  in  the  countries 
for  whose  exports  there  is  the  greatest  foreign  demand,  and  which 
have  themselves  the  least  demand  for  foreign  commodities.  To 
these  two  circumstances  it  is  however  necessary  to  add  two  others, 
which  produce  their  effect  through  cost  of  carriage.  The  cost  of 
obtaining  bullion  is  compounded  of  two  elements  ; the  goods  given 
to  purchase  it,  and  the  expense  of  transport : of  which  last,  the 
bullion  countries  will  bear  a part,  (though  an  uncertain  part,)  in 
the  adjustment  of  international  values.  The  expense  of  transport 
is  partly  that  of  carrying  the  goods  to  the  bullion  countries,  and 
partly  that  of  bringing  back  the  bullion  : both  these  items  are 
influenced  by  the  distance  from  the  mines ; and  the  former  is  also 
much  affected  by  the  bulkiness  of  the  goods.  Countries  whoso 
exportable  produce  consists  of  the  flner  manufactures,  obtain  bullion, 
as  well  as  all  other  foreign  articles,  cceteris  'paribus y at  less  expense 
than  countries  which  export  nothing  but  bulky  raw  produce. 

To  be  quite  accurate,  therefore,  we  must  say — The  countries 
whose  exportable  productions  are  most  in  demand  abroad,  and 
contain  greatest  value  in  smallest  bulk,  which  are  nearest  to  the 
mines,  and  which  have  least  demand  for  foreign  productions,  are 
those  in  which  money  will  be  of  lowest  value,  or,  in  other  words, 
in  which  prices  will  habitually  range  the  highest.  If  we  are  speaking 
not  of  the  value  of  money,  but  of  its  cost,  (that  is,  the  quantity  of 
the  country’s  labour  which  must  be  expended  to  obtain  it,)  we  must 
add  to  these  four  conditions  of  cheapness  a fifth  condition,  namely, 
whose  productive  industry  is  the  most  efficient.”  This  last,  how- 
ever, does  not  at  all  affect  the  value  of  money,  estimated  in  com- 
modities : it  affects  the  general  abundance  and  facility  with  which 
all  things,  money  and  commodities  together,  can  be  obtained. 

Although,  therefore,  Mr.  Senior  is  right  in  pointing  out  the  great 
efficiency  of  English  labour  as  the  chief  cause  why  the  precious 
metals  are  obtained  at  less  cost  by  England  than  by  most  other 
countries,  I cannot  admit  that  it  at  all  accounts  for  their  being  of 
less  value  ; for  their  going  less  far  in  the  purchase  of  commodities 
This,  in  so  far  as  it  is  a fact,  and  not  an  illusion,  must  be  occasioned 
by  the  great  demand  in  foreign  countries  for  the  staple  commodities 
of  England,  and  the  generally  unbulky  character  of  those  com- 
modities, compared  with  the  com,  wine,  timber,  sugar,  wool,  hides. 


610 


BOOK  m.  CHAPTER  XIX.  § 3 


tallow,  hemp,  flax,  tobacco,  raw  cotton,  &c.,  which  form  the  exports 
of  other  commercial  countries.  These  two  causes  will  account  for 
a somewhat  higher  range  of  general  prices  in  England  than  elsewhere, 
notwithstanding  the  counteracting  influence  of  her  own  great  demand 
for  foreign  commodities.  I am,  however,  strongly  of  opinion  that 
the  high  prices  of  commodities,  and  low  purchasing  power  of  money 
in  England,  are  more  apparent  than  real.  Food,  indeed,  is  some- 
what dearer  ; and  food  composes  so  large  a portion  of  the  expenditure 
when  the  income  is  small  and  the  family  large,  that  to  such  families 
England  is  a dear  country.  Services,  also,  of  most  descriptions, 
are  dearer  than  in  the  other  countries  of  Europe,  from  the  less 
costly  mode  of  living  of  the  poorer  classes  on  the  Continent.  But 
manufactured  commodities  (except  most  of  those  in  which  good 
taste  is  required)  are  decidedly  cheaper ; or  would  be  so  if  buyers 
would  be  content  with  the  same  quality  of  material  and  of  work- 
manship. What  is  called  the  dearness  of  living  in  England  is 
mainly  an  affair  not  of  necessity  but  of  foolish  custom ; it  being 
thought  imperative  by  aU  classes  in  England  above  the  condition 
of  a day-labourer  that  the  things  they  consume  should  either  be 
of  the  same  quality  with  those  used  by  much  richer  people,  or  at 
least  should  be  as  nearly  as  possible  undistinguishable  from  them 
in  outward  appearance. 

§ 3.  From  the  preceding  considerations,  it  appears  that  those 
are  greatly  in  error  who  contend  ^ that  the  value  of  money,  in 
countries  where  it  is  an  imported  commodity,  must  be  entirely 
regulated  by  its  value  in  the  countries  which  produce  it ; and 
cannot  be  raised  or  lowered  in  any  permanent  manner  unless  some 
change  has  taken  place  in  the  cost  of  production  at  the  mines.  On 
the  contrary,  any  circumstance  which  disturbs  the  equation  of 
international  demand  with  respect  to  a particular  country,  not  only 
may,  but  must,  affect  the  value  of  money  in  that  country — its  value 
at  the  mines  remaining  the  same.  The  opening  of  a new  branch 
of  export  trade  from  England ; an  increase  in  the  foreign  demand 
for  English  products,  either  by  the  natural  course  of  events,  or  by 
the  abrogation  of  duties ; a check  to  the  demand  in  England  for 
foreign  commodities,  by  the  laying  on  of  import  duties  in  England 
or  of  export  duties  elsewhere ; these  and  aU  other  events  of  similar 
tendency,  would  make  the  imports  of  England  (bullion  and  other 

^ [In  the  1st  and  2nd  editions  here  followed  : “ (as  has  been  done  in  the 
controversies  called  forth  by  the  recent  publications  of  Colonel  Torrens).”] 


MONEY  AS  AN  IMPORTED  COMMODITY 


6li 


things  taken  together)  no  longer  an  equivalent  for  the  exports ; 
and  the  countries  which  take  her  exports  would  bo  obliged  to  offer 
their  commodities,  and  bullion  among  the  rest,  on  cheaper  terms, 
in  order  to  re-establish  the  equation  of  demand  : and  thus  England 
would  obtain  money  cheaper,  and  would  acquire  a generally  higher 
range  of  prices.  Incidents  the  reverse  of  these  would  produce  effects 
the  reverse — would  reduce  prices ; or,  in  other  words,  raise  the 
value  of  the  precious  metals.  It  must  be  observed,  however,  that 
money  would  be  thus  raised  in  value  only  with  respect  to  home 
commodities  : in  relation  to  all  imported  articles  it  would  remain 
as  before,  since  their  values  would  be  affected  in  the  same  way 
and  in  the  same  degree  with  its  own.  A country  which,  from  any 
of  the  causes  mentioned,  gets  money  cheaper,  obtains  all  its  other 
imports  cheaper  likewise. 

It  is  by  no  means  necessary  that  the  increased  demand  for 
English  commodities,  which  enables  England  to  supply  herself  with 
bullion  at  a cheaper  rate,  should  be  a demand  in  the  mining  countries. 
England  might  export  nothing  whatever  to  those  countries,  and 
yet  might  be  the  country  which  obtained  bullion  from  them  on  the 
lowest  terms,  provided  there  were  a sufficient  intensity  of  demand 
in  other  foreign  countries  for  English  goods,  which  would  be  paid 
for  circuitously  with  gold  and  silver  from  the  mining  countries. 
The  whole  of  its  exports  are  what  a country  exchanges  against  the 
whole  of  its  imports,  and  not  its  exports  and  imports  to  and  from 
any  one  country  ; and  the  general  foreign  demand  for  its  productions 
will  determine  what  equivalent  it  must  give  for  imported  goods,  in 
order  to  establish  an  equilibrium  between  its  sales  and  purchases 
generally  ; without  regard  to  the  maintenance  of  a similar  equili- 
brium between  it  and  any  country  singly. 


CHAPTEK  XX 


OF  THE  FOREIGN  EXCHANGES 

§ !.  We  have  thus  tar  considered  the  precious  metals  as  a 
commodity,  imported  like  other  commodities  in  the  common  course 
of  trade,  and  have  examined  what  are  the  circumstances  which 
would  in  that  case  determine  their  value.  But  those  metals  are 
also  imported  in  another  character,  that  which  belongs  to  them  as 
a medium  of  exchange ; not  as  an  article  of  commerce,  to  be  sold 
for  money,  but  as  themselves  money,  to  pay  a debt,  or  effect  a 
transfer  of  property.  It  remains  to  consider  whether  the  liability 
of  gold  and  silver  to  be  transported  from  country  to  country  for 
such  purposes,  in  any  way  modifies  the  conclusions  we  have  already 
arrived  at,  or  places  those  metals  under  a different  law  of  value 
from  that  to  which,  in  common  with  all  other  imported  commodities, 
they  would  be  subject  if  international  trade  were  an  affair  of  direct 
barter. 

Money  is  sent  from  one  country  to  another  for  various  purposes  : 
such  as  the  payment  of  tributes  or  subsidies  ; remittances  of  revenue 
to  or  from  dependencies,  or  of  rents  or  other  incomes  to  their  absent 
owners ; emigration  of  capital,  or  transmission  of  it  for  foreign 
investment.  The  most  usual  purpose,  however,  is  that  of  payment 
for  goods.  To  show  in  what  circumstances  money  actually  passes 
from  country  to  country  for  this  or  any  of  the  other  purposes 
mentioned,  it  is  necessary  briefly  to  state  the  nature  of  the  mechanism 
by  which  international  trade  is  carried  on,  when  it  takes  place  not 
by  barter  but  through  the  medium  of  money. 

§ 2.  In  practice,  the  exports  and  imports  of  a country  not 
only  are  not  exchanged  directly  against  each  other,  but  often  do 
not  even  pass  through  the  same  hands.  Each  is  separately  bought 
and  paid  for  with  money.  We  have  seen,  however,  that,  even  in 
the  same  country,  money  does  not  actually  pass  from  hand  to  hand 


THE  FOREIGN  EXCHANGES 


613 


each  time  that  purchases  are  made  with  it,  and  still  less  does  this 
happen  between  different  countries.  The  habitual  mode  of  paying 
and  receiving  payment  for  commodities,  between  country  and 
country,  is  by  bills  of  exchange. 

A merchant  in  England,  A,  has  exported  English  commodities, 
consigning  them  to  his  correspondent  B in  France.  Another 
merchant  in  France,  C,  has  exported  French  commodities,  suppose 
of  equivalent  value,  to  a merchant  D in  England.  It  is  evidently 
unnecessary  that  B in  France  should  send  money  to  A in  England, 
and  that  D in  England  should  send  an  equal  sum  of  money  to  C in 
France.  The  one  debt  may  be  applied  to  the  payment  of  the  other, 
and  the  double  cost  and  risk  of  carriage  be  thus  saved.  A draws 
a bill  on  B for  the  amount  which  B owes  to  him : D,  having  an 
equal  amount  to  pay  in  France,  buys  this  bill  from  A,  and  sends  it 
to  C,  who,  at  the  expiration  of  the  number  of  days  which  the  bill 
has  to  run,  presents  it  to  B for  payment.  Thus  the  debt  due  from 
France  to  England,  and  the  debt  due  from  England  to  France,  are 
both  paid  without  sending  an  ounce  of  gold  or  silver  from  one  country 
to  the  other. 

In  this  statement,  however,  it  is  supposed,  that  the  sum  of 
the  debts  due  from  France  to  England,  and  the  sum  of  those  due 
from  England  to  France,  are  equal;  that  each  country  has  exactly 
the  same  number  of  ounces  of  gold  or  silver  to  pay  and  to  receive. 
This  implies  (if  we  exclude  for  the  present  any  other  international 
payments  than  those  occurring  in  the  course  of  commerce),  that 
the  exports  and  imports  exactly  pay  for  one  another,  or,  in  other 
words,  that  the  equation  of  international  demand  is  established. 
When  such  is  the  fact,  the  international  transactions  are  hquidated 
without  the  passage  of  any  money  from  one  country  to  the  other. 
But  if  there  is  a greater  sum  due  from  England  to  France,  than  is 
due  from  France  to  England,  or  vice  versa^  the  debts  cannot  be 
simply  written  off  against  one  another.  After  the  one  has  been 
applied,  as  far  as  it  will  go,  towards  covering  the  other,  the  balance 
must  be  transmitted  in  the  precious  metals.  In  point  of  fact,  the 
merchant  who  has  the  amount  to  pay,  will  even  then  pay  for  it 
by  a bill.  When  a person  has  a remittance  to  make  to  a foreign 
country,  he  does  not  himself  search  for  some  one  who  has  money 
to  receive  from  that  country,  and  ask  him  for  a bill  of  exchange. 
In  this,  as  in  other  branches  of  business,  there  is  a class  of  middlemen, 
or  brokers,  who  bring  buyers  and  sellers  together,  or  stand  between 
them,  buying  bills  from  those  who  have  money  to  receive,  and 


514 


BOOK  III.  CHAPTER  XX.  § 2 


selling  bills  to  those  who  have  naoney  to  pay.  When  a customer 
comes  to  a broker  for  a bill  on  Paris  or  Amsterdam,  the  broker  sells 
to  him,  perhaps  the  bill  he  may  himself  have  bought  that  morning 
from  a merchant,  perhaps  a bill  on  his  own  correspondent  in  the 
foreign  city : and  to  enable  his  correspondent  to  pay,  when  due, 
all  the  bills  he  has  granted,  he  remits  to  him  all  those  which  he  has 
bought  and  has  not  resold.  In  this  manner  these  brokers  take  upon 
themselves  the  whole  settlement  of  the  pecuniary  transactions 
between  distant  places,  being  remunerated  by  a small  commission 
or  percentage  on  the  amount  of  each  bill  which  they  either  sell  or 
buy.  Now,  if  the  brokers  find  that  they  are  asked  for  bills  on  the 
one  part,  to  a greater  amount  than  bills  are  ofiered  to  them  on  the 
other,  they  do  not  on  this  account  refuse  to  give  them : but  since, 
in  that  case,  they  have  no  means  of  enabling  the  correspondents 
on  whom  their  bills  are  drawn,  to  pay  them  when  due,  except  by 
transmitting  part  of  the  amount  in  gold  or  silver,  they  require 
from  those  to  whom  they  sell  bills  an  additional  price,  sufficient 
to  cover  the  freight  and  insurance  of  the  gold  and  silver,  with  a 
profit  sufficient  to  compensate  them  for  their  trouble  and  for  the 
temporary  occupation  of  a portion  of  their  capital.  This  premium 
(as  it  is  called)  the  buyers  are  willing  to  pay,  because  they  must 
otherwise  go  to  the  expense  of  remitting  the  precious  metals  them- 
selves, and  it  is  done  cheaper  by  those  who  make  doing  it  a part 
of  their  especial  business.  But  though  only  some  of  those  who 
have  a debt  to  pay  would  have  actually  to  remit  money,  all  will  be 
obliged,  by  each  other’s  competition,  to  pay  the  premium ; and 
the  brokers  are  for  the  same  reason  obliged  to  pay  it  to  those  whose 
bills  they  buy.  The  reverse  of  all  this  happens  if,  on  the  comparison 
of  exports  and  imports,  the  country,  instead  of  having  a balance 
to  pay,  has  a balance  to  receive.  The  brokers  find  more  bills  ofiered 
to  them  than  are  sufficient  to  cover  those  which  they  are  required 
to  grant.  Bills  on  foreign  countries  consequently  fall  to  a discount ; 
and  the  competition  among  the  brokers,  which  is  exceedingly 
active,  prevents  them  from  retaining  this  discount  as  a profit  for 
themselves,  and  obliges  them  to  give  the  benefit  of  it  to  those  who 
buy  the  bills  for  purposes  of  remittance. 

Let  us  suppose  that  all  countries  had  the  same  currency,  as  in 
the  progress  of  pohtical  improvement  they  one  day  will  have : and, 
as  the  most  familiar  to  the  reader,  though  not  the  best,  let  us  suppose 
this  currency  to  be  the  English.  When  England  had  the  same 
number  of  pounds  sterhng  to  pay  to  France,  which  France  had  to 


THE  FOREIGN  EXCHANGES 


«16 


pay  to  her,  one  set  of  merchants  in  England  would  want  bills,  and 
another  set  would  have  bills  to  dispose  of,  for  the  very  same  number 
of  pounds  sterling ; and  consequently  a bill  on  France  for  lOOZ. 
would  sell  for  exactly  lOOZ.,  or,  in  the  phraseology  of  merchants, 
the  exchange  would  be  at  par.  As  France  also,  on  this  supposition, 
would  have  an  equal  number  of  pounds  sterling  to  pay  and  to  receive, 
bills  on  England  would  be  at  par  in  France,  whenever  bills  on 
France  were  at  par  in  England. 

If,  however,  England  had  a larger  sum  to  pay  to  France  than 
to  receive  from  her,  there  would  be  persons  requiring  bills  on  France 
for  a greater  number  of  pounds  sterling  than  there  were  bills  drawn 
by  persons  to  whom  money  was  due.  A bill  on  France  for  lOOZ. 
would  then  sell  for  more  than  100?.,  and  bills  would  be  said  to  be 
at  a premium.  The  premium,  however,  could  not  exceed  the  cost 
and  risk  of  making  the  remittance  in  gold,  together  with  a trifling 
profit ; because  if  it  did,  the  debtor  would  send  the  gold  itself,  in 
preference  to  buying  the  bill. 

If,  on  the  contrary,  England  had  more  money  to  receive  from 
France  than  to  pay,  there  would  be  bills  offered  for  a greater  number 
of  pounds  than  were  wanted  for  remittance,  and  the  price  of  bills 
would  fall  below  par  : a bill  for  a 100?.  might  be  bought  for  somewhat 
less  than  100?.,  and  bills  would  be  said  to  be  at  a discount. 

When  England  has  more  to  pay  than  to  receive,  France  has 
more  to  receive  than  to  pay,  and  vice  versd.  When,  therefore,  in 
England,  bills  on  France  bear  a premium,  then,  in  France,  bills 
on  England  are  at  a discount : and  when  bills  on  France  are  at 
a discount  in  England,  bills  on  England  are  at  a premium  in 
France.  If  they  are  at  par  in  either  country,  they  are  so,  as  we 
have  already  seen,  in  both. 

Thus  do  matters  stand  between  countries,  or  places,  which  have 
the  same  currency.  So  much  of  barbarism,  however,  still  remains 
in  the  transactions  of  the  most  civilized  nations,  that  almost  all 
independent  countries  choose  to  assert  their  nationality  by  having, 
to  their  own  inconvenience  and  that  of  their  neighbours,  a peculiar 
currency  of  their  own.  To  our  present  purpose  this  makes  no 
other  difference,  than  that  instead  of  speaking  of  equal  sums  of 
money,  we  have  to  speak  of  equivalent  sums.  By  equivalent  sums, 
when  both  currencies  are  composed  of  the  same  metal,  are  meant 
sums  which  contain  exactly  the  same  quantity  of  the  metal,  in 
weight  and  fineness ; but  when,  as  in  the  case  of  France  and  Eng- 
land, the  metals  are  different,  what  is  meant  is  that  the  quantity 


616 


BOOK  m.  CHAPTER  XX.  § 2 


of  gold  in  the  one  sum,  and  the  quantity  of  silver  in  the  other,  are 
of  the  same  value  in  the  general  market  of  the  world  : there  being 
no  material  difference  between  one  place  and  another  in  the  relative 
value  of  these  metals.  Suppose  25  francs  to  be  (as  within  a trifling 
fraction  it  is)  the  equivalent  of  a pound  sterhng.  The  debts  and 
credits  of  the  two  countries  would  be  equal,  when  the  one  owed 
as  many  times  25  francs,  as  the  other  owed  pounds.  When  this 
was  the  case,  a bill  on  France  for  2500  francs  would  be  worth  in 
England  lOOZ.,  and  a bill  on  England  for  lOOh  would  be  worth  in 
France  2500  francs.  The  exchange  is  then  said  to  be  at  par  : and 
25  francs  (in  reality  25  francs  and  a trifle  more)  * is  called  the  par 
of  exchange  with  France.  When  England  owed  to  France  more 
than  the  equivalent  of  what  France  owed  to  her,  a bill  for  2500 
francs  would  be  at  a premium,  that  is,  would  be  worth  more  than 
lOOZ.  When  France  owed  to  England  more  than  the  equivalent 
of  what  England  owed  to  France,  a bill  for  2500  francs  would  be 
worth  less  than  lOOh,  or  would  be  at  a discount. 

When  bills  on  foreign  countries  are  at  a premium,  it  is  customary 
to  say  that  the  exchanges  are  against  the  country,  or  unfavourable 
to  it.  In  order  to  understand  these  phrases,  we  must  take  notice 
of  what  “^e  exchange,”  in  the  language  of  merchants,  really 
means.  It  means  the  power  which  the  money  of  the  country  has 
of  purchasing  the  money  of  other  countries.  Supposing  25  francs 
to  be  the  exact  par  of  exchange,  then  when  it  requires  more  than 
lOOZ.  to  buy  a bill  for  2500  francs,  1001.  of  English  money  are  worth 
less  than  their  real  equivalent  of  French  money  : and  this  is  called 
an  exchange  unfavourable  to  England.  The  only  persons  in  Eng- 
land, however,  to  whom  it  is  really  unfavourable  are  those  who 
have  money  to  pay  in  France ; for  they  come  into  the  bill  market 
as  buyers,  and  have  to  pay  a premium : but  to  those  who  have 
money  to  receive  in  France,  the  same  state  of  things  is  favourable  ; 
for  they  come  as  sellers,  and  receive  the  premium.  The  premium, 
however,  indicates  that  a balance  is  due  by  England,  which  might 
have  to  be  eventually  liquidated  in  the  precious  metals  : and  since, 
according  to  the  old  theory,  the  benefit  of  a trade  consisted  in 
bringing  money  into  the  country,  this  prejudice  introduced  the 
practice  of  calling  the  exchange  favourable  when  it  indicated  a 

* [1862]  Written  before  the  change  in  the  relative  value  of  the  two  metals 
produced  by  the  gold  discoveries.  The  par  of  exchange  between  gold  and 
silver  currencies  is  now  variable,  and  no  one  can  foresee  at  what  point  it 
will  ultimately  rest. 


THE  FOREIGN  EXCHANGES 


617 


balance  to  receive,  and  unfavourable  when  it  indicated  one  to  pay  : 
and  the  phrases  in  turn  tended  to  maintain  the  prejudice. 

§ 3.  It  might  be  supposed  at  first  sight  that  when  the  exchange 
is  unfavourable,  or,  in  other  words,  when  bills  are  at  a premium, 
the  premium  must  always  amount  to  a full  equivalent  for  the  cost 
of  transmitting  money  : since,  as  there  is  really  a balance  to  pay, 
and  as  the  full  cost  must  therefore  be  incurred  by  some  of  those 
who  have  remittances  to  make,  their  competition  will  compel  all 
to  submit  to  an  equivalent  sacrifice.  And  such  would  certainly 
be  the  case,  if  it  were  always  necessary  that  whatever  is  destined 
to  be  paid  should  be  paid  immediately.  The  expectation  of  great 
and  immediate  foreign  payments  sometimes  produces  a most  start- 
ling effect  on  the  exchanges.*  But  a small  excess  of  imports  above 
exports,  or  any  other  small  amount  of  debt  to  be  paid  to  foreign 
countries,  does  not  usually  affect  the  exchanges  to  the  fuU  extent 
of  the  cost  and  risk  of  transporting  bullion.  The  length  of  credit 
allowed  generally  permits,  on  the  part  of  some  of  the  debtors,  a 
postponement  of  payment,  and  in  the  mean  time  the  balance  may 
turn  the  other  way,  and  restore  the  equality  of  debts  and  credits 
without  any  actual  transmission  of  the  metals.  And  this  is  the 
more  likely  to  happen,  as  there  is  a self-adjusting  power  in  the 
variations  of  the  exchange  itself.  Bills  are  at  a premium  because 
a greater  money  value  has  been  imported  than  exported.  But  the 
premium  is  itself  an  extra  profit  to  those  who  export.  Besides  the 
price  they  obtain  for  their  goods,  they  draw  for  the  amount  and 
gain  the  premium.  It  is,  on  the  other  hand,  a diminution  of  profit 
to  those  who  import.  Besides  the  price  of  the  goods,  they  have 
to  pay  a premium  for  remittance.  So  that  what  is  called  an  un- 
favourable exchange  is  an  encouragement  to  export,  and  a discourage- 
ment to  import.  And  if  the  balance  due  is  of  small  amount,  and 

* On  the  news  of  Bonaparte’s  landing  from  Elba,  the  price  of  bills  advanced 
in  one  day  as  much  as  ten  per  cent.  Of  course  this  premium  was  not  a mere 
equivalent  for  cost  of  carriage,  since  the  freight  of  such  an  article  as  gold,  even 
with  the  addition  of  war  insurance,  could  never  have  amounted  to  so  much. 
This  great  price  was  an  equivalent  not  for  the  difficulty  of  sending  gold,  but  for 
the  anticipated  difficulty  of  procuring  it  to  send ; the  expectation  being  that 
there  would  be  such  immense  remittances  to  the  Continent  in  subsidies  and  for 
the  support  of  armies,  as  would  press  hard  on  the  stock  of  bullion  in  the  country 
(which  was  then  entirely  denuded  of  specie),  and  this,  too,  in  a shorter  time  than 
would  allow  of  its  being  replenished.  Accordingly  the  price  of  bullion  rose 
likewise,  with  the  same  suddenness.  It  is  hardly  necessary  to  say  that  this 
took  place  during  the  Bank  restriction.  In  a convertible  state  of  the  currency, 
no  such  thing  could  have  occurred  until  the  Bank  stopped  payment. 


618 


BOOK  IIL  CHAPTER  XX.  § 3 


is  the  consequence  of  some  merely  casual  disturbance  in  the  ordinary 
course  of  trade,  it  is  soon  liquidated  in  commodities,  and  the  account 
adjusted  by  means  of  bills,  without  the  transmission  of  any  bulhon. 
Not  so,  however,  when  the  excess  of  imports  above  exports,  which 
has  made  the  exchange  unfavourable,  arises  from  a permanent 
cause.  In  that  case,  what  disturbed  the  equilibrium  must  have 
been  the  state  of  prices,  and  it  can  only  be  restored  by  acting  on 
prices.  It  is  impossible  that  prices  should  be  such  as  to  invite  to 
an  excess  of  imports,  and  yet  that  the  exports  should  be  kept 
permanently  up  to  the  imports  by  the  extra  profit  on  exportation 
derived  from  the  premium  on  bills ; for  if  the  exports  were  kept 
up  to  the  imports,  bills  would  not  be  at  a premium,  and  the  extra 
profit  would  not  exist.  It  is  through  the  prices  of  commodities 
that  the  correction  must  be  administered. 

Disturbances,  therefore,  of  the  equilibrium  of  imports  and 
exports,  and  consequent  disturbances  of  the  exchange,  may  be 
considered  aaL_Qi,two  classes ; the  one  casual  or  accidental,  which, 
if  not  on  too  large  a scale,  correct  themselves  through  the  premium 
on  bills,  without  any  transmission  of  the  precious  metals  ; the  other 
arising  from  the  general  state  of  prices,  which  cannot  be  corrected 
without  the  subtraction  of  actual  money  from  the  circulation  of 
one  of  the  countries,  or  an  annihilation  of  credit  equivalent  to  itj 
since  the  mere  transmission  of  bullion  (as  distinguished  from  money), 
not  having  any  effect  on  prices,  is  of  no  avail  to  abate  the  cause 
from  which  the  disturbance  proceeded. 

It  remains  to  observe,  that  the  exchanges  do  not  depend  on 
the  balance  of  debts  and  credits  with  each  country  separately,  but 
with  all  countries  taken  together.  England  may  owe  a balance 
of  payments  to  France ; but  it  does  not  follow  that  the  exchange 
with  France  will  be  against  England,  and  that  biUs  on  France  will 
be  at  a premium ; because  a balance  may  be  due  to  England  from 
Holland  or  Hamburg,  and  she  may  pay  her  debts  to  France  with 
bills  on  those  places ; which  is  technically  called  arbitration  of 
exchange.  There  is  some  little  additional  expense,  partly  com- 
mission and  partly  loss  of  interest,  in  settling  debts  in  this  circuitous 
manner,  and  to  the  extent  of  that  small  difference  the  exchange 
with  one  country  may  vary  apart  from  that  with  others ; but  in 
the  main,  the  exchanges  with  all  foreign  countries  vary  together, 
according  as  the  country  has  a balance  to  receive  or  to  pay  on  the 
general  result  of  its  foreign  transactions. 


CHAPTER  XXI 


OF  THE  DISTRIBUTION  OP  THE  PRECIOUS  METALS  THROUGH  THE 
COMMERCIAL  WORLD 

§ 1.  Having  now  examined  the  mechanism  by  which  the 
commercial  transactions  between  nations  are  actually  conducted, 
we  have  next  to  inquire  whether  this  mode  of  conducting  them 
makes  any  difference  in  the  conclusions  respecting  international 
values,  which  we  previously  arrived  at  on  the  hypothesis  of  barter. 

The  nearest  analogy  would  lead  us  to  presume  the  negative. 
We  did  not  find  that  the  intervention  of  money  and  its  substitutes 
made  any  difference  in  the  law  of  value  as  applied  to  adjacent 
places.  Things  which  would  have  been  equal  in  value  if  the  mode 
of  exchange  had  been  by  barter,  are  worth  equal  sums  of  money. 
The  introduction  of  money  is  a mere  addition  of  one  more  com- 
modity, of  which  the  value  is  regulated  by  the  same  laws  as  that 
of  all  other  commodities.  We  shall  not  be  surprised,  therefore,  if 
we  find  that  international  values  also  are  determined  by  the  same 
causes  under  a money  and  bill  system,  as  they  would  be  under  a 
system  of  barter ; and  that  money  has  little  to  do  in  the  matter, 
except  to  furnish  a convenient  mode  of  comparing  values. 

All  interchange  is,  in  substance  and  effect,  barter  V whoever 
sells  commodities  for  money,  and  with  that  money  buys  other  goods, 
really  buys  those  goods  with  his  own  commodities.  And  so  of 
nations  : their  trade  is  a mere  exchange  of  exports  for  imports ; 
and  whether  money  is  employed  or  not,  things  are  only  in  their 
permanent  state  when  the  exports  and  imports  exactly  pay  for  each 
other.  When  this  is  the  case,  equal  sums  of  money  are  due  from 
each  country  to  the  other,  the  debts  are  settled  by  bills,  and  there 
is  no  balance  to  be  paid  in  the  precious  metals.  The  trade  is  in 
a state  hke  that  which  is  called  in  mechanics  a condition  of  stable 
equilibrium. 

But  the  process  by  which  things  are  brought  back  to  this  state 


620 


BOOK  III.  CHAPTER  XXL  § 1 


when  they  happen  to  deviate  from  it,  is,  at  least  outwardly,  not  the 
same  in  a barter  system  and  in  a money  system.  Under  the  first, 
the  coimtry  which  wants  more  imports  than  its  exports  will  pay  for, 
must  offer  its  exports  at  a cheaper  rate,  as  the  sole  means  of  creating 
a demand  for  them  sufficient  to  re-establish  the  equilibrium.  When 
money  is  used,  the  country  seems  to  do  a thing  totally  different. 
She  takes  the  additional  imports  at  the  same  price  as  before,  and  as 
she  exports  no  equivalent,  the  balance  of  payments  turns  against 
her  ; the  exchange  becomes  unfavourable,  and  the  difference  has  to 
be  paid  in  money.  This  is  in  appearance  a very  distinct  operation 
from  the  former.  Let  us  see  if  it  differs  in  its  essence,  or  only  in  its 
mechanism. 

Let  the  country  which  has  the  balance  to  pay  be  England,  and 
the  country  which  receives  it,  France.  By  this  transmission  of  the 
precious  metals,  the  quantity  of  the  currency  is  diminished  in  Eng- 
land, and  increased  in  France.  This  I am  at  liberty  to  assume. 
As  we  shall  see  hereafter,  it  would  be  a very  erroneous  assumption 
if  made  in  regard  to  all  payments  of  international  balances.  A 
balance  which  has  only  to  be  paid  once,  such  as  the  payment  made 
for  an  extra  importation  of  corn  in  a season  of  dearth,  may  be  paid 
from  hoards,  or  from  the  reserves  of  bankers,  without  acting  on  the 
circulation.  But  we  are  now  supposing  that  there  is  an  excess  of 
imports  over  exports,  arising  from  the  fact  that  the  equation  of 
international  demand  is  not  yet  established : that  there  is  at  the 
ordinary  prices  a permanent  demand  in  England  for  more  French 
goods  than  the  English  goods  required  in  France  at  the  ordinary 
prices  will  pay  for.  When  this  is  the  case,  if  a change  were  not 
made  in  the  prices,  there  would  be  a perpetually  renewed  balance  to 
be  paid  in  money.  The  imports  require  to  be  permanently  dimin- 
ished, or  the  exports  to  be  increased ; which  can  only  be  accom- 
plished through  prices ; and  hence,  even  if  the  balances  are  at  first 
paid  from  hoards,  or  by  the  exportation  of  bullion,  they  will  reach 
the  circulation  at  last,  for  until  they  do,  nothing  can  stop  the  drain. 

When,  therefore,  the  state  of  prices  is  such  that  the  equation  of 
international  demand  cannot  establish  itself,  the  country  requiring 
more  imports  than  can  be  paid  for  by  the  exports  ; it  is  a sign  that 
the  country  has  more  of  the  precious  metals  or  their  substitutes 
in  circulation,  than  can  permanently  circulate,  and  must  necessarily 
part  with  some  of  them  before  the  balance  can  be  restored.  The 
currency  is  accordingly  contracted  : prices  fall,  and,  among  the  rest, 
the  pnces  of  exportable  articles ; for  which,  accordingly,  there 


DISTRIBUTION  OF  THE  PRECIOUS  METALS 


621 


arises,  in  foreign  countries,  a greater  demand  : while  imported 
commodities  have  possibly  risen  in  price,  from  the  influx  of  money 
into  foreign  countries,  and  at  all  events  have  not  participated  in  the 
general  fall.  But  until  the  increased  cheapness  of  English  goods 
induces  foreign  countries  to  take  a greater  pecuniary  value,  or  until 
the  increased  dearness  (positive  or  comparative)  of  foreign  goods 
makes  England  take  a less  pecuniary  value,  the  exports  of  England 
will  be  no  nearer  to  paying  for  the  imports  than  before,  and  the 
stream  of  the  precious  metals  which  had  begun  to  flow  out  of  England, 
will  still  flow  on.  This  efflux  will  continue,  until  the  fall  of  prices 
in  England  brings  within  reach  of  the  foreign  market  some  com- 
modity which  England  did  not  previously  send  thither ; or  until 
the  reduced  prices  of  the  things  which  she  did  send,  has  forced  a 
demand  abroad  for  a sufficient  quantity  to  pay  for  the  imports, 
aided,  perhaps,  by  a reduction  of  the  English  demand  for  foreign 
goods,  through  their  enhanced  price,  either  positive  or  comparative. 

Now  this  is  the  very  process  which  took  place  on  our  original 
supposition  of  barter.  Not  only,  therefore,  does  the  trade  between 
nations  tend  to  the  same  equihbrium  between  exports  and  imports, 
whether  money  is  employed  or  not,  but  the  means  by  which  this 
equihbrium  is  estabhshed  are  essentially  the  same.  The  country 
whose  exports  are  not  sufficient  to  pay  for  her  imports,  offers  them 
on  cheaper  terms,  until  she  succeeds  in  forcing  the  necessary  demand  : 
in  other  words,  the  Equation  of  International  Demand,  under  a 
money  system  as  well  as  under  a barter  system,  is  the  law  of  inter- 
nes tional  trade.  Every  country  exports  and  imports  the  very  same 
things,  and  in  the  very  same  quantity,  under  the  one  system  as 
under  the  other.  In  a barter  system,  the  trade  gravitates  to  the 
point  at  which  the  sum  of  the  imports  exactly  exchanges  for  the 
sum  of  the  exports:  in  a money  system,  it  gravitates  to  the  point 
at  which  the  sum  of  the  imports  and  the  sum  of  the  exports  exchange 
for  the  same  quantity  of  money.  And  since  things  which  are 
equal  to  the  same  thing  are  equal  to  one  another,  the  exports  and 
imports  which  are  equal  in  money  price,  would,  if  money  were  not 
used,  precisely  exchange  for  one  another.* 

* The  subjoined  extract  from  the  separate  Essay  previously  referred  to,  will 
give  some  assistance  in  following  the  course  of  the  phenomena.  It  is  adapted 
to  the  imaginary  case  used  for  illustration  throughout  that  Essay,  the  case  of  a 
trade  between  England  and  Germany  in  cloth  and  linen. 

“ We  may,  at  first,  make  whatever  supposition  we  will  with  respect  to  the 
value  of  money.  Let  us  suppose,  therefore,  that  before  the  opening  of  the  trade, 
the  price  of  cloth  is  the  same  in  both  countries,  namely  six  shillings  per  yard. 


622 


BOOK  III.  CHAPTER  XXI.  § 2 


§ 2.  It  thus  appears  that  the  law  of  international  values,  and, 
consequently,  the  division  of  the  advantages  of  trade  among  the 
nations  which  carry  it  on,  are  the  same,  on  the  supposition  of  money, 
as  they  would  be  in  a state  of  barter.  Iminternational,  as  in  ordinary 
domestic  interchanges,  money  is  to  commerce  only  what  oil  is  to 
machinery,  or  railways  to  locomotion — a contrivance  to  diminish 
friction.  In  order  still  further  to  test  these  conclusions,  let  us 
proceed  to  re-examine,  on  the  supposition  of  money,  a question 
which  we  have  already  investigated  on  the  hypothesis  of  barter. 

As  ten  yards  of  cloth  were  supposed  to  exchange  in  England  for  16  yards  of 
linen,  in  Germany  for  20,  we  mus't  suppose  that  Unen  is  sold  in  England  at  four 
shillings  per  yard,  in  Germany  at  three.  Cost  of  carriage  and  importer’s  profit 
are  left,  as  before,  out  of  consideration. 

“ In  this  state  of  prices,  cloth,  it  is  evident,  cannot  yet  be  exported  from 
England  into  Germany : but  linen  can  be  imported  from  Germany  into  England. 
It  will  be  so  ; and,  in  the  first  instance,  the  linen  will  be  paid  for  in  money. 

“ The  efflux  of  money  from  England,  and  its  influx  into  Germany,  will 
raise  money  prices  in  the  latter  country  and  lower  them  in  the  former.  Linen 
will  rise  in  Germany  above  three  shillings  per  yard,  and  cloth  above  six  shillings. 
Linen  in  England,  being  imported  from  Germany,  will  (since  cost  of  carriage 
is  not  reckoned)  sink  to  the  same  price  as  in  that  country,  while  cloth  wfil 
fall  below  six  shillings.  As  soon  as  the  price  of  cloth  is  lower  in  England 
than  in  Germany,  it  will  begin  to  be  exported,  and  the  price  of  cloth  in 
Germany  wiU  fall  to  what  it  is  in  England.  As  long  as  the  cloth  exported 
does  not  sufflce  to  pay  for  the  Unen  imported,  money  will  continue  to  flow 
from  England  into  Germany,  and  prices  generally  will  continue  to  fall  in 
England  and  rise  in  Germany.  By  the  fall,  however,  of  cloth  in  England, 
cloth  wiU  faU  in  Germany  also,  and  the  demand  for  it  wiU  increase.  By  the 
rise  of  linen  in  Germany,  linen  must  rise  in  England  also,  and  the  demand  for 
it  will  diminish.  As  cloth  fell  in  price  and  linen  rose,  there  would  be  some 
particular  price  of  both  articles  at  which  the  cloth  exported  and  the  linen 
imported  would  exactly  pay  for  each  other.  At  this  point  prices  would  remain, 
because  money  would  then  cease  to  move  out  of  England  into  Germany. 
What  this  point  might  be,  would  entirely  depend  upon  the  circumstances  and 
inclinations  of  the  purchasers  on  both  sides.  If  the  faU  of  cloth  did  not  much 
increase  the  demand  for  it  in  Germany,  and  the  rise  of  linen  did  not  diminish 
very  rapidly  the  demand  for  it  in  England,  much  money  must  pass  before  the 
equilibrium  is  restored ; cloth  would  faU  very  much,  and  linen  would  rise,  until 
England,  perhaps,  had  to  pay  nearly  as  much  for  it  as  when  she  produced  it 
for  herself.  But  if,  on  the  contrary,  the  faU  of  cloth  caused  a very  rapid 
increase  of  the  demand  for  it  in  Germany,  and  the  rise  of  linen  in  Germany 
reduced  very  rapidly  the  demand  in  England  from  what  it  was  under  the 
influence  of  the  first  cheapness  produced  by  the  opening  of  the  trade;  the 
cloth  would  very  soon  suffice  to  pay  for  the  linen,  little  money  would  pass 
between  the  two  countries,  and  England  would  derive  a large  portion  of  the 
benefit  of  the  trade.  We  have  thus  arrived  at  precisely  the  same  conclusion, 
in  supposing  the  employment  of  money,  which  we  found  to  hold  under  the 
supposition  of  barter. 

“ In  what  shape  the  benefit  accrues  to  the  two  nations  from  the  trade  is 
clear  enough.  Germany,  before  the  commencement  of  the  trade,  paid  six 
shillings  per  yard  for  broadcloth  : she  now  obtains  it  at  a lower  price.  This, 
however,  is  not  the  whole  of  her  advantage.  As  the  money  prices  of  aU  her 


DISTRIBUTION  OF  THE  PRECIOUS  METALS 


623 


nanely,  to  what  extent  the  benefit  of  an  improvement  in  the  pro- 
duction of  an  exportable  article  is  participated  in  by  the  countries 
importing  it. 

The  improvement  may  either  consist  in  the  cheapening  of  some 
article  which  was  already  a staple  production  of  the  country,  or  in 
the  estabhshment  of  some  new  branch  of  industry,  or  of  some 
process  rendering  an  article  exportable  which  had  not  till  then  been 
exported  at  all.  It  will  be  convenient  to  begin  with  the  case  of  a 
new  export,  as  being  somewhat  the  simpler  of  the  two. 

The  first  effect  is  that  the  article  falls  in  price,  and  a demand 

other  commodities  have  risen,  the  money-incomes  of  all  her  producers  have 
increased.  This  is  no  advantage  to  them  in  buying  from  each  other,  because  the 
price  of  what  they  buy  has  risen  in  the  same  ratio  with  their  means  of  paying 
for  it ; but  it  is  an  advantage  to  them  in  buying  anything  which  has  not  risen, 
and,  still  more,  anything  which  has  fallen.  They,  therefore,  benefit  as  con- 
sumers of  cloth,  not  merely  to  the  extent  to  which  cloth  has  fallen,  but  also  to 
the  extent  to  which  other  prices  have  risen.  Suppose  that  this  is  one-tenth. 
The  same  proportion  of  their  money  incomes  as  before  will  suffice  to  supply 
their  other  wants ; and  the  remainder,  being  increased  one-tenth  in  amount, 
will  enable  them  to  purchase  one- tenth  more  cloth  than  before,  even  though 
cloth  had  not  fallen  : but  it  has  fallen  ; so  that  they  are  doubly  gainers.  They 
purchase  the  same  quantity  with  less  money,  and  have  more  to  expend  upon 
their  other  wants. 

“ In  England,  on  the  contrary,  general  money-prices  have  fallen.  Linen, 
however,  has  fallen  more  than  the  rest,  having  been  lowered  in  price  by  impor- 
tation from  a country  where  it  was  cheaper ; whereas  the  others  have  fallen 
only  from  the  consequent  efflux  of  money.  Notwithstanding,  therefore,  the 
general  fall  of  money-prices,  the  English  producers  will  be  exactly  as  they  were 
in  all  other  respects,  while  they  will  gain  as  purchasers  of  linen. 

“ The  greater  the  efflux  of  money  required  to  restore  the  equilibrium,  the 
greater  will  be  the  gain  of  Germany,  both  by  the  fall  of  cloth  and  by  the  rise 
of  her  general  prices.  The  lesa  the  efflux  of  money  requisite,  the  greater  will  be 
the  gain  of  England  ; because  the  price  of  linen  will  continue  lower,  and  her 
general  prices  will  not  be  reduced  so  much.  It  must  not,  however,  be  imagined 
that  high  money -prices  are  a good,  and  low  money-prices  an  evU,  in  them- 
selves. But  the  higher  the  general  money-prices  in  any  country,  the  greater 
will  be  that  country’s  means  of  purchasing  those  commodities  which,  being 
imported  from  abroad,  are  independent  of  the  causes  which  keep  prices  high  at 
home.” 

In  practice,  the  cloth  and  the  hnen  would  not,  as  here  supposed,  be  at  the 
same  price  in  England  and  m Germany  ; each  would  be  dearer  in  money-price 
in  the  country  which  imported  than  m tnat  which  produced  it,  by  the  amount 
of  the  cost  of  carriage,  together  with  tne  ordinary  profit  on  the  importer’s 
capital  for  the  average  length  of  time  which  elapsed  before  the  commodity  could 
be  disposed  of.  But  it  does  not  follow  that  each  country  pays  the  cost  of 
carriage  of  the  commodity  it  imports ; for  the  addition  of  this  item  to  the 
price  may  operate  as  a greater  check  to  demand  on  one  side  than  on  the  other  ; 
and  the  equation  of  international  aemand,  and  consequent  equilibrium  of  pay- 
ments, may  not  be  maintained.  Money  would  then  flow  out  of  one  country  into 
the  other,  until,  in  the  manner  already  illustrated,  the  equilibrium  was  restored  ; 
and,  when  this  was  effected,  one  country  would  be  paying  more  thar  it:  own 
cost  of  carriage,  and  the  other  less. 


624 


BOOK  III.  CHAPTER  XXL  § 2 


arises  for  it  abroad.  This  new  exportation  disturbs  the  balance, 
turns  the  exchanges,  money  flows  into  the  country  (which  we  shall 
suppose  to  be  England),  and  continues  to  flow  until  prices  rise. 
This  higher  range  of  prices  will  somewhat  check  the  demand  in 
foreign  countries  for  the  new  article  of  export ; and  will  diminish 
the  demand  which  existed  abroad  for  the  other  things  which  England 
was  in  the  habit  of  exporting.  The  exports  will  thus  be  diminished  ; 
while  at  the  same  time  the  English  public,  having  more  money,  will 
have  a greater  power  of  purchasing  foreign  commodities.  If  they 
make  use  of  this  increased  power  of  purchase,  there  will  be  an 
increase  of  imports  : and  by  this,  and  the  check  to  exportation,  the 
equilibrium  of  imports  and  exports  will  be  restored.  The  result  to 
foreign  countries  will  be,  that  they  have  to  pay  dearer  than  before 
for  their  other  imports,  and  obtain  the  new  commodity  cheaper 
than  before,  but  not  so  much  cheaper  as  England  herself  does.  I 
say  this,  being  well  aware  that  the  article  would  be  actually  at  the 
very  same  price  (cost  of  carriage  excepted)  in  England  and  in  other 
countries.  The  cheapness,  however,  of  the  article  is  not  measured 
solely  by  the  money-price,  but  by  that  price  compared  with  the 
money  incomes  of  the  consumers.  The  price  is  the  same  to  the 
English  and  to  the  foreign  consumers ; but  the  former  pay  that 
price  from  money  incomes  which  have  been  increased  by  the  new 
distribution  of  the  precious  metals  ; while  the  latter  have  had  their 
money  incomes  probably  diminished  by  the  same  cause.  T^  trade, 
therefore,  has  not  imparted  to  the  foreign  consumer  the  whole,  but 
only  a portion,  of  the  benefit  which  the  English  consumer  has 
derived  from  the  improvement ; while  England  has  also  benefited 
in  the  prices  of  foreign  commodities.  Thus,  then,  any  industrial 
improvement  which  leads  to  the  opening  of  a new  branch  of  export 
trade,  benefits  a country  not  only  by  the  cheapness  of  the  article  in 
which  the  improvement  has  taken  place,  but  by  a general  cheapening 
of  all  imported  products. 

Let  us  now  change  the  hypothesis,  and  suppose  that  the  improve- 
ment, instead  of  creating  a new  export  from  England,  cheapens 
an  existing  one.  When  we  examined  this  case  on  the  supposition 
of  barter,  it  appeared  to  us  that  the  foreign  consumers  might  either 
obtain  the  same  benefit  from  the  improvement  as  England  herself, 
or  a less  benefit,  or  even  a greater  benefit,  according  to  the  degree 
in  which  the  consumption  of  the  cheapened  article  is  calculated  to 
extend  itself  as  the  article  diminishes  in  price.  The  same  con- 
clusions will  be  found  true  on  the  supposition  of  money. 


DISTRIBUTION  OF  THE  PRECIOUS  METALS 


626  ' 


Let  the  commodity  in  which  there  is  an  improvement  be  cloth. 
The  first  effect  of  the  improvement  is  that  its  price  falls,  and  there 
is  an  increased  demand  for  it  in  the  foreign  market.  But  this 
demand  is  of  uncertain  amount.  Suppose  the  foreign  consumers  to 
increase  their  purchases  in  the  exact  ratio  of  the  cheapness,  or,  in 
other  words,  to  lay  out  in  cloth  the  same  sum  of  money  as  before ; the 
same  aggregate  payment  as  before  will  be  due  from  foreign  countries 
to  England ; the  equilibrium  of  exports  and  imports  will  remain 
undisturbed,  and  foreigners  will  obtain  the  full  advantage  of  the 
increased  cheapness  of  cloth.  But  if  the  foreign  demand  for  cloth 
is  of  such  a character  as  to  increase  in  a greater  ratio  than  the 
cheapness,  a larger  sum  than  formerly  will  be  due  to  England  for 
cloth,  and  when  paid  will  raise  English  prices,  the  price  of  cloth 
included  ; this  rise,  however,  will  affect  only  the  foreign  purchaser, 
English  incomes  being  raised  in  a corresponding  proportion ; and 
the  foreign  consumer  will  thus  derive  a less  advantage  than  England 
from  the  improvement.  If,  on  the  contrary,  the  cheapening  of 
cloth  does  not  extend  the  foreign  demand  for  it  in  a proportional 
degree,  a less  sum  of  debts  than  before  will  be  due  to  England  foi 
cloth,  while  there  will  be  the  usual  sum  of  debts  due  from  England 
to  foreign  countries  ; the  balance  of  trade  will  turn  against  England, 
money  will  be  exported,  prices  (that  of  cloth  included)  will  fall,  and 
cloth  will  eventually  be  cheapened  to  the  foreign  purchaser  in  a still 
greater  ratio  than  the  improvement  has  cheapened  it  to  England. 
These  are  the  very  conclusions  which  we  deduced  on  the  hypothesis 
of  barter. 

The  result  of  the  preceding  discussion  cannot  be  better  summed 
up  than  in  the  words  of  Ricardo.*  “ Gold  and  silver  having  been 
chosen  for  the  general  medium  of  circulation,  they  are,  by  the 
competition  of  commerce,  distributed  in  such  proportions  amongst 
the  different  countries  of  the  world  as  to  accommodate  themselves 
to  the  natural  traffic  which  would  take  place  if  no  such  metals  existed, 
and  the  trade  between  countries  were  purely  a trade  of  barter.” 
Of  this  principle,  so  fertile  in  consequences,  previous  to  which  the 
theory  of  foreign  trade  was  an  unintelligible  chaos,  Mr.  Ricardo, 
though  he  did  not  pursue  it  into  its  ramifications,  was  the  real 
originator.  No  writer  who  preceded  him  appears  to  have  had  a 
glimpse  of  it : and  few  are  those  who  even  since  his  time  have  had 
an  adequate  conception  of  its  scientific  value. 


Principles  oj  Political  Economy  and  Taxation^  3rd  ed.  p.  143. 


626 


BOOK  III.  CHAPTER  XXI.  § 3 


§ 3.  It  is  now  necessary  to  inquire,  in  what  manner  this  l?w 
of  the  distribution  of  the  precious  metals  by  means  of  the  exchanges, 
affects  the  exchange  value  of  money  itself  ; and  how  it  tallies  with 
the  law  by  which  we  found  that  the  value  of  money  is  regulated 
when  imported  as  a mere  article  of  merchandize.  For  there  is  here 
a semblance  of  contradiction,  which  has,  I think,  contributed  more 
than  anything  else  to  make  some  distinguished  political  economists 
resist  the  evidence  of  the  preceding  doctrines.  Money,  they  justly 
think,  is  no  exception  to  the  general  laws  of  value  ; it  is  a commodity 
like  any  other,  and  its  average  or  natural  value  must  depend  on  the 
cost  of  producing,  or  at  least  of  obtaining  it.  That  its  distribution 
through  the  world,  therefore,  and  its  different  value  in  different 
places,  should  be  liable  to  be  altered,  not  by  causes  affecting  itself, 
but  by  a hundred  causes  unconnected  with  it;  by  everything 
which  affects  the  trade  in  other  commodities,  so  as  to  derange  the 
equilibrium  of  exports  and  imports ; appears  to  these  thinkers  a 
doctrine  altogether  inadmissible. 

But  the  supposed  anomaly  exists  only  in  semblance.  The  causes 
which  bring  money  into  or  carry  it  out  of  a country  through  the 
exchanges  to  restore  the  equihbrium  of  trade,  and  which  thereby 
raise  its  value  in  some  countries  and  lower  it  in  others,  are  the  very 
same  causes  on  which  the  local  value  of  money  would  depend  if 
it  were  never  imported  except  as  a merchandize,  and  never  except 
directly  from  the  mines.  When  the  value  of  money  in  a country  is 
permanently  lowered  by  an  influx  of  it  through  the  balance  of  trade, 
the  cause,  if  it  is  not  diminished  cost  of  production,  must  be  one  of 
those  causes  which  compel  a new  adjustment,  more  favourable  to 
the  country,  of  the  equation  of  international  demand : namely, 
either  an  increased  demand  abroad  for  her  commodities,  or  a dimin- 
ished demand  on  her  part  for  those  of  foreign  coimtries.  Now  an 
increased  foreign  demand  for  the  commodities  of  a country,  or  a 
diminished  demand  in  the  country  for  imported  commodities,  are 
the  very  causes  which,  on  the  general  principles  of  trade,  enable 
a country  to  purchase  aU  imports,  and  consequently  the  precious 
metals,  at  a lower  value.  There  is  therefore  no  contradiction,  but 
the  most  perfect  accordance  in  the  results  of  the  two  different  modes 
in  which  the  precious  metals  may  be  obtained.  When  money  flows 
from  country  to  country  in  consequence  of  changes  in  the  inter- 
national demand  for  commodities,  and  by  so  doing  alters  its  own 
local  value,  it  merely  realizes,  by  a more  rapid  process,  the  effect 
which  would  otherwise  take  place  more  slowly,  by  an  alteration  in 


DISTRIBUTION  OF  THE  PRECIOUS  METALS 


627 


the  relative  breadth  of  the  streams  by  which  the  precious  metals  flow 
into  different  regions  of  the  earth  from  the  mining  countries.  As, 
therefore,  we  before  saw  that  the  use  of  money  as  a medium  of 
exchange  does  not  in  the  least  alter  the  law  on  which  the  values 
of  other  things,  either  in  the  same  country  or  internationally,  depend, 
so  neither  does  it  alter  the  law  of  the  value  of  the  precious  metal 
itself  : and  there  is  in  the  whole  doctrine  of  international  values,  as 
now  laid  down,  a unity  and  harmony  which  is  a strong  collateral 
presumption  of  truth. 

§ 4.  Before  closing  this  discussion,  it  is  fitting  to  point  out  in 
what  manner  and  degree  the  preceding  conclusions  are  affected  by 
the  existence  of  international  payments  not  originating  in  commerce, 
and  for  which  no  equivalent  in  either  money  or  commodities  is 
expected  or  received ; such  as  a tribute,  or  remittances  of  rent  to 
absentee  landlords,  or  of  interest  to  foreign  creditors,  or  a govern- 
ment expenditure  abroad,  such  as  England  incurs  in  the  manage- 
ment of  some  of  her  colonial  dependencies. 

To  begin  with  the  case  of  barter.  The  supposed  annual  re- 
mittances being  made  in  commodities,  and  being  exports  for  which 
there  is  to  be  no  return,  it  is  no  longer  requisite  that  the  imports  and 
exports  should  pay  for  one  another  : on  the  contrary,  there  must 
be  an  annual  excess  of  exports  over  imports,  equal  to  the  value  of 
the  remittance.  If,  before  the  country  became  liable  to  the  annual 
payment,  foreign  commerce  was  in  its  natural  state  of  equilibrium, 
it  will  now  be  necessary  for  the  purpose  of  effecting  the  remittance, 
that  foreign  countries  should  be  induced  to  take  a greater  quantity 
of  exports  than  before : which  can  only  be  done  by  offering  those 
exports  on  cheaper  terms,  or,  in  other  words,  by  paying  dearer  for 
foreign  commodities.  The  international  values  will  so  adjust  them- 
selves that  either  by  greater  exports,  or  smaller  imports,  or  both, 
the  requisite  excess  on  the  side  of  exports  will  be  brought  about ; 
and  this  excess  will  become  the  permanent  state.  The  result  is 
that  a country  which  makes  regular  payments  to  foreign  countries, 
besides  losing  what  it  pays,  loses  also  something  more,  by  the  less 
advantageous  terms  on  which  it  is  forced  to  exchange  its  productions 
for  foreign  commodities. 

The  same  results  follow  on  the  supposition  of  money.  Commerce 
being  supposed  to  be  in  a state  of  equilibrium  when  the  obligatory 
remittances  begin,  the  first  remittance  is  necessarily  made  in  money. 
This  lowers  prices  in  the  remitting  country,  and  raises  them  in  the 


628 


BOOK  III.  CHAPTER  XXI.  § 4 


recemn^.„  The  natural  effect  is  that  more  commodities  are  exported 
than  before,  and  fewer  imported,  and  that,  on  the  score  of  commerce 
alone,  a balance  of  money  will  be  constantly  due  from  the  receiving 
to  the  paying  country.  When  the  debt  thus  annually  due  to  the 
tributary  country  becomes  equal  to  the  annual  tribute  or  other 
regular  payment  due  from  it,  no  further  transmission  of  money  takes 
place  ; the  equilibrium  of  exports  and  imports  will  no  longer  exist, 
but  that  of  payments  will ; the  exchange  will  be  at  par,  the  two 
debts  will  be  set  off  against  one  another,  and  the  tribute  or  re- 
mittance will  be  virtually  paid  in  goods.  The  result  to  the  interest 
of  the  two  countries  will  be  as  already  pointed  out : the  paying 
country  will  give  a higher  price  for  all  that  it  buys  from  the  receiving 
country,  while  the  latter,  besides  receiving  the  tribute,  obtairs  the 
exportable  produce  of  the  tributary  country  at  a lower  price. 


CHAPTER  XXII 


INFLUENCE  OP  THE  CURRENCY  ON  THE  EXCHANGES  AND  ON 
FOREIGN  TRADE 

§ 1.  In  our  inquiry  into  the  laws  of  international  trade,  we 
commenced  with  the  principles  which  determine  international 
exchanges  and  international  values  on  the  hypothesis  of  barter.  We 
next  showed  that  the  introduction  of  money  as  a medium  of  exchange 
makes  no  difference  in  the  laws  of  exchanges  and  of  values  between 
country  and  country,  no  more  than  between  individual  and  in- 
dividual : since  the  precious  metals,  under  the  influence  of  those 
same  laws,  distribute  themselves  in  such  proportions  among  the 
different  countries  of  the  world,  as  to  allow  the  very  same  exchanges 
to  go  on,  and  at  the  same  values,  as  would  be  the  case  under  a 
system  of  barter.  We  lastly  considered  how  the  value  of  money 
itself  is  affected,  by  those  alterations  in  the  state  of  trade  which 
arises  from  alterations  either  in  the  demand  and  supply  of  com- 
modities, or  in  their  cost  of  production.  It  remains  to  consider  the 
alterations  in  the  state  of  trade  which  originate  not  in  commodities 
but  in  money. 

Gold  and  silver  may  vary  like  other  things,  though  they  are  not 
so  likely  to  vary  as  other  things,  in  their  cost  of  production.  The 
demand  for  them  in  foreign  countries  may  also  vary.  It  may 
increase,  by  augmented  employment  of  the  metals  for  purposes  of 
art  and  ornament,  or  because  the  increase  of  production  and  of 
transactions  has  created  a greater  amount  of  business  to  be  done  by 
the  circulating  medium.  It  may  diminish,  for  the  opposite  reasons  ; 
or  from  the  extension  of  the  economizing  expedients  by  which  the 
use  of  metallic  money  is  partially  dispensed  with.  These  changes 
act  upon  the  trade  between  other  countries  and  the  mining  countries, 
and  upon  the  value  of  the  precious  metals,  according  to  the  general 
laws  of  the  value  of  imported  commodities  : which  have  been  set 
forth  in  the  previous  chapters  with  sufficient  fulness. 


630 


BOOK  III.  CHAPTER  XXII.  § 2 


What  I propose  to  examine  in  the  present  chapter,  is  not  those 
circumstances  afiecting  money,  which  alter  the  permanent  con- 
ditions of  its  value  ; but  the  effects  produced  on  international  trade 
by  casual  or  temporary  variations  in  the  value  of  money,  which  have 
no  connexion  with  any  causes  afiecting  its  permanent  value.  This 
is  a subject  of  importance,  on  account  of  its  bearing  upon  the 
practical  problem  which  has  excited  so  much  discussion  for  sixty 
years  past,  the  regulation  of  the  currency. 

§ 2.  Let  us  suppose  in  any  country  a circulating  medium  purely 
metallic,  and  a sudden  casual  increase  made  to  it ; for  example,  by 
bringing  into  circulation  hoards  of  treasure,  which  had  been  con- 
cealed in  a previous  period  of  foreign  invasion  or  internal  disorder. 
The  natural  effect  would  be  a rise  of  prices.  This  would  check 
exports,  and  encourage  imports  ;__tlie_  imports  would  exceed  the 
exports,  the  exchanges  would  become  unfavourable,  and  the  newly 
acquired  stock  of  money  would  diffuse  itself  over  all  countries  with 
which  the  supposed  country  carried  on  trade,  and  from_tJiesi, 
progressively,  through  all  parts  of  the  commercial  world.  The 
money  which  thus  overflowed  would  spread  itself  to  amoqual  depth 
overUT  commercial  countries.  For  it  would  go  on  flowing  until 
the  exports  and  imports  again  balanced  one  another : and  this  (as 
no  change  is  supposed  in  the  permanent  circumstances  of  inter- 
national demand)  could  only  be,  when  the  money  had  diffused  itself 
so  equally  that  prices  had  risen  in  the  same  ratio  in  all  countries, 
so  that  the  alteration  of  price  would  be  for  all  practical  purposes 
ineffective,  and  the  exports  and  imports,  though  at  a higher  money 
valuation,  would  be  exactly  the  same  as  they  were  originally.  This 
diminished  value  of  money  throughout  the  world  (at  least,  if  the 
diminution  was  considerable)  would  cause  a suspension,  or  at  least 
a diminution,  of  the  annual  supply  from  the  mines  : since  the  metal 
would  no  longer  command  a value  equivalent  to  its  highest  cost  of 
production.  The  annual  waste  would,  therefore,  not  be  fully  made 
up,  and  the  usual  causes  of  destruction  would  gradually  reduce  the 
aggregate  quantity  of  the  precious  metals  to  its  former  amount ; 
after  which  their  production  would  recommence  on  its  former  scale. 
The  discovery  of  the  treasure  would  thus  produce  only  temporary 
effects  ; namely,  a brief  disturbance  of  international  trade  until  the 
treasure  had  disseminated  itself  through  the  world,  and  then  a 
temporary  depression  in  the  value  of  the  metal,  below  that  which 
corresponds  to  the  cost  of  producing  or  of  obtaining  it ; which 


INFLUENCE  OF  CURRENCY  ON  FOREIGN  TRADE 


631 


depression  would  gradually  be  corrected,  by  a temporarily  diminished 
production  in  the  producing  countries,  and  importation  in  the 
importing  countries. 

The  same  effects  which  would  thus  arise  from  the  discovery  of  a 
treasure,  accompany  the  process  by  which  bank  notes,  or  any  of 
the  other  substitutes  for  money,  take  the  place  of  the  precious 
metals.  Suppose  that  England  possessed  a currency  wholly  metallic 
of  twenty  millions  sterling,  and  that  suddenly  twenty  millions  of 
bank  notes  were  sent  into  circulation.  If  these  were  issued  by 
bankers,  they  would  be  employed  in  loans,  or  in  the  purchase  of 
securities,  and  would  therefore  create  a sudden  fall  in  the  rate  of 
interest,  which  would  probably  send  a great  part  of  the  twenty 
millions  of  gold  out  of  the  county  as  capital  to  seek  a higher  rate  of 
interest  elsewhere,  before  there  had  been  time  for  any  action  on 
prices.  But  we  will  suppose  that  the  notes  are  not  issued  by  bankers 
or  money-lenders  of  any  kind,  but  by  manufacturers,  in  the  pay- 
ment of  wages  and  purchase  of  materials,  or  by  the  government  in 
its  ordinary  expenses,  so  that  the  whole  amount  would  be  rapidly 
carried  into  the  markets  for  commodities.  The  following  would  be 
the  natural  order  of  consequences.  All  prices  would  rise  greatly. 
Exportation  would  almost  cease ; importation  would  be  pro- 
digiously stimulated.  A great  balance  of  payments  would  become 
due,  the  exchanges  would  turn  against  England,  to  the  full  extent 
of  the  cost  of  exporting  money ; and  the  surplus  coin  would  pour 
itself  rapidly  forth,  over  the  various  countries  of  the  world,  in  the 
order  of  their  proximity,  geographically  and  commercially,  to  Eng- 
land. efflux  would  continue  until  the  currencies  of  all  countries^'- 
had  come  to  aTevel ; by  which  I do  not  mean,  until  money  became  . 
of  the  same  value  everywhere,  but  until  the  differences  were  only*^ 
those  which  existed  before,  and  which  corresponded  to  permanent 
differences  in  the  cost  of  obtaining  it.  When  the  rise  of  prices  had 
extended  itself  in  an  equal  degree  to  aU  countries,  exports  and  imports 
would  everywhere  revert  to  what  they  were  at  first,  would  balance 
one  another,  and  the  exchanges  would  return  to  par.  If  such  a sum 
of  money  as  twenty  millions,  when  spread  over  the  whole  surface 
of  the  commercial  world,  were  sufflcient  to  raise  the  general  level 
in  a perceptible  degree,  the  effect  would  be  of  no  long  duration.  No 
alteration  having  occurred  in  the  general  conditions  under  which 
the  metals  were  procured,  either  in  the  world  at  large  or  in  any  part 
of  it,  the  reduced  value  would  no  longer  be  remunerating  and  the 
supply  from  the  mines  would  cease  partially  or  wholly,  until  the 


632 


BOOK  IIL  CHAPTER  XXII.  § 2 


twenty  millions  were  absorbed ; * after  which  absorption,  the 
currencies  of  all  countries  would  be,  in  quantity  and  in  value,  nearly 
at  their  original  level.  I say  nearly,  for  in  strict  accuracy  there 
would  be  a slight  difference.  A somewhat  smaller  annual  supply 
of  the  precious  metals  would  now  be  required,  there  being  in  the 
world  twenty  millions  less  of  metallic  money  undergoing  waste. 
The  equilibrium  of  payments,  consequently,  between  the  mining 
countries  and  the  rest  of  the  world,  would  thenceforth  require  that 
the  mining  countries  should  either  export  rather  more  of  something 
else,  or  import  rather  less  of  foreign  commodities ; which  implies  a 
somewhat  lower  range  of  prices  than  previously  in  the  mining 
countries,  and  a somewhat  higher  in  all  others  ; a scantier  currency 
in  the  former,  and  rather  fuller  currencies  in  the  latter.  This  effect, 
which  would  be  too  trifling  to  require  notice  except  for  the  illustra- 
tion of  a principle,  is  the  only  permanent  change  which  would  be 
produced  on  international  trade,  or  on  the  value  or  quantity  of  the 
currency  of  any  country. 

Effects  of  another  kind,  however,  will  have  been  produced. 
Twenty  millions,  which  formerly  existed  in  the  unproductive  form 
of  metallic  money,  have  been  converted  into  what  is,  or  is  capable 
of  becoming,  productive  capital.  This  gain  is  at  first  made  by 
England  at  the  expense  of  other  countries,  who  have  taken  her 
superfluity  of  this  costly  and  unproductive  article  off  her  hands, 
giving  for  it  an  equivalent  value  in  other  commodities.  By  degrees 
the  loss  is  made  up  to  those  countries  by  diminished  influx  from  the 
mines,  and  finally  the  world  has  gained  a virtual  addition  of  twenty 
millions  to  its  productive  resources.  Adam  Smith’s  illustration, 
though  so  well  known,  deserves  for  its  extreme  aptness  to  be  once 
more  repeated.  He  compares  the  substitution  of  paper  in  the  room 
of  the  precious  metals,  to  the  construction  of  a highway  through  the 
air,  by  which  the  ground  now  occupied  by  roads  would  become 
available  for  agriculture.  As  in  that  case  a portion  of  the  soil,  so 
in  this  a part  of  the  accumulated  wealth  of  the  country,  would  be 
relieved  from  a function  in  which  it  was  only  employed  in  rendering 
other  soils  and  capitals  productive,  and  would  itself  become  applicable 
to  production ; the  office  it  previously  fulfilled  being  equally  well 
discharged  by  a medium  which  costs  nothing. 

* [1862]  I am  here  supposing  a state  of  things  in  which  gold  and  silver 
mining  are  a permanent  branch  of  industry,  carried  on  under  known  conditions ; 
and  not  the  present  state  of  uncertainty,  in  which  gold-gathering  is  a game  of 
chance,  prosecuted  (for  the  present)  in  the  spirit  of  an  adventure,  not  in 
that  of  a regular  industrial  pursuit. 


INFLUENCE  OF  CURRENCY  ON  FOREIGN  TRADE 


633 


The  value  saved  to  the  community  by  thus  dispensing  with 
metallic  money,  is  a clear  gain  to  those  who  provide  the  substitute. 
They  have  the  use  of  twenty  millions  of  circulating  medium  which 
have  cost  them  only  the  expense  of  an  engraver’s  plate.  If  they 
employ  this  accession  to  their  fortunes  as  productive  capital,  the 
produce  of  the  country  is  increased,  and  the  community  benefited, 
as  much  as  by  any  other  capital  of  equal  amount.  Whether  it  is  so 
employed  or  not,  depends,  in  some  degree,  upon  the  mode  of  issuing 
it.  If  issued  by  the  government,  and  employed  in  paying  off  debt,  it 
would  probably  become  productive  capital.  The  government,  how- 
ever, may  prefer  employing  this  extraordinary  resource  in  its  ordinary 
expenses  ; may  squander  it  uselessly,  or  make  it  a mere  temporary 
substitute  for  taxation  to  an  equivalent  amount ; in  which  last  case 
the  amount  is  saved  by  the  taxpayers  at  large,  who  either  add  it  to 
their  capital  or  spend  it  as  income.  When  paper  currency  is  supplied, 
as  in  our  own  country,  by  bankers  and  banking  companies,  the  amount 
is  almost  wholly  turned  into  productive  capital : for  the  issuers,  being 
at  all  times  liable  to  be  called  upon  to  refund  the  value,  are  under  the 
strongest  inducements  not  to  squander  it,  and  the  only  cases  in 
which  it  is  not  forthcoming  are  cases  of  fraud  or  mismanagement.  A 
banker’s  profession  being  that  of  a money-lender,  his  issue  of  notes 
is  a simple  extension  of  his  ordinary  occupation.  He  lends  the 
amount  to  farmers,  manufacturers,  or  dealers,  who  employ  it  in  their 
several  businesses.  So  employed,  it  yields,  like  any  other  capital, 
wages  of  labour  and  profits  of  stock.  The  profit  is  shared  between 
the  banker,  who  receives  interest,  and  a succession  of  borrowers, 
mostly  for  short  periods,  who  after  paying  the  interest,  gain  a profit 
in  addition,  or  a convenience  equivalent  to  profit.  The  capital 
itself  in  the  long  run  becomes  entirely  wages,  and  when  replaced  by 
the  sale  of  the  produce,  becomes  wages  again ; thus  affording  a 
perpetual  fund,  of  the  value  of  twenty  millions,  for  the  maintenance 
of  productive  labour,  and  increasing  the  annual  produce  of  the 
country  by  all  that  can  be  produced  through  the  means  of  a capital 
of  that  value.  To  this  gain  must  be  added  a further  saving  to  the 
country,  of  the  annual  supply  of  the  precious  metals  necessary  for 
repairing  the  wear  and  tear,  and  other  waste,  of  a metallic  currency. 

The  substitution,  therefore,  of  paper  for  the  precious  metals, 
should  always  be  carried  as  far  as  is  consistent  with  safety ; no 
greater  amount  of  metallic  currency  being  retained  than  is  necessary 
to  maintain,  both  in  fact  and  in  public  belief,  the  convertibility  of 
the  paper.  A country  with  the  extensive  commercial  relations  of 


634 


BOOK  in.  CHAPTER  XXIL  § 3 


England  is  liable  to  be  suddenly  called  upon  for  large  foreign  pay- 
ments, sometimes  in  loans,  or  other  investments  of  capital  abroad, 
sometimes  as  the  price  of  some  unusual  importation  of  goods,  the 
most  frequent  case  being  that  of  large  importations  of  food  conse- 
quent on  a bad  harvest.  To  meet  such  demands  it  is  necessary  that 
there  should  be,  either  in  circulation  or  in  the  coffers  of  the  banks, 
coin  or  bullion  to  a very  considerable  amount,  and  that  this,  when 
drawn  out  by  any  emergency,  should  be  allowed  to  return  after  the 
emergency  is  past.  But  since  gold  wanted  for  exportation  is  almost 
invariably  drawn  from  the  reserves  of  the  banks,  and  is  never  likely 
to  be  taken  directly  from  the  circulation  while  the  banks  remain 
solvent,  the  only  advantage  which  can  be  obtained  from  retaining 
partially  a metallic  currency  for  daily  purposes  is  that  the  banks 
may  occasionally  replenish  their  reserves  from  it. 

§ 3.  When  metallic  money  had  been  entirely  superseded  and 
expelled  from  circulation,  by  the  substitution  of  an  equal  amount  of 
bank  notes,  any  attempt  to  keep  a still  further  quantity  of  paper 
in  circulation  must,  if  the  notes  are  convertible,  be  a complete  failure. 
The  new  issue  would  again  set  in  motion  the  same  train  of  conse- 
quences by  which  the  gold  coin  had  already  been  expelled.  The 
metals  would,  as  before,  be  required  for  exportation,  and  would  be  for 
that  purpose  demanded  from  the  banks,  to  the  full  extent  of  the 
superfluous  notes ; which  thus  could  not  possibly  be  retained  in 
circulation.  If,  indeed,  the  notes  were  inconvertible,  there  would 
be  no  such  obstacle  to  the  increase  of  their  quantity.  ^A^mconver- 
tible  paper  acts  in  the  same  way  as  a convertible,  while  there  remains 
any  coin  for  it  to  supersede  : the  difference  begins  to  manifest  itself 
when  all  the  coin  is  driven  from  circulation  (except  what  may  be 
retained  for  the  convenience  of  small  change),  and  the  issues  still 
go  on  increasing.  Wlien  the  paper  begins  to  exceed  in  quanfity 
the  metallic  currency  which  it  superseded,  prices  of  course  rise ; 
things  which  were  worth  5L  in  metallic  money,  become  worth  61. 
in  inconvertible  paper,  or  more,  as  the  case  may  be.  rise  of 

price  will  not,  as  in  the  cases  before  examined,  stimulateTmpbrl, 
and  discourage  export.  The  imports  and  exports  are  determined 
by  the  metallic  prices  of  things,  not  by  the  paper  prices  : and  it  is 
only  when  the  paper  is  exchangeable  at  pleasure  for  the  metals  that 
paper  prices  and  metallic  prices  must  correspond. 

Let  us  suppose  that  England  is  the  country  which  has  the  depre- 
ciated paper.  Suppose  that  some  English  production  could  be 


INFLUENCE  OF  CURRENCY  ON  FOREIGN  TRADE 


635 


bought,  while  the  currency  was  still  metallic,  for  5Z.,  and  sold  in 
Fpince  for  5Z.  10s.,  the  difference  covering  the  expense  and  risk, 
and  affording  a profit  to  the  merchant.  On  account  of  the  depre- 
ciation this  commodity  will  now  cost  in  England  6Z.,  and  cannot  be 
sold  in  France  for  more  than  5Z.  10s.,  and  yet  it  will  be  exported  as 
before.  Why  ? Because  the  5h  10s.,  which  the  exporter  can  get  for 
it  in  France,  is  not  depreciated  paper,  but  gold  or  silver:  and  since 
in  England  bullion  has  risen,  in  the  same  proportion  with  other 
things — if  the  merchant  brings  the  gold  or  silver  to  England,  he  can 
sell  his  5Z.  10s.  for  61. 12s.,  and  obtain  as  before  10  per  cent  for  profit 
and  expenses. 

It  thus  appears,  that  a depreciation  of  the  currency  does  not  affect 
the  foreign  trade  of  the  country  : this  is  carried  on  precisely  as  if  the 
currency  maintained  its  value.  But  though  the  trade  is  not  affected, 
the  exchanges  are.  When  the  imports  and  exports  are  in  equili- 
brium, the  exchange,  in  a metallic  currency,  would  be  at  par ; a 
bill  on  France  for  the  equivalent  of  five  sovereigns,  would  be  worth 
five  sovereigns.  But  five  sovereigns,  or  the  quantity  of  gold  con- 
tained in  them,  having  come  to  be  worth  in  England  6^.,  it  follows 
that  a bill  on  France  for  51.  will  be  worth  61.  When,  therefore, 
the  real  exchange  is  at  par,  there  will  be  a nominal  exchange  against 
the  country,  of  as  much  per  cent  as  the  amount  of  the  depreciation. 
If  the  currency  is  depreciated  10, 15,  or  20  per  cent,  then  in  whatever 
way  the  real  exchange,  arising  from  the  variations  of  international 
debts  and  credits,  may  vary,  the  quoted  exchange  will  always  differ 
10,  15,  or  20  per  cent  from  it.  However  high  this  nominal  premium 
may  be,  it  has  no  tendency  to  send  gold  out  of  the  country,  for  the 
purpose  of  drawing  a bill  against  it  and  profiting  by  the  premium ; 
because  the  gold  so  sent  must  be  procured,  not  from  the  banks  and 
at  par,  as  in  the  case  of  a convertible  currency,  but  in  the  market 
at  an  advance  of  price  equal  to  the  premium.  In  such  cases,  instead 
of  saying  that  the  exchange  is  unfavourable,  it  would  be  a more 
correct  representation  to  say  that  the  par  has  altered,  since  there  is 
now  required  a larger  quantity  of  Enghsh  currency  to  be  equivalent 
to  the  same  quantity  of  foreign.  The  exchanges,  however,  continue 
to  be  computed  according  to  the  metalHc  par.  The  quoted  exchanges, 
therefore,  when  there  is  a depreciated  currency,  are  compounded  of 
two  elements  or  factors ; the  real  exchange,  which  follows  the  varia- 
tions of  international  payments,  and  the  nominal  exchange,  which 
varies  with  the  depreciation  of  the  currency,  but  which,  while  there  is 
any  depreciation  at  all,  must  always  be  unfavourable.  Since  the 


636 


BOOK  III.  CHAPTER  XXII.  § 3 


amount  of  depreciation  by  the  degree  in  which 

the  market  price  of  bullion  exceeds  the  Mint  valuation,  we  have  a 
sure  criterion  to  determine  what  portion  of  the  quoted  exchange, 
being  referable  to  depreciation,  may  be  struck  off  as  nominal ; the 
result  so  corrected  expressing  the  real  exchange. 

The  jame  disturbance  of  the  exchanges  and  of  ixitexnational 
trade,  which  is  produced  by  an  increased  issue  of  convertible  bank 
notes,  is  in  hke  manner  produced  by  those  extensions  of  credit, 
which,  as  was  so  fully  shown  in  a preceding  chapter,  have  the  sanie 
effect  on  prices  as  an  increase  of  the  currency.  Whenever  circum- 
stances have  given  such  an  impulse  to  the  spirit  of  speculation  as  to 
occasion  a great  increase  of  purchases  on  credit,  money  prices  rise, 
just  as  much  as  they  would  have  risen  if  each  person  who  so  buys  on 
credit  had  bought  with  money.  All  the  effects,  therefore,  must  be 
similar.  As  a consequence  of  high  prices,  exportation  is  checked 
and  importation  stimulated  ; though  in  fact  the  increase  of  importa- 
tion seldom  waits  for  the  rise  of  prices  which  is  the  consequence  of 
speculation,  inasmuch  as  some  of  the  great  articles  of  import  are 
usually  among  the  things  in  which  speculative  overtrading  first 
shows  itself.  There  is,  therefore,  in  such  periods,  usually  a great 
excess  of  imports  over  exports  ; and  when  the  time  comes  at  which 
these  must  be  paid  for,  the  exchanges  become  unfavourable,  and 
gold  flows  out  of  the  country.  In  what  precise  manner  this  efflux 
of  gold  takes  effect  on  prices,  depends  on  circumstances  of  which  we 
shall  presently  speak  more  fully ; but  that  its  effect  is  to  make 
them  recoil  downwards,  is  certain  and  evident.  The  recoil,  once 
begun,  generally  becomes  a total  rout,  and  the  unusual  extension 
of  credit  is  rapidly  exchanged  for  an  unusual  contraction  of  it. 
Accordingly,  when  credit  has  been  imprudently  stretched,  and  the 
speculative  spirit  carried  to  excess,  the  turn  of  the  exchanges, 
and  consequent  pressure  on  the  banks  to  obtain  gold  for  exportation, 
are  generally  the  proximate  cause  of  the  catastrophe.  But  these 
phenomena,  though  a conspicuous  accompaniment,  are  no  essential 
part  of  the  collapse  of  credit  called  a commercial  crisis ; which, 
as  we  formerly  showed,*  might  happen  to  as  great  an  extent,  and  is 
quite  as  hkely  to  happen,  in  a country,  if  any  such  there  were, 
altogether  destitute  of  foreign  trade. 


Supra,  pp.  525-7. 


CHAPTER  XXIII 


OF  THE  RATE  OF  INTEREST 

§ 1.  The  present  seems  the  most  proper  place  for  discussing 
the  circumstances  which  determine  the  rate  of  interest.  The  interest 
of  loans,  being  really  a question  of  exchange  value,  falls  naturally 
into  the  present  division  of  our  subject : and  the  two  topics  of 
Currency  and  Loans,  though  in  themselves  distinct,  are  so  intimately 
blended  in  the  phenomena  of  what  is  called  the  money  market, 
that  it  is  impossible  to  understand  the  one  without  the  other,  and  in 
many  minds  the  two  subjects  are  mixed  up  in  the  most  inextricable 
confusion. 

In  the  preceding  Book  * we  defined  the  relation  in  which  interest 
stands  to  profit.  We  found  that  the  gross  profit  of  capital  might 
be  distinguished  into  three  parts,  which  are  respectively  the  remuner- 
ation for  risk,  for  trouble,  and  for  the  capital  itself,  and  may  be 
termed  insurance,  wages  of  superintendence,  and  interest.  After 
making  compensation  for  risk,  that  is,  after  covering  the  average 
losses  to  which  capital  is  exposed  either  by  the  general  circumstances 
of  society  or  by  the  hazards  of  the  particular  employment,  there 
remains  a surplus,  which  partly  goes  to  repay  the  owner  of  the  capital 
for  his  abstinence,  and  partly  the  employer  of  it  for  his  time  and 
trouble.  How  much  goes  to  the  one  and  how  much  to  the  other,  is 
shown  by  the  amount  of  the  remuneration  which,  when  the  two 
functions  are  separated,  the  owner  of  capital  can  obtain  from  the 
employer  for  its  use.  This  is  evidently  a question  of  demand  and 
supply.  Nor  have  demand  and  supply  any  different  meaning  or 
effect  in  this  case  from  what  they  have  in  all  others.  The  rate  of 
interest  will  be  such  as  to  equalize  the  demand  for  loans  with  the 
supply  of  them.  It  will  be  such,  that  exactly  as  much  as  some 
people  are  desirous  to  borrow  at  that  rate,  others  shall  be  willing 

* Supra,  book  ii.  oh.  xv.  § 1. 


638 


BOOK  III.  CHAPTER  XXIII.  § 2 


to  lend.  If  there  is  more  offered  than  demanded,  interest  will 
fall;  if  more  is  demanded  than  offered,  it  will  rise;  and,  in  both 
cases,  to  the  point  at  which  the  equation  of  supply  and  demand  is 
re-established. 

Both  the  demand  and  supply  of  loans  fluctuate  more  inces- 
santly than  any  other  demand  or  supply  whatsoever.  The  fluctua- 
tions in  other  things  depend  on  a hmited  number  of  influencing 
circumstances ; but  the  desire  to  borrow,  and  the  willingness  to 
lend,  are  more  or  less  influenced  by  every  circumstance  which 
affects  the  state  or  prospects  of  industry  or  commerce,  either  gener- 
ally or  in  any  of  their  branches.  The  rate  of  interest,  therefore, 
on  good  security,  which  alone  we  have  here  to  consider  (for  interest 
in  which  considerations  of  risk  bear  a part  may  swell  to  any  amount) 
is  seldom,  in  the  great  centres  of  money  transactions,  precisely  the 
same  for  two  days  together ; as  is  shown  by  the  never-ceasing 
variations  in  the  quoted  prices  of  the  funds  and  other  negotiable 
securities.  Nevertheless,  there  must  be,  as  in  other  cases  of  value, 
some  rate  which  (in  the  language  of  Adam  Smith  and  Ricardo)  may 
be  called  th§  natural  rate ; some  rate  about  which  the  market  rate 
oscillates,  and  to  which  it  always  tends  to  return.  This  rate  partly 
depends  on  the  amount  of  accumulation  going  on  in  the  hands  of 
persons  who  cannot  themselves  attend  to  the  employment  of  their 
savings,  and  partly  on  the  comparative  taste  existing  in  the  com- 
munity for  the  active  pursuits  of  industry,  or  for  the  leisure,  ease, 
and  independence  of  an  annuitant. 

§ 2.  To  exclude  casual  fluctuations,  we  will  suppose  commerce 
to  be  in  a quiescent  condition,  no  employment  being  unusually  pros- 
perous, and  none  particularly  distressed.  In  these  circumstances, 
the  more  thriving  producers  and  traders  have  their  capital  fully 
employed,  and  many  are  able  to  transact  business  to  a considerably 
greater  extent  than  they  have  capital  for.  These  are  naturally 
borrowers  : and  the  amount  which  they  desire  to  borrow,  and  can 
obtain  credit  for,  constitutes  the  demand  for  loans  on  account  of 
productive  employment.  To  these  must  be  added  the  loans  required 
by  Government,  and  by  landowners,  or  other  unproductive  con- 
sumers who  have  good  security  to  give.  This  constitutes  the  mass 
of  loans  for  which  there  is  an  habitual  demand. 

Now  it  is  conceivable  that  there  might  exist,  in  the  hands  of 
persons  disinclined  or  disqualified  for  engaging  personally  in  business, 
a mass  of  capital  equal  to,  and  even  exceeding,  this  demand.  In  that 


RATE  OF  INTEREST 


639 


case  there  would  be  an  habitual  excess  of  competition  on  the  part  of 
lenders,  and  the  rate  of  interest  would  bear  a low  proportion  to  the 
rate  of  profit.  Interest  would  be  forced  down  to  the  point  which 
would  either  tempt  borrowers  to  take  a greater  amount  of  loans 
than  they  had  a reasonable  expectation  of  being  able  to  employ 
in  their  business,  or  would  so  discourage  a portion  of  the  lenders, 
as  to  make  them  either  forbear  to  accumulate,  or  endeavour  to 
increase  their  income  by  engaging  in  business  on  their  own 
account,  and  incurring  the  risks,  if  not  the  labours,  of  industrial 
employment. 

On  the  other  hand,  the  capital  owned  by  persons  who  prefer 
lending  it  at  interest,  or  whose  avocations  prevent  them  from 
personally  superintending  its  employment,  may  be  short  of  the 
habitual  demand  for  loans.  It  may  be  in  great  part  absorbed  by  the 
investments  afforded  by  the  public  debt  and  by  mortgages,  and  the 
remainder  may  not  be  sufficient  to  supply  the  wants  of  commerce. 
If  so,  the  rate  of  interest  will  be  raised  so  high  as  in  some  way  to 
re-establish  the  equilibrium.  When  there  is  only  a small  difference 
between  interest  and  profit,  many  borrowers  may  no  longer  be  willing 
to  increase  their  responsibilities  and  involve  their  credit  for  so  small 
a remuneration : or  some  who  would  otherwise  have  engaged  in 
business,  may  prefer  leisure,  and  become  lenders  instead  of  borrowers, 
or  others,  under  the  inducement  of  high  interest  and  easy  investment 
for  their  capital,  may  retire  from  business  earlier,  and  with  smaller 
fortunes,  than  they  otherwise  would  have  done.  Or,  lastly,  there 
is  another  process  by  which,  in  England  and  other  commercial  coun- 
tries, a large  portion  of  the  requisite  supply  of  loans  is  obtained. 
Instead  of  its  being  afforded  by  persons  not  in  business,  the  affording 
it  may  itself  become  a business.  A portion  of  the  capital  employed 
in  trade  may  be  supplied  by  a class  of  professional  money  lenders. 
These  money  lenders,  however,  must  have  more  than  a mere  interest ; 
they  must  have  the  ordinary  rate  of  profit  on  their  capital,  risk  and 
all  other  circumstances  being  allowed  for.  But  it  can  never  answer 
to  any  one  who  borrows  for  the  purposes  of  his  business,  to  pay  a 
full  profit  for  capital  from  which  he  will  only  derive  a full  profit : 
and  money-lending,  as  an  employment,  for  the  regular  supply  of 
trade,  cannot,  therefore,  be  carried  on  except  by  persons  who,  in 
addition  to  their  own  capital,  can  lend  their  credit,  or,  in  other  words, 
the  capital  of  other  people  : that  is,  bankers,  and  persons  (such  as 
bill-brokers)  who  are  virtually  bankers,  since  they  receive  money  in 
deposit.  A bank  which  lends  its  notes,  lends  capital  which  it  borrows 


640 


BOOK  III.  CHAPTER  XXIII.  § 2 


from  tlie  community,  and  for  wMcli  it  pays  no  interest.  A bank  of 
deposit  lends  capital  wMch  it  collects  from  tbe  community  in  small 
parcels ; sometimes  without  paying  any  interest,  as  is  the  case 
with  the  London  private  bankers  ; and  if,  like  the  Scotch,  the  joint 
stock,  and  most  of  the  country  banks,  it  does  pay  interest,  it  still 
pays  much  less  than  it  receives  ; for  the  depositors,  who  in  any  other 
way  could  mostly  obtain  for  such  small  balances  no  interest  worth 
taking  any  trouble  for,  are  glad  to  receive  even  a little.  Having  this 
subsidiary  resource,  bankers  are  enabled  to  obtain,  by  lending  at 
interest,  the  ordinary  rate  of  profit  on  their  own  capital.  In  any 
other  manner,  money-lending  could  not  be  carried  on  as  a regular 
mode  of  business,  except  upon  terms  on  which  none  would  consent 
to  borrow  but  persons  either  counting  on  extraordinary  profits,  or 
in  urgent  need  : unproductive  consumers  who  have  exceeded  their 
means,  or  merchants  in  fear  of  bankruptcy.  The  disposable  capital 
deposited  in  banks  ; that  represented  by  bank  notes  ; the  capital  of 
bankers  themselves,  and  that  which  their  credit,  in  any  way  in  which 
they  use  it,  enables  them  to  dispose  of ; these,  together  with  the 
funds  belonging  to  those  who,  either  from  necessity  or  preference, 
live  upon  the  interest  of  their  property,  constitute  the  general  loan 
fund  of  the  country  : and  the  amount  of  this  aggregate  fund,  when 
set  against  the  habitual  demands  of  producers  and  dealers,  and  those 
of  the  Government  and  of  unproductive  consumers,  determines  the 
permanent  or  average  rate  of  interest ; which  must  always  be  such 
as  to  adjust  these  two  amounts  to  one  another.*  But  while  the  whole 
of  this  mass  of  lent  capital  takes  efiect  upon  the  'permanent  rate  of 
interest,  the  fluctuations  depend  almost  entirely  upon  the  portion 
which  is  in  the  hands  of  bankers  ; for  it  is  that  portion  almost  exclu- 
sively which,  being  lent  for  short  times  only,  is  continually  in  the 
market  seeking  an  investment.  The  capital  of  those  who  live  on  the 
interest  of  their  own  fortunes,  has  generally  sought  and  found 
some  fixed  investment,  such  as  the  public  funds,  mortgages,  or  the 

♦ I do  not  include  in  the  general  loan  fund  of  the  country  the  capitals, 
large  as  they  sometimes  are,  which  are  habitually  employed  in  speculatively 
buying  and  selling  the  public  funds  and  other  securities.  It  is  true  that  all 
who  buy  securities  add,  for  the  time,  to  the  general  amount  of  money  on  loan, 
and  lower  pro  tarUo  the  rate  of  interest.  But  as  the  persons  I speak  of  buy 
only  to  sell  again  at  a higher  price,  they  are  alternately  in  the  position  of  lenders 
and  of  borrowers ; their  operations  raise  the  rate  of  interest  at  one  time,  exactly 
as  much  as  they  lower  it  at  another.  Like  all  persons  who  buy  and  sell  on 
speculation,  their  function  is  to  equalize,  not  to  raise  or  lower,  the  value  of  the 
commodity.  When  they  speculate  prudently,  they  temper  the  fluctuations  of 
price ; when  imprudently,  they  often  aggravate  them. 


RATE  OF  INTEREST 


641 


bonds  of  public  companies,  which  investment,  except  under  peculiar 
temptations  or  necessities,  is  not  changed. 

§ 3.  Fluctuations  in  the  rate  of  interest  arise  from  variations 
either  in  the  demand  for  loans,  or  in  the  supply.  The  supply  is 
hable  to  variation,  though  less  so  than  the  demand.  The  willing- 
ness to  lend  is  greater  than  usual  at  the  commencement  of  a period 
of  speculation,  and  much  less  than  usual  during  the  revulsion  which 
follows.  In  speculative  times,  money-lenders  as  well  as  other  people 
are  inchned  to  extend  their  business  by  stretching  their  credit ; 
they  lend  more  than  usual  (just  as  other  classes  of  dealers  and 
producers  employ  more  than  usual)  of  capital  which  does  not  belong 
to  them.  Accordingly,  these  are  the  times  when  the  rate  of  interest 
is  low  ; though  for  this  too  (as  we  shall  hereafter  see)  there  are  other 
causes.  During  the  revulsion,  on  the  contrary,  interest  always 
rises  inordinately,  because,  while  there  is  a most  pressing  need  on  the 
part  of  many  persons  to  borrow,  there  is  a general  disinclination  to 
lend.  This  disinchnation,  when  at  its  extreme  point,  is  called  a 
panic.  It  occurs  when  a succession  of  unexpected  failures  has 
created  in  the  mercantile,  and  sometimes  also  in  the  non-mercantile 
pubhc,  a general  distrust  in  each  other’s  solvency  ; disposing  every 
one  not  only  to  refuse  fresh  credit,  except  on  very  onerous  terms, 
but  to  call  in,  if  possible,  all  credit  which  he  has  already  given. 
Deposits  are  withdrawn  from  banks ; notes  are  returned  on  the 
issuers  in  exchange  for  specie ; bankers  raise  their  rate  of  discount, 
and  withhold  their  customary  advances ; merchants  refuse  to  renew 
mercantile  bills.  At  such  times  the  most  calamitous  consequences 
were  formerly  experienced  from  the  attempt  of  the  law  to  prevent 
more  than  a certain  hmited  rate  of  interest  from  being  given  or  taken. 
Persons  who  could  not  borrow  at  five  per  cent,  had  to  pay,  not  six 
or  seven,  but  ten  or  fifteen  per  cent,  to  compensate  the  lender  for 
risking  the  penalties  of  the  law  : or  had  to  sell  securities  or  goods 
for  ready  money  at  a still  greater  sacrifice. 

In  the  intervals  between  commercial  crises,  there  is  usually  a 
tendency  in  the  rate  of  interest  to  a progressive  decline,  from  the 
gradual  process  of  accumulation  : which  process,  in  the  great 
commercial  countries,  is  sufiiciently  rapid  to  account  for  the  almost 
periodical  recurrence  of  these  fits  of  speculation  ; since,  when  a few 
years  have  elapsed  without  a crisis,  and  no  new  and  tempting 
channel  for  investment  has  been  opened  in  the  meantime,  there  is 
always  found  to  have  occurred  in  those  few  years  so  large  an  increase 


642 


BOOK  III.  CHAPTER  XXIII.  § 3 


of  capital  seeking  investment,  as  to  have  lowered  considerably 
the  rate  of  interest,  whether  indicated  by  the  prices  of  securities 
or  by  the  rate  of  discount  on  bills  ; and  this  diminution  of  interest 
tempts  the  possessor  to  incur  hazards  in  hopes  of  a more  considerable 
return, 

^ The  rate  of  interest  is,  at  times,  affected  more  or  less  permanently 
by  circumstances,  though  not  of  frequent,  yet  of  occasional  occur- 
rence, which  tend  to  alter  the  proportion  between  the  class  of  interest- 
receiving and  that  of  profit-receiving  capitalists.  Two  causes  of 
this  description,  operating  in  contrary  ways,  have  manifested  them- 
selves of  late  years,  and  are  now  producing  considerable  effects  in 
England.  One  is  the_^qld  discoveries.  The  masses  of  the  precious 
metals  which  are  constantly  arriving  from  the  gold  countries,  are, 
it  may  safely  be  said,  wholly  added  to  the  funds  that  supply  the 
loan  market.  So  great  an  additional  capital,  not  divided  between 
the  two  classes  of  capitalists,  but  aggregated  bodily  to  the  capital  of 
the  interest-receiving  class,  disturbs  the  pre-existing  ratio  between 
the  two,  and  tends  to  depress  interest  relatively  to  profit.  Another 
circumstance  of  still  more  recent  date,  but  tending  to  the  contrary 
effect,  k-the^Jegalization  of  joint-stock  associations  with  limited 
liability.  The  shareholders  in  these  associations,  now  so  rapidly 
multiplying,  are  drawn  almost  exclusively  from  the  lending  class  ; 
from  those  who  either  left  their  disposable  funds  in  deposit,  to  be 
lent  out  by  bankers,  or  invested  them  in  public  or  private  securities, 
and  received  the  interest.  To  the  extent  of  their  shares  in  any  of 
these  companies  (with  the  single  exception  of  banking  companies) 
they  have  become  traders  on  their  own  capital ; they  have  ceased 
to  be  lenders,  and  have  even,  in  most  cases,  passed  over  to  the  class 
of  borrowers.  Their  subscriptions  have  been  abstracted  from  the 
funds  which  feed  the  loan  market,  and  they  themselves  have  become 
competitors  for  a share  of  the  remainder  of  those  funds  : of  all  which 
the  natural  effect  is  a rise  of  interest.  And  it  would  not  be  surpris- 
ing if,  for  a considerable  time  to  come,  the  ordinary  rate  of  interest 
in  England  should  bear  a higher  proportion  to  the  common  rate  of 
mercantile  profit,  than  it  has  borne  at  any  time  since  the  influx  of 
new  gold  set  in.* 

^ [This  paragraph  and  the  accompanying  note  were  added  in  the  6th  ed. 
(1865).] 

* [1865]  To  the  cause  of  augmentation  in  the  rate  of  interest,  mentioned  in 
the  text,  must  be  added  another,  forcibly  insisted  on  by  the  author  of  an  able 
article  in  the  Edinburgh  Review  for  January,  1865 ; the  increased  and  increasing 
willingness  to  send  capital  abroad  for  investment.  Owing  to  the  vastly  augmented 


RATE  OF  INTEREST 


643 


The  demand  foi  loans  varies  much  more  largely  than  the  supply, 
und  embraces  longer  cycles  of  years  in  its  aberrations.  A time  of 
war,  for  example,  is  a period  of  unusual  drafts  on  the  loan  market. 
The  Government,  at  such  times,  generally  incurs  new  loans,  and  as 
these  usually  succeed  each  other  rapidly  as  long  as  the  war  lasts, 
the  general  rate  of  interest  is  kept  higher  in  war  than  in  peace, 
without  reference  to  the  rate  of  profit,  and  productive  industry  is 
stinted  of  its  usual  supplies.  During  part  of  the  last  war  with  France, 
the  Government  could  not  borrow  under  six  per  cent,  and  of  course 
all  other  borrowers  had  to  pay  at  least  as  much.  Nor  does  the  influ- 
ence of  these  loans  altogether  cease  when  the  Government  ceases  to 
contract  others  ; for  those  already  contracted  continue  to  afford  an 
investment  for  a greatly  increased  amount  of  the  disposable  capital 
of  the  country,  which  if  the  national  debt  were  paid  off,  would  be 
added  to  the  mass  of  capital  seeking  investment,  and  (independently 
of  temporary  disturbance)  could  not  but,  to  some  extent,  permanently 
lower  the  rate  of  interest. 

The  same  effect  on  interest  which  is  produced  by  Government 
loans  for  war  expenditure,  is  produced  by  the  sudden  opening  of  any 
new  and  generally  attractive  mode  of  permanent  investment.  The 
only  instance  of  the  kind  in  recent  history  on  a scale  comparable 
to  that  of  the  war  loans,  is  the  absorption  of  capital  in  the  construc- 
tion of  railways.  This  capital  must  have  been  principally  drawn 
from  the  deposits  in  banks,  or  from  savings  which  would  have  gone 
into  deposit,  and  which  were  destined  to  be  ultimately  employed 
‘in  buying  securities  from  persons  who  would  have  employed  the 
purchase  money  in  discounts  or  other  loans  at  interest : in  either 
case,  it  was  a draft  on  the  general  loan  fund.  It  is,  in  fact,  evident, 
^that  unless  savings  were  made  expressly  to  be  employed  in  railway 

• adventure,  the  amount  thus  employed  must  have  been  derived  either 
from  the  actual  capital  of  persons  in  business,  or  from  capital  which 
would  have  been  lent  to  persons  in  business.  In  the  first  case,  the 
•subtraction,  by  crippHng  their  means,  obliges  them  to  be  larger 
borrowers ; in  the  second,  it  leaves  less  for  them  to  borrow ; in 
•either  case  it  equally  tends  to  raise  the  rate  of  interest. 

facilities  of  access  to  foreign  countries,  and  the  abundant  information  inces- 
santly received  from  them,  foreign  investments  have  ceased  to  inspire  the  terror 
that  belongs  to  the  unknown  ; capital  flows,  without  misgiving,  to  any  place 

• which  affords  an  expectation  of  high  proflt ; and  the  loan  market  of  the  whole 
‘commercial  world  is  rapidly  becoming  one.  The  rate  of  interest,  therefore,  in 
the  part  of  the  world  out  of  which  capital  most  freely  flows,  cannot  any  longer 
remain  so  much  inferior  to  the  rate  elsewhere,  as  it  has  hitherto  been. 


644 


BOOK  111.  CHAPTER  XXIIL  § 4 


§ 4.^  I have,  thus  far,  considered  loans,  and  the  rate  of  interest, 
as  a matter  which  concerns  capital  in  general,  in  direct  opposition 
to  the  popular  notion,  according  to  which  it  only  concerns  money. 
Injoans,  as  in  all  other  money  transactions,  I have  regarded  the 
money  which  passes,  only  as  the  medium,  and  commodities  as  the 
thing  really  transferred — the  real  subject  of  the  transaction.  And 
this  is,  in  the  main,  correct : because  the  purpose  for  which,  in  the 
ordinary  course  of  affairs,  money  is  borrowed,  is  to  acquire  a pur- 
chasing  power  over  commodities.  In  an  industrious  and  commercial 
country,  the  ulterior  intention  commonly  is,  to  employ  the  com- 
modities as  capital : but  even  in  the  case  of  loans  for  unproductive 
consumption,  as  those  of  spendthrifts,  or  of  the  Government,  the 
amount  borrowed  is  taken  from  a previous  accumulation,  which 
would  otherwise  have  been  lent  to  carry  on  productive  industiy ; 
it  is,  therefore,  so  much  subtracted  from  what  may  correctly  be 
called  the  amount  of  loanable  capital. 

There  is,  however,  a not  unfrequent  case,  in  which  the  purpose 
of  the  borrower  is  different  from  what  I have  here  supposed.  He 
may  borrow  money,  neither  to  employ  it  as  capital  nor  to  spend  it 
unproductively,  but  to  pay  a previous  debt.  In  this  case,  what  he 
wants  is  not  purchasing  power,  but  legal  tender,  or  something  which 
a creditor  will  accept  as  equivalent  to  it.  His  need  is  specifically 
for  money,  not  for  commodities  or  capital.  It  is  the  demand  arising 
from  this  cause,  which  produces  almost  all  the  great  and  sudden 
variations  of  the  rate  of  interest.  Such  a demand  forms  one  of  the 
earliest  features  of  a commercial  crisis.  At  such  a period,  many 
persons  in  business,  who  have  contracted  engagements,  have  been 
prevented  by  a change  of  circumstances  from  obtaining  in  time  the 
means  on  which  they  calculated  for  fulfilling  them.  These  means 
they  must  obtain  at  any  sacrifice,  or  submit  to  bankruptcy ; and 
what  they  must  have  is  money.  Other  capital,  however  much  of  it 
they  may  possess,  cannot  answer  the  purpose  unless  money  can 
first  be  obtained  for  it ; while,  on  the  contrary,  without  any  increase 
of  the  capital  of  the  country,  a mere  increase  of  circulating  instru- 
ments of  credit  (be  they  of  as  little  worth  for  any  other  purpose  %s 
the  box  of  one  pound  notes  discovered  in  the  vaults  of  the  Bank  of 
England  during  the  panic  of  1825)  will  effectually  serve  their  turn 
if  only  they  are  allowed  to  make  use  of  it.  An  increased  issue  of 
notes,  in  the  form  of  loans,  is  all  that  is  required  to  satisfy  the 

^ [The  first  three  paragraphs  of  this  section  were  added  in  the  6th  ed 
(1865).] 


RATE  OF  INTEREST 


645 


demand,  and  put  an  end  to  the  accompanying  panic.  But  although, 
in  this  case,  it  is  not  capital,  or  purchasing  power,  that  the  borrower 
needs,  but  money  as  money,  it  is  not  only  money  that  is  transferred 
to  him.  The  money  carries  its  purchasing  power  with  it  wherever  it 
goes  ; and  money  thrown  into  the  loan  market  really  does,  through 
its  purchasing  power,  turn  over  an  increased  portion  of  the  capital 
of  the  country  into  the  direction  of  loans.  Though  money  alone 
was  wanted,  capital  passes  ; and  it  may  still  be  said  with  truth  that 
it  is  by  an  addition  to  loanable  capital  that  the  rise  of  the  rate  of 
interest  is  met  and  corrected. 

Independently  of  this,  however,  there  is  a real  relation,  which 
it  is  indispensable  to  recognise,  between  loans  and  money.  Loan* 
able  capital  is  all  of  it  in  the  form  of  money.  Capital  destined  directly 
for  production  exists  in  many  forms ; but  capital  destined  for 
lending  exists  normally  in  that  form  alone.  Owing  to  this  circum* 
stance,  we  should  naturally  expect  that  among  the  causes  which 
aSect  more  or  less  the  rate  of  interest,  would  be  found  not  only 
causes  which  act  through  capital,  but  some  causes  which  act,  directly 
at  least,  only  through  money. 

1 The  rate  of  interest  bears  no  necessary  relation  to  the  quantity 
or  value  of  the  money  in  circulation.  The  permanent  amount  of 
the  circulating  medium,  whether  great  or  small,  affects  only  prices  ; 
not  the  rate  of  interest.  A depreciation  of  the  currency,  when  it  has 
become  an  accomplished  fact,  affects  the  rate  of  interest  in  no 
manner  whatever.  It  diminishes  indeed  the  power  of  money  to 
buy  commodities,  but  not  the  power  of  money  to  buy  money.  I, 
a hundred  pounds  will  buy  a perpetual  annuity  of  four  pounds  a 
year,  a depreciation  which  makes  the  hundred  pounds  worth  only 
half  as  much  as  before,  has  precisely  the  same  effect  on  the  four 
pounds,  and  cannot  therefore  alter  the  relation  between  the  two. 
The  greater  or  smaller  number  of  counters  which  must  be  used  to 
express  a given  amount  of  real  wealth,  makes  no  difference  in  the 
position  or  interests  of  lenders  or  borrowers,  and  therefore  makes  no 
difference  in  the  demand  and  supply  of  loans.  There  is  the  same 
amount  of  real  capital  lent  and  borrowed  ; and  if  the  capital  in  the 
hands  of  lenders  is  represented  by  a greater  number  of  pounds 
sterling,  the  same  greater  number  of  pounds  sterling  will,  in  con- 
sequence of  the  rise  of  prices,  be  now  required  for  the  purposes  to 
which  the  borrowers  intend  to  apply  them. 

1 [The  text  of  this  and  the  next  seven  paragraphs  is  an  expansion  in  the 
6th  ed.  (1865)  of  two  paragraphs  of  the  earher  editions.] 


646 


BOOK  III.  CHAPTER  XXIII.  § 4 


But  though  the  greater  or  less  quantity  of  money  makes  in  itself 
no  difierence  in  the  rate  of  interest,  a change  from  a less  quantity  to 
a greater,  or  from  a greater  to  a less,  may  and  does  make  a difference 
in  it. 

Suppose  money  to  be  in  process  of  depreciation  by  means  of  an 
inconvertible  currency,  issued  by  a government  in  payment  of  its 
expenses.  This  fact  will  in  no  way  diminish  the  demand  for  real 
capital  on  loan ; but  it  will  diminish  the  real  capital  loanable, 
because,  this  existing  only  in  the  form  of  money,  the  increase  of 
quantity  depreciates  it.  Estimated  in  capital,  the  amount  offered 
is  less,  while  the  amount  required  is  the  same  as  before.  Estimated 
in  currency,  the  amount  offered  is  only  the  same  as  before,  while  the 
amount  required,  owing  to  the  rise  of  prices,  is  greater.  Either 
way,  the  rate  of  interest  must  rise.  So  that  in  this  case  increase 
of  currency  really  affects  the  rate  of  interest,  but  in  the  con- 
trary way  to  that  \^ch^  is  generally  supposed  ; by  raising,  not  J)y 
lowering  it. 

The  reverse  will  happen  as  the  effect  of  calling  in,  or  diminishing 
in  quantity,  a depreciated  currency.  The  money  in  the  hands  of 
lenders,  in  common  with  all  other  money,  will  be  enhanced  in  value, 
that  is,  there  will  be  a greater  amount  of  real  capital  seeking 
borrowers  ; while  the  real  capital  wanted  by  borrowers  will  be  only 
the  same  as  before,  and  the  money  amount  less  : the  rate  of  interest, 
therefore,  will  tend  to  fall. 

We  thus  see  that  depreciation,  merely  as  such,  while  in  process 
of  taking  place,  tends  to  raise  the  rate  of  interest : and  the  expecta- 
tion of  further  depreciation  adds  to  this  effect ; because  lenders  who 
expect  that  their  interest  will  be  paid,  and  the  principal  perhaps 
redeemed,  in  a less  valuable  currency  than  they  lent,  of  course 
require  a rate  of  interest  sufficient  to  cover  this  contingent 
loss. 

But  this  effect  is  more  than  counteracted  by  a contrary  one, 
when  the  additional  money  is  thrown  into  circulation  not  by  pur- 
chases but  by  loans.  In  England,  and  in  most  other  commercial 
countries,  the  paper  currency  in  common  use,  being  a currency 
provided  by  bankers,  is  all  issued  in  the  way  of  loans,  except  the 
part  employed  in  the  purchase  of  gold  and  silver.  The  same  opera- 
tion, therefore,  which  adds  to  the  currency  also  adds  to  the  loans  : 
the  whole  increase  of  currency  in  the  first  instance  swells  the  loan 
market.  Considered  as  an  addition  to  loans  it  tends  to  lower  interest, 
more  than  in  its  character  of  depreciation  it  tends  to  raise  it ; for 


RATE  OF  INTEREST 


647 


the  former  effect  depends  on  the  ratio  which  the  new  money  bears 
to  the  money  lent,  while  the  latter  depends  on  its  ratio  to  all  the 
money  in  circulation.  An  increase,  therefore,  of  currency  issued 
by  banks,  tends,  while  the  process  continues,  to  bring  down  or  to 
keep  down  the  rate  of  interest.  A similar  effect  is  produced  by  the 
increase  of  money  arising  from  the  gold  discoveries ; almost  the 
whole  of  which,  as  already  noticed,  is,  when  brought  to  Europe, 
added  to  the  deposits  in  banks,  and  consequently  to  the  amount  of 
loans ; and  when  drawn  out  and  invested  in  securities,  liberates 
an  equivalent  amount  of  other  loanable  capital.  The  newly-arrived 
gold  can  only  get  itself  invested,  in  any  given  state  of  business,  by 
lowering  the  rate  of  interest ; and  as  long  as  the  influx  continues,  it 
cannot  fail  to  keep  interest  lower  than,  all  other  circumstances  being 
supposed  the  same,  would  otherwise  have  been  the  case. 

As  the  introduction  of  additional  gold  and  silver,  which  goes  into 
the  loan  market,  tends  to  keep  down  the  rate  of  interest,  so  any 
considerable  abstraction  of  them  from  the  country  invariably  raises 
it  * even  when  occurring  in  the  course  of  trade,  as  in  paying  for  the 
extra  importations  caused  by  a bad  harvest,  or  for  the  high-priced 
cotton  which,  under  the  influence  of  the  American  civil  war,  was 
imported  from  so  many  parts  of  the  world.  The  money  required 
for  these  payments  is  taken  in  the  first  instance  from  the  deposits  in 
the  hands  of  bankers,  and  to  that  extent  starves  the  fimd  that 
supplies  the  loan  market. 

The  rate  of  interest,  then,  depends  essentially  and  permanently 
on  the  comparative  amount  of  real  capital  offered  and  demanded 
In'  the  way  of  loan ; but  is  subject  to  temporary  disturbances  of 
various  sorts  from  increase  and  diminution  of  the  circulating 
medium  ; which  derangements  are  somewhat  intricate,  and  some- 
times in  direct  opposition  to  first  appearances.  All  these  distinctions 
are  veiled  over  and  confounded,  by  the  unfortunate  misapplication  of 
language  which  designates  the  rate  of  interest  by  a phrase  (“  the 
value  of  money  ”)  which  properly  expresses  the  purchasing  power 
of  the  circulating  medium.  The  pubHc,  even  mercantile,  habitually 
fancies  that  ease  in  the  money  market,  that  is,  facility  of  borrowing 
at  low  interest,  is  proportional  to  the  quantity  of  money  in  circula- 
tion. Not  only,  therefore,  are  bank  notes  supposed  to  produce 
effects  as  currency,  which  they  only  produce  as  loans,  but  attention 
is  habitually  diverted  from  effects  similar  in  kind  and  much  greater 
in  degree,  when  produced  by  an  action  on  loans  which  does  not 
happen  to  be  accompanied  by  any  action  on  the  currency. 


648 


BOOK  III.  CHAPTER  XXIII.  § 4 


For  example,  in  considering  the  effect  produced  by  the  proceedings 
of  banks  in  encouraging  the  excesses  of  speculation,  an  immense 
effect  is  usually  attributed  to  their  issues  of  notes,  but  until  of  late 
hardly  any  attention  was  paid  to  the  management  of  their  deposits  ; 
though  nothing  is  more  certain  than  that  their  imprudent  extensions 
of  credit  take  place  more  frequently  by  means  of  their  deposits  than 
of  their  issues.  “ There  is  no  doubt,’’  says  Mr.  Tooke,*  “ that 
banks,  whether  private  or  joint  stock,  may,  if  imprudently  con- 
ducted, minister  to  an  undue  extension  of  credit  for  the  purpose  of 
speculations,  whether  in  commodities,  or  in  over- trading  in  exports 
or  imports,  or  in  building  or  mining  operations,  and  that  they  have 
so  ministered  not  unfrequently,  and  in  some  cases  to  an  extent 
ruinous  to  themselves,  and  without  ultimate  benefit  to  the  parties 
to  whose  views  their  resources  were  made  subservient.”  But, 
“ supposing  all  the  deposits  received  by  a banker  to  be  in  coin,  is 
he  not,  just  as  much  as  the  issuing  banker,  exposed  to  the  im- 
portunity of  customers,  whom  it  may  be  impolitic  to  refuse,  for 
loans  or  discounts,  or  to  be  tempted  by  a high  interest  ? and  may 
he  not  be  induced  to  encroach  so  much  uppn  his  deposits  as  to  leave 
him,  under  not  improbable  circumstances,  unable  to  meet  the 
demands  of  his  depositors  ? In  what  respect,  indeed,  would  the 
case  of  a banker  in  a perfectly  metallic  circulation  differ  from  that 
of  a London  banker  at  the  present  day  ? He  is  not  a creator  of 
money,  he  cannot  avail  himself  of  his  privilege  as  an  issuer  in  aid  of 
his  other  business,  and  yet  there  have  been  lamentable  instances 
of  London  bankers  issuing  money  in  excess.” 

In  the  discussions,  too,  which  have  been  for  so  many  years  carried 
on  respecting  the  operations  of  the  Bank  of  England,  and  the  effects 
produced  by  those  operations  on  the  state  of  credit,  though  for 
nearly  half  a century  there  never  has  been  a commercial  crisis  which 
the  Bank  has  not  been  strenuously  accused  either  of  producing  or  of 
aggravating,  it  has  been  almost  universally  assumed  that  the  influ- 
ence of  its  acts  was  felt  only  through  the  amount  of  its  notes  in 
circulation,  and  that  if  it  could  be  prevented  from  exercising  any 
discretion  as  to  that  one  feature  in  its  position,  it  would  no  longer 
have  any  power  liable  to  abuse.  This  at  least  is  an  error  which,  after 
the  experience  of  the  year  1847,  we  may  hope  has  been  committed 
for  the  last  time.  During  that  year  the  hands  of  the  bank  were 
absolutely  tied,  in  its  character  of  a bank  of  issue ; but  through  its 


Inquiry  into  the  Currency  Principle,  ch.  xiv. 


HATE  OF  INTEREST 


649 


operations  as  a bank  of  deposit  it  exercised  as  great  an  influence,  or 
apparent  influence,  on  the  rate  of  interest  and  the  state  of  credit,  as 
at  any  former  period ; it  was  exposed  to  as  vehement  accusations 
of  abusing  that  influence ; and  a crisis  occurred,  such  as  few 
that  preceded  it  had  equalled,  and  none  perhaps  surpassed,  in 
intensity. 

§ 5.  Before  quitting  the  general  subject  of  this  chapter,  I will 
make  the  obvious  remark,  that  the  rate  of  interest  determines  the 
value  and  price  of  all  those  saleable  articles  which  are  desired  and 
bought,  not  for  themselves,  but  for  the  income  which  they  are 
capaWe  of  yielding.  The  public  funds,  shares  in  joint-stock  com- 
panies, and  all  descriptions  of  securities,  are  at  a high  price  in  pro- 
portion as  the  rate  of  interest  is  low.  They  are  sold  at  the  price 
which  will  give  the  market  rate  of  interest  on  the  purchase  money, 
with  allowance  for  all  differences  in  the  risk  incurred,  or  in  any 
circumstance  of  convenience.  Exchequer  bills,  for  example,  usually 
sell  at  a higher  price  than  consols,  proportionally  to  the  interest 
which  they  yield  ; because,  though  the  security  is  the  same,  yet  the 
former  being  annually  paid  off  at  par  unless  renewed  by  the  holder, 
the  purchaser  (unless  obliged  to  sell  in  a moment  of  general  emer- 
gency), is  in  no  danger  of  losing  anything  by  the  resale,  except  the 
premium  he  may  have  paid. 

The  price  of  land,  mines,  and  all  other  fixed  sources  of  income, 
depends  in  hke  manner  on  the  rate  of  interest.  Land  usually  sells 
at  a higher  price,  in  proportion  to  the  income  afforded  by  it,  than 
the  public  funds,  not  only  because  it  is  thought,  even  in  this  country, 
to  be  somewhat  more  secure,  but  because  ideas  of  power  and  dignity 
are  associated  with  its  possession.  But  these  differences  are  constant, 
or  nearly  so ; and  in  the  variations  of  price,  land  follows,  cceteris 
'paribus^  the  permanent  (though  of  course  not  the  daily)  variations 
of  the  rate  of  interest.  When  interest  is  low,  land  will  naturally 
be  dear ; when  interest  is  high,  land  will  be  cheap.  The  last  long 
war  presented  a striking  exception  to  this  rule,  since  the  price  of 
land  as  well  as  the  rate  of  interest  was  then  remarkably  high.  For 
this,  however,  there  was  a special  cause.  The  continuance  of  a 
very  high  average  price  of  corn  for  many  years  had  raised  the  rent 
of  land  even  more  than  in  proportion  to  the  rise  of  interest  and  fall 
of  the  selling  price  of  fixed  incomes.  Had  it  not  been  for  this  accident, 
chiefly  dependent  on  the  seasons,  land  must  have  sustained  as 
great  a depreciation  in  value  as  the  public  funds  : which  it  probably 


650 


BOOK  III.  CHAPTER  XXIII.  § 5 


would  do,  were  a similar  war  to  break  out  hereafter ; to  the  signal 
disappointment  of  those  landlords  and  farmers  who,  generalizing 
from  the  casual  circumstances  of  a remarkable  period,  so  long 
persuaded  themselves  that  a state  of  war  was  peculiarly  advan- 
tageous, and  a state  of  peace  disadvantageous,  to  what  they  chose  to 
call  the  interests  of  agriculture. 


CHAPTER  XXIV 


OF  THE  REGULATION  OP  A CONVERTIBLE  PAPER  CURRENCY 

§ 1.  The  frequent  recurrence  during  the  last  half  century  of 
the  painful  series  of  phenomena  called  a commercial  crisis,  has 
directed  much  of  the  attention  both  of  economists  and  of  practical 
politicians  to  the  contriving  of  expedients  for  averting,  or,  at  the 
least,  mitigating  its  evils.  And  the  habit  which  grew  up  during 
the  era  of  the  Bank  restriction,  of  ascribing  all  alterations  of  high 
and  low  prices  to  the  issues  of  banks,  has  caused  inquirers  in  general 
to  fix  their  hopes  of  success  in  moderating  those  vicissitudes  upon 
schemes  for  the  regulation  of  bank  notes.  A scheme  of  this  nature, 
after  having  obtained  the  sanction  of  high  authorities,  so  far  estab- 
lished itself  in  the  public  mind,  as  to  be,  with  general  approba- 
tion, converted  into  a law,  at  the  renewal  of  the  Charter  of  the  Bank 
of  England  in  1844  : and  the  regulation  is  still  in  force,  though  with 
a great  abatement  of  its  popularity,  and  with  its  prestige  impaired 
by  three  ^ temporary  suspensions,  on  the  responsibility  of  the 
executive,  the  earliest  little  more  than  three  years  after  its  enact- 
ment. It  is  proper  that  the  merits  of  this  plan  for  the  regulation  of 
a convertible  bank  note  currency  should  be  here  considered.  Before 
touching  upon  the  practical  provisions  of  Sir  Robert  Peel’s  Act  of 
1844, 1 shall  briefly  state  the  nature,  and  examine  the  grounds,  of  the 
theory  on  which  it  is  founded. 

It  is  believed  by  many,  that  banks  of  issue  universally,  or  the 
Bank  of  England  in  particular,  have  a power  of  throwing  their  notes 
into  circulation,  and  thereby  raising  prices,  arbitrarily ; that  this 
power  is  only  limited  by  the  degree  of  moderation  with  which  they 
think  fit  to  exercise  it ; that  when  they  increase  their  issues  beyond 
the  usual  amount,  the  rise  of  prices,  thus  produced,  generates  a 
spirit  of  speculation  in  commodities,  which  carries  prices  still  higher, 

* [So  from  the  7th  ed.  (1871).  In  the  original  (1848) : “ a temporary  sus- 
pension ” &c.  ; in  the  5th  ed.  (1862)  : “ two  temporary 'suspensions.”] 


652 


BOOK  III.  CHAPTER  XXIV.  § 1 


and  ultimately  causes  a reaction  and  recoil,  amounting  in  extreme 
cases  to  a commercial  crisis  : and  that  every  such  crisis  which  has 
occurred  in  this  country  within  mercantile  memory,  has  been  either 
originally  produced  by  this  cause,  or  greatly  aggravated  by  it.  To 
this  extreme  length  the  currency  theory  has  not  been  carried  by  the 
eminent  political  economists  who  have  given  to  a more  moderate  form 
of  the  same  theory  the  sanction  of  their  names.  But  I have  not 
overstated  the  extravagance  of  the  popular  version ; which  is  a 
remarkable  instance  to  what  lengths  a favourite  theory  will  hurry, 
not  the  closet  students  whose  competency  in  such  questions  is  often 
treated  with  so  much  contempt,  but  men  of  the  world  and  of  business, 
who  pique  themselves  on  the  practical  knowledge  which  they  have 
at  least  had  ample  opportunities  of  acquiring.  Not  only  has  this 
fixed  idea  of  the  currency  as  the  prime  agent  in  the  fluctuations  of 
price  made  them  shut  their  eyes  to  the  multitude  of  circumstances 
which,  by  influencing  the  expectation  of  suppiy,  are  the  true  causes 
of  almost  all  speculations,  and  of  almost  aU  fluctuations  of  price; 
but  in  order  to  bring  about  the  chronologica.  agreement  required 
by  their  theory  between  the  variations  of  bank  issues  and  those  of 
prices,  they  have  played  such  fantastic  tricks  with  facts  and  dates 
as  would  be  thought  incredible,  if  an  eminent  practica*  authority 
had  not  taken  the  trouble  of  meeting  them,  on  the  ground  of  mere 
history,  with  an  elaborate  exposure.  I refer,  as  all  conversant  with 
the  subject  must  be  aware,  to  Mr.  Tooke’s  History  of  Prices,  The 
result  of  Mr.  Tooke’s  investigations  was  thus  stated  by  himself,  in 
his  examination  before  the  Commons’  Committee  on  the  Bank 
Charter  question  in  1832  ; and  the  evidences  of  it  stand  recorded  in 
his  book  : “ In  point  of  fact,  and  historically,  as  far  as  my  researches 
have  gone,  in  every  signal  instance  of  a rise  or  fall  of  prices,  the  rise 
or  fall  has  preceded,  and  therefore  could  not  be  the  effect  of,  an 
enlargement  or  contraction  of  the  bank  circulation.” 

The  extravagance  of  the  currency  theorists,  in  attributing  almost 
every  rise  or  fall  of  prices  to  an  enlargement  or  contraction  of  the 
issues  of  bank  notes,  has  raised  up,  by  reaction,  a theory  the  extreme 
opposite  of  the  former,  of  which,  in  scientific  discussion,  the  most 
prominent  representatives  are  Mr.  Tooke  and  Mr.  FuUarton.  This 
counter-theory  denies  to  bank  notes,  so  long  as  their  convertibility  is 
maintained,  any  power  whatever  of  raising  prices,  and  to  banks  any 
power  of  increasing  their  circulation,  except  as  a consequence  of, 
and  in  proportion  to,  an  increase  of  the  business  to  be  done.  This 
last  statement  is  supported  by  the  unanimous  assurances  of  all  the 


REGULATION  OF  CURRENCY 


663 


country  bankers  who  have  been  examined  before  successive  Parlia- 
mentary Committees  on  the  subject.  They  all  bear  testimony  that 
(in  the  words  of  Mr.  Fullarton  *)  “ the  amount  of  their  issues  is 
exclusively  regulated  by  the  extent  of  local  dealings  and  expenditure 
in  their  respective  districts,  fluctuating  with  the  fluctuations  of 
production  and  price,  and  that  they  neither  can  increase  their  issues 
beyond  the  limits  which  the  range  of  such  dealings  and  expenditure 
prescribes,  without  the  certainty  of  having  their  notes  immediately 
returned  to  them,  nor  diminish  them,  but  at  an  almost  equal  cer- 
tainty of  the  vacancy  being  filled  up  from  some  other  source.” 
From  these  premises  it  is  argued  by  Mr.  Tooke  and  Mr.  Fullarton 
that  bank  issues,  since  they  cannot  be  increased  in  amount  unless 
there  be  an  increased  demand,  cannot  possibly  raise  prices  ; cannot 
encourage  speculation,  nor  occasion  a commercial  crisis ; and  that 
the  attempt  to  guard  against  that  evil  by  an  artificial  manage- 
ment of  the  issue  of  notes  is  of  no  efiect  for  the  intended 
purpose,  and  liable  to  produce  other  consequences  extremely 
calamitous. 

§ 2.  As  much  of  this  doctrine  as  rests  upon  testimony,  and  not 
upon  inference,  appears  to  me  incontrovertible.  I give  complete 
credence  to  the  assertion  of  the  country  bankers  very  clearly  and 
correctly  condensed  into  a small  compass  in  the  sentence  just  quoted 
from  Mr.  Fullarton.  I am  convinced  that  they  cannot  possibly 
increase  their  issue  of  notes  in  any  other  circumstances  than  those 
which  are  there  stated.  I believe,  also,  that  the  theory,  grounded 
by  Mr.  Fullarton  upon  this  fact,  contains  a large  portion  of  truth, 
and  is  far  nearer  to  being  the  expression  of  the  whole  truth  than 
any  form  whatever  of  the  currency  theory. 

There  are  two  states  of  the  markets  : one  which  may  be  termed 
the  quiescent  state,  the  other  the  expectant,  or  speculative,  state. 
The  first  is  that  in  which  there  is  nothing  tending  to  engender  in  any 
considerable  portion  of  the  mercantile  public  a desire  to  extend  their 
operations.  The  producers  produce  and  the  dealers  purchase  only 
their  usual  stocks,  having  no  expectation  of  a more  than  usually  rapid 
vent  for  them.  Each  person  transacts  his  ordinary  amount  of 
business,  and  no  more  ; or  increases  it  only  in  correspondence  with 
the  increase  of  his  capital  or  connexion,  or  with  the  gradual  growth 
of  the  demand  for  his  commodity,  occasioned  by  the  pubh’c  prosperity. 


Fegulation  of  Currencies  p.  85. 


654 


BOOK  III.  CHAPTER  XXIV.  § 2 


Not  meditating  any  unusual  extension  of  their  own  operations, 
producers  and  dealers  do  not  need  more  than  the  usual  accom- 
inodation  from  bankers  and  other  money  lenders ; and  as  it  is  only 
by  extending  their  loans  that  bankers  increase  their  issues,  non© 
but  a momentary  augmentation  of  issues  is  in  these  circumstances 
possible.  If  at  a certain  time  of  the  year  a portion  of  the  public 
have  larger  payments  to  make  than  at  other  times,  or  if  an  indi- 
vidual, under  some  peculiar  exigency,  requires  an  extra  advance,  they 
may  apply  for  more  bank  notes,  and  obtain  them ; but  the  notes 
will  no  more  remain  in  circulation  than  thc'-extra  quantity  of  Bank 
of  England  notes  which  are  issued  once  in  every  three  months  in  pay- 
ment of  the  dividends.  The  person  to  whom,  after  being  borrowed, 
the  notes  are  paid  away,  has  no  extra  payments  to  make,  and  no 
peculiar  exigency,  and  he  keeps  them  by  him  unused,  or  sends  them 
into  deposit,  or  repays  with  them  a previous  advance  made  to  him  by 
some  banker  : in  any  case  he  does  not  buy  commodities  with  them, 
since  by  the  supposition  there  is  nothing  to  induce  him  to  lay  in  a 
larger  stock  of  commodities  than  before.  ^Even  if  we  suppose,  as 
we  may  do,  that  bankers  create  an  artificial  increase  of  the  demand 
for  loans  by  offering  them  below  the  market  rate  of  interest,  the  notes 
they  issue  will  not  remain  in  circulation ; for  when  the  borrower, 
having  completed  the  transaction  for  which  he  availed  himself  of 
them,  has  paid  them  away,  the  creditor  or  dealer  who  receives  them, 
having  no  demand  for  the  immediate  use  of  an  extra  quantity  of 
notes,  sends  them  into  deposit.  In  this  case,  therefore,  there  can  ba 
no  addition,  at  the  discretion  of  bankers,  to  the  general  circulating 
medium  : any  increase  of  their  issues  either  comes  back  to  them,  or 
remains  idle  in  the  hands  of  the  pubhc,  and  no  rise  takes  place  in 
prices. 

But  there  is  another  state  of  the  markets,  strikingly  contrasted 
with  the  preceding,  and  to  this  state  it  is  not  so  obvious  that  the 
theory  of  Mr.  Tooke  and  Mr.  Fullarton  is  applicable  ; namely,  when 
an  impression  prevails,  whether  well  founded  or  groundless,  that  the 
supply  of  one  or  more  great  articles  of  commerce  is  likely  to  fall 
short  of  the  ordinary  consumption.  In  such  circumstances  all 
persons  connected  with  those  commodities  desire  to  extend  their 
operations.  The  producers  or  importers  desire  to  produce  or  import 
a larger  quantity,  speculators  desire  to  lay  in  a stock  in  order  to  profit 
by  the  expected  rise  of  price,  and  holders  of  the  commodity  desire 


* [Sentence  inserted  in  5th  ed.  (1862).] 


REGULATION  OF  CURRENCY 


655 


additional  advances  to  enable  them  to  continue  holding.  All  these 
classes  are  disposed  to  make  a more  than  ordinary  use  of  their  credit, 
and  to  this  desire  it  is  not  denied  that  bankers  very  often  unduly 
administer.  Effects  of  the  same  kind  may  be  produced  by  any- 
thing which,  exciting  more  than  usual  hopes  of  profit,  gives  increased 
briskness  to  business : for  example,  a sudden  foreign  demand  for 
commodities  on  a large  scale,  or  the  expectation  of  it ; such  as 
occurred  on  the  opening  of  Spanish  America  to  English  trade,  and 
has  occurred  on  various  occasions  in  the  trade  with  the  United  States. 
Such  occurrences  produce  a tendency  to  a rise  of  price  in  exportable 
articles,  and  generate  speculations,  sometimes  of  a reasonable,  and 
(as  long  as  a large  proportion  of  men  in  business  prefer  excitement 
to  safety)  frec[uently  of  an  irrational  or  immoderate  character.  In 
such  cases  there  is  a desire  in  the  mercantile  classes,  or  in  some 
portion  of  them,  to  employ  their  credit,  in  a more  than  usual 
degree,  as  a power  of  purchasing.  This  is  a state  of  business  which, 
when  pushed  to  an  extreme  length,  brings  on  the  revulsion  called  a 
commercial  crisis ; and  it  is  a known  fact  that  such  periods  of 
speculation  hardly  ever  pass  off  without  having  been  attended, 
during  some  part  of  their  progress,  by  a considerable  increase  of 
bank  notes. 

To  this,  however,  it  is  replied  by  Mr.  Tooke  and  Mr.  Fullarton, 
that  the  increase  of  the  circulation  always  follows  instead  of  pre- 
ceding the  rise  of  prices,  and  is  not  its  cause,  but  its  effect.  That 
in  the  first  place,  the  speculative  purchases  by  which  prices  are 
raised,  are  not  effected  by  bank  notes  but  by  cheques,  or  still  more 
commonly  on  a simple  book  credit : and  secondly,  even  if  they  were 
made  with  bank  notes  borrowed  for  that  express  purpose  from 
bankers,  the  notes,  after  being  used  for  that  purpose,  would,  if  not 
wanted  for  current  transactions,  be  returned  into  deposit  by  the 
persons  receiving  them.  In  this  I fully  concur,  and  I regard  it 
' as  proved,  both  scientifically  and  historically,  that  during  the 
ascending  period  of  speculation,  and  as  long  as  it  is  confined  to 
transactions  between  dealers,  the  issues  of  bank  notes  are  seldom 
materially  increased,  nor  contribute  anything  to  the  speculative 
rise  of  prices.  It  seems  to  me,  however,  that  this  can  no  longer  be 
affirmed  when  speculation  has  proceeded  so  far  as  to  reach  the  pro- 
ducers. Speculative  orders  given  by  merchants  to  manufacturers 
induce  them  to  extend  their  operations,  and  to  become  applicants  to 
bankers  for  increased  advances,  which,  if  made  in  notes,  are  not  paid 
away  to  persons  who  return  them  into  deposit,  but  are  partially 


656 


BOOK  III.  CHAPTER  XXIV.  § 3 


expended  in  paying  wages,  and  pass  into  the  various  channels  ol 
retail  trade,  where  they  become  directly  effective  in  producing  a 
further  rise  of  prices.  I cannot  but  think  that  this  employment  of 
bank  notes  must  have  been  powerfully  operative  on  prices  at  the 
time  when  notes  of  one  and  two  pounds’  value  were  permitted  by 
law.  Admitting,  however,  that  the  prohibition  of  notes  below  five 
pounds  has  now  rendered  this  pait  of  their  operation  comparatively 
insignificant  by  greatly  limiting  their  applicability  to  the  payment 
of  wages,  there  is  another  form  of  their  instrumentality  which  comes 
into  play  in  the  latter  stages  of  speculation,  and  which  forms  the 
principal  argument  of  the  more  moderate  supporters  of  the  currency 
theory.  Though  advances  by  bankers  are  seldom  demanded  for 
the  purpose  of  buying  on  speculation,  they  are  largely  demanded  by 
unsuccessful  speculators  for  the  purpose  of  holding  on;  and  the 
competition  of  these  speculators  for  a share  of  the  loanable  capital 
makes  even  those  who  have  not  speculated  more  dependent  than 
before  on  bankers  for  the  advances  they  require.  Between  the 
ascending  period  of  speculation  and  the  revulsion,  there  is  an  interval 
extending  to  weeks  and  sometimes  months,  of  struggling  against  a 
fall.  The  tide  having  shown  signs  of  turning,  the  speculative  holders 
are  unwilling  to  sell  in  a falling  market,  and  in  the  meantime  they 
require  funds  to  enable  them  to  fulfil  even  their  ordinary  engage- 
ments. It  is  this  stage  that  is  ordinarily  marked  by  a considerable 
increase  in  the  amount  of  the  bank-note  circulation.  That  such  an 
increase  does  usually  take  place  is  denied  by  no  one.  And  I think 
it  must  be  admitted  that  this  increase  tends  to  prolong  the  duration 
of  the  speculations ; that  it  enables  the  speculative  prices  to  be 
kept  up  for  some  time  after  they  would  otherwise  have  collapsed ; 
and  therefore  prolongs  and  increases  the  drain  of  the  precious  metals 
for  exportation,  which  is  the  leading  feature  of  this  stage  in  the 
progress  of  a commercial  crisis  : the  continuance  of  which  drain  at 
last  endangering  the  power  of  the  banks  to  fulfil  their  engagement 
of  paying  their  notes  on  demand,  they  are  compelled  to  contract 
their  credit  more  suddenly  and  severely  than  would  have  been 
necessary  if  they  had  been  prevented  from  propping  up  speculation 
by  increased  advances,  after  the  time  when  the  recoil  had  become 
inevitable. 

§ 3.  To  prevent  this  retardation  of  the  recoil,  and  ultimate 
aggravation  of  its  severity,  is  the  object  of  the  scheme  for  regulating 
the  currency,  of  which  Lord  Overstone,  Mr.  Norman,  and  Colonel 


REGULATION  OF  CURRENCY 


667 


Torrens,  were  the  first  promulgators,  and  which  has,  in  a shghtly 
modified  form,  been  enacted  into  law.* 

According  to  the  scheme  in  its  original  purity,  the  issue  of 
promissory  notes  for  circulation  was  to  be  confined  to  one  body.  In 
the  form  adopted  by  Parliament,  all  existing  issuers  were  permitted 
to  retain  this  privilege,  but  none  were  to  be  hereafter  admitted  to  it, 
even  in  the  place  of  those  who  might  discontinue  their  issues  : and, 
for  all  except  the  Bank  of  England,  a maximum  of  issues  was  pre- 
scribed, on  a scale  intentionally  low.  To  the  Bank  of  England  no 
maximum  was  fixed  for  the  aggregate  amount  of  its  notes,  but  only 
for  the  portion  issued  on  securities,  or,  in  other  words,  on  loan. 
These  were  never  to  exceed  a certain  limit,  fixed  in  the  first  instance 
at  fourteen  millions.*)*  All  issues  beyond  that  amount  must  be  in 
exchange  for  bullion ; of  which  the  Bank  is  bound  to  purchase,  at  a 
trifle  below  the  Mint  valuation,  any  quantity  which  is  ofiered  to  it, 
giving  its  notes  in  exchange.  In  regard,  therefore,  to  any  issue  of 
notes  beyond  the  limit  of  fourteen  millions,  the  Bank  is  purely 
passive,  having  no  function  but  the  compulsory  one  of  giving 
its  notes  for  gold  at  SI.  17s.  9d.,  and  gold  for  its  notes  at 

* [1857]  I think  myself  justified  in  affirming  that  the  mitigation  of  com- 
mercial revulsions  is  the  real,  and  only  serious,  purpose  of  the  Act  of  1844.  I 
am  quite  aware  that  its  supporters  insist  (especially  since  1847)  on  its  supreme 
efficacy  in  “ maintaining  the  convertibility  of  the  Bank  note.”  But  I must  be 
excused  for  not  attaching  any  serious  importance  to  this  one  among  its  alleged 
merits.  The  convertibility  of  the  Bank  note  was  maintained,  and  would  have 
continued  to  be  maintained,  at  whatever  cost,  under  the  old  system.  As  was 
well  said  by  Lord  Overstone  in  his  evidence,  the  Bank  can  always,  by  a 
sufficiently  violent  action  on  credit,  save  itself  at  the  expense  of  the  mercantile 
public.  That  the  Act  of  1844  mitigates  the  violence  of  that  process,  is  a 
sufficient  claim  to  prefer  in  its  behalf.  Besides,  if  we  suppose  such  a degree 
of  mismanagement  on  the  part  of  the  Bank,  as,  were  it  not  for  the  Act,  would 
endanger  the  continuance  or  convertibility,  the  same  (or  a less)  degree  of  mis- 
management, practised  under  the  Act,  would  suffice  to  produce  a suspension  of 
payments  by  the  Banking  Department ; an  event  which  the  compulsory 
separation  of  the  two  departments  brings  much  nearer  to  possibility  than  it  was 
before,  and  which,  involving  as  it  would  the  probable  stoppage  of  every  private 
banking  establishment  in  London,  and  perhaps  also  the  non-payment  of  the 
dividends  to  the  national  creditor,  would  be  a far  greater  immediate  calamity 
than  a brief  interruption  of  the  convertibility  of  the  note ; insomuch  that,  to 
enable  the  Bank  to  resume  payment  of  its  deposits,  no  Government  would 
hesitate  a moment  to  suspend  payment  of  the  notes,  if  suspension  of  the  Act 
of  1844  proved  insufficient. 

f A conditional  increase  of  this  maximum  is  permitted,  but  only  when  by 
arrangement  with  any  country  bank  the  issues  of  that  bank  are  discontinued, 
and  Bank  of  England  notes  substituted  ; and  even  then  the  increase  is  limited 
to  two-thirds  of  the  amount  of  the  country  notes  to  be  thereby  superseded. 
Under  this  provision  the  amount  of  notes  which  the  Bank  of  England  is  now 
[1871]  at  liberty  to  issue  against  securities,  is  about  fifteen  millions. 


66S  BOOK  III.  CHAPTER  XXIV.  § 3 

3/.  17s.  whenever  and  by  whomsoever  it  is  called  upon 

to  do  so. 

The  object  for  which  this  mechanism  is  intended  is  that  the 
bank-note  currency  may  vary  in  its  amount  at  the  exact  times,  and 
in  the  exact  degree,  in  which  a purely  metallic  currency  would  vary. 
And  the  precious  metals  being  the  commodity  that  has  hitherto 
approached  nearest  to  that  invariability,  in  all  the  circumstances 
influencing  value,  which  fits  a commodity  for  being  adopted  as  a 
medium  of  exchange,  it  seems  to  be  thought  that  the  excellence  of 
the  Act  of  1844  is  fully  made  out,  if  under  its  operation  the  issues 
conform  in  all  their  variations  of  quantity,  and  therefore,  as  is 
inferred,  of  value,  to  the  variations  which  would  take  place  in  a 
currency  wholly  metallic. 

1 Now,  all  reasonable  opponents  of  the  Act,  in  common  with  its 
supporters,  acknowledge  as  an  essential  requisite  of  any  substitute 
for  the  precious  metals,  that  it  should  conform  exactly  in  its  per- 
manent value  to  a metallic  standard.  And  they  say,  that  so  long 
as  it  is  convertible  into  specie  on  demand,  it  does  and  must  so  con- 
form. But  when  the  value  of  a metallic  or  of  any  other  currency  is 
spoken  of,  there  are  two  points  to  be  considered  ; the  permanent  or 
average  value,  and  the  fluctuations.  It  is  to  the  permanent  value  of 
a metallic  currency  that  the  value  of  a paper  currency  ought  to 
conform.  But  there  is  no  obvious  reason  why  it  should  be  required 
to  conform  to  the  fluctuations  too.  The  only  object  of  its 
conforming  at  all  is  steadiness  of  value  ; and  with  respect  to  fluctu- 
ations the  sole  thing  desirable  is  that  they  should  be  the  smallest 
possible.  Now  the  fluctuations  in  the  value  of  the  currency  are 
determined,  not  by  its  quantity,  whether  it  consist  of  gold  or  of 
paper,  but  by  the  expansions  and  contractions  of  credit.  To  dis- 
cover, therefore,  what  currency  will  conform  the  most  nearly  to  the 
permanent  value  of  the  precious  metals,  we  must  find  under  what 
currency  the  variations  in  credit  are  least  frequent  and  least  extreme. 
Now,  whether  this  object  is  best  attained  by  a metallic  currency 
(and  therefore  by  a paper  currency  exactly  conforming  in  quantity 
to  it)  is  precisely  the  question  to  be  decided.  If  it  should  prove 
that  a paper  currency  which  follows  all  the  fluctuations  in  quantity 
of  a metallic,  leads  to  more  violent  revulsions  of  credit  than  one 
which  is  not  held  to  this  rigid  conformity,  it  will  follow  that  the 
currency  which  agrees  most  exactly  in  quantity  with  a metallic 
currency  is  not  that  which  adheres  closest  to  its  value ; that  is 
^ [Paragraph  inserted  in  4th  ed.  (1857).] 


KEGULATION  OF  CURRENCY 


669 


to  say,  its  permanent  value,  with  which  alone  agreement  is 
desirable. 

Whether  this  is  really  the  case  or  not  we  will  now  inquire.  And 
first,  let  us  consider  whether  the  Act  effects  the  practical  object 
chiefly  relied  on  in  its  defence  by  the  more  sober  of  its  advocates, 
that  of  arresting  speculative  extensions  of  credit  at  an  earlier  period, 
with  a less  drain  of  gold,  and  consequently  by  a milder  and  more 
gradual  process.  I think  it  must  be  admitted  that  to  a certain  degree 
it  is  successful  in  this  object. 

I am  aware  of  what  may  be  urged,  and  reasonably  urged,  in 
opposition  to  this  opinion.  It  may  be  said,  that  when  the  time 
arrives  at  which  the  banks  are  pressed  for  increased  advances  to 
enable  speculators  to  fulfil  their  engagements,  a limitation  of  the 
issue  of  notes  will  not  prevent  the  banks,  if  otherwise  willing,  from 
making  these  advances ; that  they  have  still  their  deposits  as  a 
source  from  which  loans  may  be  made  beyond  the  point  which  is 
consistent  with  prudence  as  bankers  ; and  that  even  if  they  refused 
to  do  so,  the  only  effect  would  be  that  the  deposits  themselves  would 
be  drawn  out  to  supply  the  wants  of  the  depositors ; which  would 
be  just  as  much  an  addition  to  the  bank  notes  and  coin  in  the  hands 
of  the  public,  as  if  the  notes  themselves  were  increased.  This  is 
true,  and  is  a sufficient  answer  to  those  who  think  that  the  advances 
of  banks  to  prop  up  failing  speculations  are  objectionable  chiefly  as 
an  increase  of  the  currency.  But  the  mode  in  which  they  are  really 
objectionable,  is  as  an  extension  of  credit.  ^ If,  instead  of  increasing 
their  discounts,  the  banks  allow  their  deposits  to  be  drawn  out,  there 
is  the  same  increase  of  currency  (for  a short  time  at  least),  but  there 
is  not  an  increase  of  loans,  at  the  time  when  there  ought  to  be  a 
diminution.  If  they  do  increase  their  discounts,  not  by  means  of 
notes,  but  at  the  expense  of  the  deposits  alone,  their  deposits 
(properly  so  called)  are  definite  and  exhaustible,  while  notes  may  be 
increased  to  any  amount,  or,  after  being  returned,  may  be  reissued 
without  limit.  It  is  true  that  a bank,  if  willing  to  add  indefinitely 
to  its  liabilities,  has  the  power  of  making  its  nominal  deposits  as 

* [The  present  text  of  the  remainder  of  this  paragraph  dates  only  from 
the  6th  ed.  (1865).  The  original  simply  ran ; “ If,  instead  of  lending  their 
notes,  the  banks  allow  the  demand  of  their  customers  for  disposable  capital 
to  act  on  the  deposits,  there  is  the  same  increase  of  currency,  (for  a short  time 
at  least,)  but  there  is  not  an  increase  of  loans.  The  rate  of  interest,  therefore, 
is  not  prevented  from  rising  at  the  first  moment  when  the  difficulties  consequent 
on  excess  of  speculation  begin  to  be  felt.  Speculative  holders,”  &c.  No  change 
was  made  in  this  before  1865,  except  the  insertion  of  the  words  “ On  the 
contrary  . . . interest  ” before  the  last  sentence  in  the  4th  ed.  (1857).] 


660 


BOOK  III.  CHAPTER  XXIV.  § 3 


unlimited  a fund  as  its  issues  could  be ; it  has  only  to  make  its 
advances  in  a book  credit,  which  is  creating  deposits  out  of  its 
own  liabilities,  the  money  for  which  it  has  made  itself  responsible 
becoming  a deposit  in  its  hands,  to  be  drawn  against  by  cheques  ; 
and  the  cheques  when  drawn  may  be  liquidated  (either  at  the  same 
bank  or  at  the  clearing  house)  without  the  aid  of  notes,  by  a mere 
transfer  of  credit  from  one  account  to  another.  I apprehend  it  is 
chiefly  in  this  way  that  undue  extensions  of  credit,  in  periods  of 
speculation,  are  commonly  made.  But  the  banks  are  not  likely  to 
persist  in  this  course  when  the  tide  begins  to  turn.  It  is  not  when 
their  deposits  have  already  begun  to  flow  out,  that  they  are  likely 
to  create  deposit  accounts  which  represent,  instead  of  funds  placed 
in  their  hands,  fresh  liabilities  of  their  own.  But  experience-^moves 
that  extension  of  credit,  when  in  the  form  of  notes,  goes  on  long  after 
the  recoil  from  over-speculation  has  commenced.  When  this  mode 
of  resisting  the  revulsion  is  made  impossible,  and  deposits  and  book 
credits  are  left  as  the  only  sources  from  which  undue  advances  can 
be  made,  the  rate  of  interest  is  not  so  often,  or  so  long,  prevented 
from  rising,  after  the  difficulties  consequent  on  excess  of  speculation 
begin  to  be  felt.  On  the  contrary,  the  necessity  which  the  banks  feej 
of  diminishing  their  advances  to  maintain  their  solvency,  when  they 
find  their  deposits  flowing  out,  and  cannot  supply  the  vacant  place 
by  their  own  notes,  accelerates  the  rise  of  the  rate  of  interest.  Specula^ 
tive  holders  are  therefore  obliged  to  submit  earlier  to  that  loss  by 
resale,  which  could  not  have  been  prevented  from  coming  on  them  at 
last : the  recoil  of  prices  and  collapse  of  general  credit  take  place 
sooner. 

To  appreciate  the  effects  which  this  acceleration  of  the  crisis 
has  in  mitigating  its  intensity,  let  us  advert  more  particularly  to  the 
nature  and  effects  of  that  leading  feature  in  the  period  just  pre- 
ceding the  collapse,  the  drain  of  gold.  A rise  of  prices  produced  by 
a speculative  extension  of  credit,  even  when  bank  notes  have  not 
been  the  instrument,  is  not  the  less  effectual  (if  it  lasts  long  enough) 
in  turning  the  exchanges : and  when  the  exchanges  have  turned 
from  this  cause,  they  can  only  be  turned  back,  and  the  drain  of  gold 
stopped,  either  by  a fall  of  prices  or  by  a rise  of  the  rate  of  interest. 
A fall  of  prices  will  stop  it  by  removing  the  cause  which  produced  it, 
and  by  rendering  goods  a more  advantageous  remittance  than  gold, 
even  for  paying  debts  already  due.  A rise  of  the  rate  of  interest, 
and  consequent  fall  of  the  prices  of  securities,  will  accomplish  the 
purpose  still  more  rapidly,  by  inducing  foreigners,  instead  of  taking 


REGULATION  OF  CURRENCY 


661 


away  the  gold  which  is  due  to  them,  to  leave  it  for  investment  within 
the  country,  and  even  send  gold  into  the  country  to  take  advantage 
of  the  increased  rate  of  interest.  Of  this  last  mode  of  stopping  a 
drain  of  gold,  the  year  1847  afforded  signal  examples.  But  until  one 
of  these  two  things  takes  place — until  either  prices  fall,  or  the  rate 
of  interest  rises — nothing  can  possibly  arrest,  or  even  moderate,  the 
efflux  of  gold.  Now,  neither  will  prices  fall  nor  interest  rise,  so  long 
as  the  unduly  expanded  credit  is  upheld  by  the  continued  advances  of 
bankers.  It  is  well  known  that  when  a drain  of  gold  has  set  in,  even 
if  bank  notes  have  not  increased  in  quantity,  it  is  upon  them  that 
the  contraction  first  falls,  the  gold  wanted  for  exportation  being 
always  obtained  from  the  Bank  of  England  in  exchange  for  its  notes. 
But  under  the  system  which  preceded  1844,  the  Bank  of  England, 
being  subjected,  in  common  with  other  banks,  to  the  importunities 
for  fresh  advances  which  are  characteristic  of  such  a time,  could,  and 
often  did,  immediately  re-issue  the  notes  which  had  been  returned 
to  it  in  exchange  for  bullion.  It  is  a great  error,  certainly,  to  suppose 
that  the  mischief  of  this  re-issue  chiefly  consisted  in  preventing  a 
contraction  of  the  currency.  It  was,  however,  quite  as  mischievous 
as  it  has  ever  been  supposed  to  be.  As  long  as  it  lasted,  the  efflux 
of  gold  could  not  cease,  since  neither  would  prices  fall  nor  interest 
rise  while  these  advances  continued.  Prices,  having  risen  without 
any  increase  of  bank  notes,  could  well  have  fallen  without  a diminu- 
tion of  them ; but  having  risen  in  consequence  of  an  extension  of 
credit,  they  could  not  fall  without  a contraction  of  it.  As  long, 
therefore,  as  the  Bank  of  England  and  the  other  banks  persevered 
in  this  course,  so  long  gold  continued  to  flow  out,  until  so  little  was 
left  that  the  Bank  of  England,  being  in  danger  of  suspension  of 
payments,  was  compelled  at  last  to  contract  its  discounts  so  greatly 
and  suddenly  as  to  produce  a much  more  extreme  variation  in  the 
rate  of  interest,  inflict  much  greater  loss  and  distress  on  individuals, 
and  destroy  a much  greater  amount  of  the  ordinary  credit  of  the 
country,  than  any  real  necessity  required. 

I acknowledge  (and  the  experience  of  1847  has  proved  to  those 
who  ovenooked  it  before)  that  the  mischief  now  described  may  be 
wrought,  and  in  large  measure,  by  the  Bank  of  England,  through  its 
deposits  alone.  It  may  continue  or  even  increase  its  discounts  and 
advances,  when  it  ought  to  contract  them  ; with  the  ultimate  effect 
of  making  the  contraction  much  more  severe  and  sudden  than 
necessary.  I cannot  but  think,  however,  that  banks  which  commit 
this  error  with  their  deposits,  would  commit  it  still  more  if  they  were 


662 


BOOK  III.  CHAPTER  XXIV.  § 4 


at-Mberty  to  make  increased  loans  'with  their  issues  as  ,Y/-elLas_theii 
deposits.  I am  compelled  to  think  that  the  being  restricted  from 
increasing  their  issues,  is  a real  impediment  to  their  making  those 
advances  which  arrest  the  tide  at  its  turn,  and  make  it  rush  like  a 
torrent  afterwards  ^ : and  when  the  Act  is  blamed  for  interposing 
obstacles  at  a time  when  not  obstacles  but  facilities  are  needed,  it 
must  in  justice  receive  credit  for  interposing  them  when  they  are 
an  acknowledged  benefit.  In  this  particular,  therefore,  I think  it 
cannot  be  denied,  that  the  new  system  is  a real  improvement  upon 
the  old. 

§ 4.  But  however  this  may  be,  it  seems  to  me  certain  that 
these  advantages,  whatever  value  may  be  put  on  them,  are  pur- 
chased by  still  greater  disadvantages. 

In  the  first  place,  aJarge  extension  of  credit  by  bankers^  though 
most  hurtful  when^  credit  being  already  in  an  inflated  state,  it  can 
only  serve  to  retard  and  aggravate  the  collapse,  is  most  salutary 
when  the  collapse  has  come,  and  when  credit  instead  of  being  in 
excess  is  in  distressing  deficiency ,^and  increased  advances  by  bankers, 
instead  of  being  an  addition  to  the  ordinary  amount  of  floating 
credit,  serve  to  replace  a mass  of  other  credit  which  has  been  suddenly 
destroyed.  Antecedently  to  1844,  if  the  Bank  of  England  occa- 
sionally aggravated  the  severity  of  a commercial  revulsion  by 
rendering  the  collapse  of  credit  more  tardy  and  hence  more  violent 
than  necessary,  itJn  return  rendered  invaluable  semcea^duringdihe 
revulsion  itself,  by  coming  forward  with  advances  to  support  solvent 
firms,  at  a time  when  all  other  paper  and  almost  aU  mercantile  credit 

1 [From  the  6th  ed.  (1865)  disappeared  the  following  lines  and  the  accom- 
panying footnote,  which  had  remained  since  1848  : 

“ If  the  restrictions  of  the  Act  of  1844  were  no  obstacle  to  the  advances  of 
banks  in  the  interval  preceding  the  crisis,  why  were  they  found  an  insuperable 
obstacle  during  the  crisis  ? an  obstacle  which  nothing  less  could  overcome 
than  a suspension  of  the  law,  through  the  assumption  by  the  Government  of  a 
temporary  dictatorship  ? Evidently  they  were  an  obstacle.” 

Footnote, — “ It  would  not  be  to  the  purpose  to  say,  by  way  of  objection,  that 
the  obstacle  may  be  evaded  by  granting  the  increased  advance  in  book  credits, 
to  be  drawn  against  by  cheques,  without  the  aid  of  bank  notes.  This  is  indeed 
possible,  as  Mr.  Fullarton  has  remarked,  and  as  I have  myself  said  in  a former 
chapter.  But  this  substitute  for  bank  note  currency  certainly  has  not  yet  been 
organised ; and  the  law  having  clearly  manifested  its  intention  that,  in  the  case 
supposed,  increased  credits  should  not  be  granted,  it  is  yet  a problem  whether 
the  law  would  not  reach  what  might  be  regarded  as  an  evasion  of  its  prohibi- 
tions, or  whether  deference  to  the  law  would  not  produce  (as  it  has  hitherto 
done),  on  the  part  of  banking  establishments,  conformity  to  its  spirit  and 
purpose,  as  well  as  to  its  mere  letter.”] 


REGULATION  OF  CURRENCY 


663 


had  become  comparatively  valueless.  This  service  was  eminently 
conspicuous  in  the  crisis  of  1825-6,  the  severest  probably  ever 
experienced ; during  which  the  Bank  increased  what  is  called  its 
circulation  by  many  milhons,  in  advances  to  those  mercantile  firms 
of  whose  ultimate  solvency  it  felt  no  doubt ; advances  which  if  it 
had  been  obhged  to  withhold,  the  severity  of  the  crisis  would  have 
been  still  greater  than  it  was.  If  the  Bank,  it  is  justly  remarked  by 
Mr.  Fullarton,*  complies  with  such  apphcations,  “ it  must  comply 
with  them  by  an  issue  of  notes,  for  notes  constitute  the  only  instru- 
mentahty  through  which  the  Bank  is  in  the  practice  of  lending  its 
credit.  But  those  notes  are  not  intended  to  circulate,  nor  do  they 
circulate.  There  is  no  more  demand  for  circulation  than  there  was 
before.  On  the  contrary,  the  rapid  decline  of  prices  which  the  case 
in  supposition  presumes,  would  necessarily  contract  the  demand  for 
circulation.  The  notes  would  either  be  returned  to  the  Bank  of 
England  as  fast  as  they  were  issued,  in  the  shape  of  deposits,  or 
would  be  locked  up  in  the  drawers  of  the  private  London  bankers, 
or  distributed  by  them  to  their  correspondents  in  the  country,  or 
intercepted  by  other  capitahsts,  who,  during  the  fervour  of  the 
previous  excitement,  had  contracted  liabilities  which  they  might 
be  imperfectly  prepared  on  the  sudden  to  encounter.  In  such 
emergencies,  every  man  connected  with  business,  who  has  been 
trading  on  other  means  than  his  own,  is  placed  on  the  defensive,  and 
his  whole  object  is  to  make  himself  as  strong  as  possible,  an  object 
which  cannot  be  more  effectually  answered  than  by  keeping  by  him 
as  large  a reserve  as  possible  in  paper  which  the  law  has  made  a legal 
tender.  The  notes  themselves  never  find  their  way  into  the  pro- 
duce market ; and  if  they  at  all  contribute  to  retard  ” (or,  as  I 
should  rather  say,  to  moderate)  “ the  fall  of  prices,  it  is  not  by 
promoting  in  the  shghtest  degree  the  effective  demand  for  com- 
modities, not  by  enabling  consumers  to  buy  more  largely  for  con- 
sumption, and  so  giving  briskness  to  commerce,  but  by  a process 
exactly  the  reverse,  by  enabhng  the  holders  of  commodities  to  hold 
on,  by  obstructing  traffic  and  repressing  consumption.” 

The  opportune  relief  thus  afforded  to  credit,  during  the  excessive 
contraction  which  succeeds  to  an  undue  expansion,  is  consistent  with 
the  principle  of  the  new  system ; for  an  extraordinary  contraction 
of  credit,  and  fall  of  prices,  inevitably  draw  gold  into  the  country, 
and  the  principle  of  the  system  is  that  the  bank-note  currency  shall 
be  permitted,  and  even  compelled,  to  enlarge  itself,  in  all  cases  in 
* P.  106. 


664 


BOOK  III.  CHAPTER  XXIV.  § 4 


which  a metallic  currency  would  do  the  same.  But,  what  the 
principle  of  the  law  would  encourage,  its  provisions  in  this  instance 
preclude,  by  not  suffering  the  increased  issues  to  take  place  until 
the  gold  has  actually  arrived : which  is  never  until  the  worst  part 
of  the  crisis  has  passed,  and  almost  all  the  losses  and  failures  attend- 
ant on  it  are  consummated.  The  machinery  of  the  system  withholds, 
until  for  many  purposes  it  comes  too  late,  the  very  medicine  which 
the  theory  of  the  system  prescribes  as  the  appropriate  remedy.* 

This  function  of  banks  in  filling  up  the  gap  made  in  mercantile 
credit  by  the  consequences  of  undue  speculation  and  its  revulsion,  is 
so  entirely  indispensable,  that  if  the  Act  of  1844  continues  unrepealed, 
there  can  be  no  difficulty  in  foreseeing  that  its  provisions  must  be 
suspended,  as  they  were  in  1847,  in  every  period  of  great  commercial 
difficulty,  as  soon  as  the  crisis  has  really  and  completely  set  in.'f 
Were  this  all,  there  would  be  no  absolute  inconsistency  in  maintain- 
mg  the  restriction  as  a means  of  preventing  a crisis,  and^elaxing  it 
for  the  purpose  of  relieving  one.  But  there  is  another  objection, 
of  a still  more  radical  and  comprehensive  character,  to  the  new 
system. 

Professing,  in  theory,  to  require  that  a paper  currency  shall  vary 
in  its  amount  in  exact  conformity  to  the  variations  of  a metallic 
currency,  it  provides,  in  fact,  that  in  every  case  of  an  efflux  of  gold, 
a corresponding  diminution  shall  take  place  in  the  quantity  of  bank 
notes  ; in  other  words,  that  every  exportation  of  the  precious  metals 
shall  be  virtually  drawn  from  the  circulation ; it  being  assumed 
that  this  would  be  the  case  if  the  currency  were  wholly  metallic. 
This  theory,  and  these  practical  arrangements,  are  adapted  to  the 
case  in  which  the  drain  of  gold  originates  in  a rise  of  prices  produced 
by  an  undue  expansion  of  currency  or  credit ; but  they  are  adapted 
to  no  case  beside. 

When  the  effiux  of  gold  is  the  last  stage  of  a series  of  effects 
arising  from  an  increase  of  the  currency,  or  from  an  expansion  of 
credit  tantamount  in  its  effect  on  prices  to  an  increase  of  currency, 

* [1857]  True,  the  Bank  is  not  precluded  from  making  increased  advances 
from  its  deposits,  which  are  likely  to  be  of  unusually  large  amount,  since,  at 
these  periods,  every  one  leaves  his  money  in  deposit  in  order  to  have  it  within 
call.  But,  that  the  deposits  are  not  always  sufficient  was  conclusively  proved 
in  1847,  when  the  Bank  stretched  to  the  very  utmost  the  means  of  relieving 
commerce  which  its  deposits  afforded,  without  allaying  the  panic,  which  how- 
ever ceased  at  once  when  the  Government  decided  on  suspending  the  Act. 

f-  [1862]  This  prediction  was  verified  on  the  very  next  occurrence  of  a 
commercial  crisis,  in  1857  ; when  Government  were  again  under  the  necessity 
of  suspending,  on  their  own  responsibility,  the  provisions  of  the  Act. 


REGULATION  OF  CURRENCY 


666 


It  is  in  that  case  a fair  assumption  that  in  a purely  metallic  system 
the  gold  exported  would  be  drawn  from  the  currency  itself ; because 
such  a drain,  being  in  its  nature  unlimited,  will  necessarily  continue 
as  long  as  currency  and  credit  are  undiminished.  But  an  exportation 
of  the  precious  metals  often  arises  from  no  causes  affecting  currency 
or  credit,  but  simply  from  an  unusual  extension  of  foreign  payments, 
arising  either  from  the  state  of  the  markets  for  commodities,  or 
from  some  circumstance  not  commercial.  In  this  class  of  causes,  four, 
of  powerful  operation,  are  included,  of  each  of  which  the  last  fifty 
years  of  English  history  afford  repeated  instances.  The  first  is 
that  of  an  extraordinary  foreign  expenditure  by  government,  either 
political  or  military ; as  in  the  revolutionary  war,  and,  as  long  as  it 
lasted,  during  the  Crimean  war.  The  second  is  the  case  of  a large 
exportation  of  capital  for  foreign  investment ; such  as  the  loans  and 
mining  operations  which  partly  contributed  to  the  crisis  of  1825,  and 
the  American  speculations  which  were  the  principal  cause  of  the 
crisis  of  1839.  The  third  is  a failure  of  crops  in  the  countries  which 
supply  the  raw  material  of  important  manufactures ; such  as  the 
cotton  failure  in  America,  which  compelled  England,  in  1847,  to 
incur  unusual  liabilities  for  the  purchase  of  that  commodity  at  an 
advanced  price.  The  fourth  is  a bad  harvest,  and  a great  consequent 
importation  of  food;  of  which  the  years  1846  and  1847  presented 
an  example  surpassing  all  antecedent  experience. 

In  none  of  these  cases,  if  the  currency  were  metallic,  would 
the  gold  or  silver  exported  for  the  purposes  in  question  be  necessarily, 
or  even  probably,  drawn  wholly  ^ from  the  circulation.  It  would 
be  drawn  from  the  hoards,  which  under  a metallic  currency  always 
exist  to  a very  large  amount ; in  uncivilized  countries,  in  the  hands 
of  all  who  can  afford  it ; in  civilized  countries  chiefly  in  the  form 
of  bankers’  reserves.  Mr.  Tooke,  in  his  Inquiry  into  the  Currency 
Principle,  bears  testimony  to  this  fact ; but  it  is  to  Mr.  FuUarton 
that  the  public  are  indebted  for  the  clearest  and  most  satisfactory 
elucidation  of  it.  As  I am  not  aware  that  this  part  of  the  theory 
of  currency  has  been  set  forth  by  any  other  writer  with  anything 
like  the  same  degree  of  completeness,  I shall  quote  somewhat  largely 
from  this  able  production. 

“ No  person  who  has  ever  resided  in  an  Asiatic  country,  where 
hoarding  is  carried  on  to  a far  larger  extent  in  proportion,  to  the 
existing  stock  of  wealth,  and  where  the  practice  has  become  much 
more  deeply  engrafted  in  the  habits  of  the  people,  by  traditionary 
* [“  Wholly  ” inserted  in  4th  ed.  (1857).] 


666 


BOOK  III.  CHAPTER  XXIV.  § 4 


apprehensioBs  of  insecurity  and  the  difficulty  of  finding  safe  and 
remunerative  investments,  than  in  any  European  community — no 
person  who  has  had  personal  experience  of  this  state  of  society,  can 
be  at  a loss  to  recollect  innumerable  instances  of  large  metallic 
treasures  extracted  in  times  of  pecuniary  difficulty  from  the  cofiers 
of  individuals  by  the  temptation  of  a high  rate  of  interest,  and 
brought  in  aid  of  the  public  necessities,  nor,  on  the  other  hand,  of 
the  facihty  with  which  those  treasures  have  been  absorbed  again, 
when  the  inducements  which  had  drawn  them  into  light  were  no 
longer  in  operation.  In  countries  more  advanced  in  civilization 
and  wealth  than  the  Asiatic  principalities,  and  where  no  man  is  in 
fear  of  attracting  the  cupidity  of  power  by  an  external  display  of 
riches,  but  where  the  interchange  of  commodities  is  still  almost 
universally  conducted  through  the  medium  of  a metallic  circulation, 
as  is  the  case  with  most  of  the  commercial  countries  on  the  Continent 
of  Europe,  the  motives  for  amassing  the  precious  metals  may  be 
less  powerful  than  in  the  majority  of  Asiatic  principahties  ; but  the 
ability  to  accumulate  being  more  widely  extended,  the  absolute 
quantity  amassed  will  be  found  probably  to  bear  a considerably 
larger  proportion  to  the  population.*  In  those  states  which  lie 
exposed  to  hostile  invasion,  or  whose  social  condition  is  unsettled 
and  menacing,  the  motive  indeed  must  still  be  very  strong ; and  in 
a nation  carrying  on  an  extensive  commerce,  both  foreign  and  internal, 
without  any  considerable  aid  from  any  of  the  banking  substitutes  for 
money,  the  reserves  of  gold  and  silver  indispensably  required  to 
secure  the  regularity  of  payments,  must  of  themselves  engross  a 
share  of  the  circulating  coin  which  it  would  not  be  easy  to  estimate. 

“ In  this  country,  where  the  banking  system  has  been  carried  to 
an  extent  and  perfection  unknown  in  any  other  part  of  Europe,  and 
may  be  said  to  have  entirely  superseded  the  use  of  coin,  except  for 
retail  dealings  and  the  purposes  of  foreign  commerce,  the  incentives 
to  private  hoarding  exist  no  longer,  and  the  hoards  have  all  been 
transferred  to  the  banks,  or  rather,  I should  say,  to  the  Bank  of 
England.  But  in  France,  where  the  bank-note  circulation  is  still 
comparatively  limited,  the  quantity  of  gold  and  silver  coin  in 
existence  I find  now  currently  estimated,  on  what  are  described  as 

* It  is  known,  from  unquestionable  facts,  that  the  hoards  of  money  at  all 
times  existing  in  the  hands  of  the  French  peasantry,  often  from  a remote  date, 
surpass  any  amount  which  could  have  been  imagined  possible ; and  even  in 
so  poor  a country  as  Ireland,  it  has  of  late  been  ascertained  that  the  small 
farmers  sometimes  possess  hoards  quite  disproportioned  to  their  visible  means 
of  subsistence. 


REGULATION  OF  CURRENCY  667 

fhe  latest  authorities,  at  the  enormous  sum  of  120  millions  sterling ; 
nor  is  the  estimate  at  all  at  variance  with  the  reasonable  probabihties 
of  the  case.  Of  this  vast  treasure  there  is  every  reason  to  presume 
that  a very  large  proportion,  probably  by  much  the  greater  part, 
is  absorbed  in  the  hoards.  If  you  present  for  payment  a bill  for  a 
thousand  francs  to  a French  banker,  he  brings  you  the  silver  in  a 
sealed  bag  from  his  strong  room.  And  not  the  banker  only,  but 
every  merchant  and  trader,  according  to  his  means,  is  under  the 
necessity  of  keeping  by  him  a stock  of  cash  sufficient  not  only  for 
his  ordinary  disbursements,  but  to  meet  any  unexpected  demands. 
That  the  quantity  of  specie  accumulated  in  these  innumerable 
depots,  not  in  France  only,  but  all  over  the  Continent,  where  banking 
institutions  are  still  either  entirely  wanting  or  very  imperfectly 
organized,  is  not  merely  immense  in  itself,  but  admits  of  being 
largely  drawn  upon,  and  transferred  even  in  vast  masses  from  one 
country  to  another,  -with  very  httle,  if  any,  effect  on  prices,  or  other 
material  derangements,  we  have  had  some  remarkable  proofs : ” 
among  others,  “ the  signal  success  which  attended  the  simultaneous 
efforts  of  some  of  the  principal  European  powers  (Russia,  Austria, 
Prussia,  Sweden,  and  Denmark)  to  replenish  their  treasuries,  and 
to  replace  with  coin  a considerable  portion  of  the  depreciated  paper 
which  the  necessities  of  the  war  had  forced  upon  them,  and  this  at 
the  very  time  when  the  available  stock  of  the  precious  metals  over 
the  world  had  been  reduced  by  the  exertions  of  England  to  recover 
her  metaUic  currency.  . . . There  can  be  no  doubt  that  these 
combined  operations  were  on  a scale  of  very  extraordinary  magnitude, 
that  they  were  accomplished  without  any  sensible  injury  to  com- 
merce or  public  prosperity,  or  any  other  effect  than  some  temporary 
derangement  of  the  exchanges,  and  that  the  private  hoards  of 
treasure  accumulated  throughout  Europe  during  the  war  must  have 
been  the  principal  source  from  which  all  this  gold  and  silver  was 
collected.  And  no  person,  I think,  can  fairly  contemplate  the 
vast  superflux  of  metallic  wealth  thus  proved  to  be  at  all  times  in 
existence,  and,  though  in  a dormant  and  inert  state,  always  ready 
to  spring  into  activity  on  the  first  indication  of  a sufficiently  intense 
demand,  without  feeling  themselves  compelled  to  admit  the  possi- 
bihty  of  the  mines  being  even  shut  up  for  years  together,  and  the 
production  of  the  metals  altogether  suspended,  while  there  might 
be  scarcely  a perceptible  alteration  in  the  exchangeable  value  of  the 
metal.”  * 


Regulation  of  CurrencieSy  pp.  71-4. 


668 


BOOK  III.  CHAPTER  XXIV.  § 4 


Applying  this  to  the  currency  doctrine  and  its  advocates,  “ one 
might  imagine,”  says  Mr.  FuUarton,*  “ that  they  supposed  the  gold 
which  is  drained  off  for  exportation  from  a country  using  a currency 
exclusively  metallic,  to  be  collected  by  driblets  at  the  fairs  and 
markets,  or  from  the  tills  of  the  grocers  and  mercers.  They  never 
even  allude  to  the  existence  of  such  a thing  as  a great  hoard  of  the 
metals,  though  upon  the  action  of  the  hoards  depends  the  whole 
economy  of  international  payments  between  specie-circulating 
communities,  while  any  operation  of  the  money  collected  in  hoards 
upon  prices  must,  even  according  to  the  currency  hypothesis,  be 
wholly  impossible.  We  know  from  experience  what  enormous 
payments  in  gold  and  silver  specie-circulating  countries  are  capable, 
at  times,  of  making,  without  the  least  disturbance  of  their  internal 
prosperity ; and  whence  is  it  supposed  that  these  payments  come, 
but  from  their  hoards  ? Let  us  think  how  the  money  market  of  a 
country  transacting  all  its  exchanges  through  the  medium  of  the 
precious  metals  only,  would  be  likely  to  be  affected  by  the  necessity 
of  making  a foreign  payment  of  several  millions.  Of  course  the 
necessity  could  only  be  satisfied  by  a transmission  of  capital ; and 
would  not  the  competition  for  the  possession  of  capital  for  trans- 
mission which  the  occasion  would  call  forth,  necessarily  raise  the 
market  rate  of  interest  ? If  the  payment  was  to  be  made  by  the 
government,  would  not  the  government,  in  all  probability,  have  to 
open  a new  loan  on  terms  more  than  usually  favourable  to  the 
lender  ? ” If  made  by  merchants,  would  it  not  be  drawn  either 
from  the  deposits  in  banks,  or  from  the  reserves  which  merchants 
keep  by  them  in  default  of  banks,  or  would  it  not  oblige  them  to 
obtain  the  necessary  amount  of  specie  by  going  into  the  money 
market  as  borrowers  ? “ And  would  not  all  this  inevitably  act  upon 

the  hoards,  and  draw  forth  into  activity  a portion  of  the  gold  and 
silver  which  the  money-dealers  had  been  accumulating,  and  some  of 
them  with  the  express  view  of  watching  such  opportunities  for 
turning  their  treasures  to  advantage  ? . . . 

“ To  come  to  the  present  time  [1844],  the  balance  of  payments 
with  nearly  all  Europe  has  for  about  four  years  past  been  in  favour 
of  this  country,  and  gold  has  been  pouring  in  till  the  influx  amounts 
to  the  unheard-of  sum  of  about  fourteen  millions  sterling.  Yet,  in 
all  this  time,  has  any  one  heard  a complaint  of  any  serious  suffering 
inflicted  on  the  people  of  the  Continent  ? Have  prices  there  been 


Regulation  of  Currencies^  pp.  139-42. 


REGULATION  OF  CURRENCY 


669 


greatly  depressed  beyond  their  range  in  this  country  ? Have 
wages  fallen,  or  have  merchants  been  extensively  ruined  by  the 
universal  depreciation  of  their  stock  ? There  has  occurred  nothing 
of  the  kind.  The  tenor  of  commercial  and  monetary  affairs  has  been 
everywhere  even  and  tranquil ; and  in  France  more  particularly, 
an  improving  revenue  and  extended  commerce  bear  testimony  to 
the  continued  progress  of  internal  prosperity.  It  may  be  doubted, 
indeed,  if  this  great  efflux  of  gold  has  withdrawn,  from  that  portion 
of  the  metallic  wealth  of  the  nation  which  really  circulates,  a single 
napoleon.  And  it  has  been  equally  obvious,  from  the  undisturbed 
state  of  credit,  that  not  only  has  the  supply  of  specie  indispensable 
for  the  conduct  of  business  in  the  retail  market  been  all  the  while 
uninterrupted,  but  that  the  hoards  have  continued  to  furnish  every 
facihty  requisite  for  the  regularity  of  mercantile  payments.  It  is 
of  the  very  essence  of  the  metallic  system,  that  the  hoards,  in  all 
cases  of  probable  occurrence,  should  be  equal  to  both  objects  ; that 
they  should,  in  the  first  place,  supply  the  bulhon  demanded  for 
exportation,  and  in  the  next  place,  should  keep  up  the  home  circu- 
lation to  its  legitimate  complement.  Every  man  trading  under  that 
system,  who^  in  the  course  of  his  business,  may  have  frequent 
occasion  to  remit  large  sums  in  specie  to  foreign  countries,  must 
either  keep  by  him  a sufficient  treasure  of  his  own  or  must  have 
the  means  of  borrowing  enough  from  his  neighbours,  not  only  to 
make  up  when  wanted  the  amount  of  his  remittances,  but  to  enable 
him,  moreover,  to  carry  on  his  ordinary  transactions  at  home 
without  interruption.” 

In  a country  in  which  credit  is  carried  to  so  great  an  extent 
as  in  England,  one  great  reserve,  in  a single  establishment,  the  Bank 
of  England,  supplies  the  place,  as  far  as  the  precious  metals  are 
concerned,  of  the  multitudinous  reserves  of  other  countries.  The 
theoretical  principle,  therefore,  of  the  currency  doctrine  would 
require,  that  aU  those  drains  of  the  metal  which,  if  the  currency 
were  purely  metallic,  would  be  taken  from  the  hoards,  should  be 
allowed  to  operate  freely  upon  the  reserve  in  the  coffers  of  the  Bank 
of  England,  without  any  attempt  to  stop  it  either  by  a diminution 
of  the  currency  or  by  a contraction  of  credit.  Nor  to  this  would 
there  be  any  well-grounded  objection,  unless  the  drain  were  so  great 
as  to  threaten  the  exhaustion  of  the  reserve,  and  a consequent 
stoppage  of  payments  ; a danger  against  which  it  is  possible  to  take 
adequate  precautions,  because  in  the  cases  which  we  are  considering, 
the  drain  is  for  foreign  payments  of  definite  amount,  and  stops  of 


670 


BOOK  HI.  CHAPTER  XXIV.  § 4 


itself  as  soon  as  these  are  efiected.  And  in  all  systems  it  is  admitted 
that  the  habitual  reserve  of  the  Bank  should  exceed  the  utmost 
amount  to  which  experience  warrants  the  belief  that  such  a drain 
may  extend  ; which  extreme  limit  Mr.  FuUarton  affirms  to  be  seven 
millions,  but  Mr.  Tooke  recommends  an  average  reserve  of  ten,  and 
in  his  last  publication,  of  twelve  millions.  ^ Under  these  circum- 
stances, the  habitual  reserve,  which  would  never  be  employed  in 
discounts,  but  kept  to  be  paid  out  exclusively  in  exchange  for 
cheques  or  bank  notes,  would  be  sufficient  for  a crisis  of  this  descrip- 
tion ; which  therefore  would  pass  ofi  without  having  its  difficulties 
increased  by  a contraction  either  of  credit  or  of  the  circulation. 
But  this,  the  most  advantageous  denouement  that  the  case  admits  of, 
and  not  only  consistent  with  but  required  by  the  professed  principle 
of  the  system,  the  panegyrists  of  the  system  claim  for  it  as  a great 
merit  that  it  prevents.  They  boast,  that  on  the  first  appearance 
of  a drain  for  exportation — whatever  may  be  its  cause,  and  whether, 
under  a metallic  currency,  it  would  involve  a contraction  of  credit 
or  not — the  Bank  is  at  once  obliged  to  curtail  its  advances.  And 
this,  be  it  remembered,  when  there  has  been  no  speculative  rise 
of  prices  which  it  is  indispensable  to  correct,  no  unusual  extension 
of  credit  requiring  contraction ; but  the  demand  for  gold  is  solely 
occasioned  by  foreign  payments  on  account  of  government,  or  large 
corn  importations  consequent  on  a bad  harvest. 

2 Even  supposing  that  the  reserve  is  insufficient  to  meet  the 
foreign  payments,  and  that  the  means  wherewith  to  make  them  have 
to  be  taken  from  the  loanable  capital  of  the  country,  the  consequence 
of  which  is  a rise  of  the  rate  of  interest ; in  such  circumstances  some 
pressure  on  the  money  market  is  unavoidable,  but  that  pressure  is 
much  increased  in  severity  by  the  separation  of  the  Banking  from 
the  Issue  Department.  The  case  is  generally  stated  as  if  the  Act  only 
operated  in  one  way,  namely,  by  preventing  the  Bank,  when  it  has 

^ [The  rest  of  this  paragraph  replaced  in  the  6th  ed.  (1865)  the  following 
passage  of  the  original  text : 

“ The  machinery,  however,  of  the  new  system  insists  upon  bringing  about 
by  force,  what  its  principle  not  only  does  not  require,  but  positively  condemns. 
Every  drain  for  exportation,  whatever  may  be  its  cause,  and  whether  under  a 
metallic  currency  it  would  affect  the  circulation  or  not,  is  now  compulsorily 
drawn  from  that  source  alone.  The  bank-note  circulation,  and  the  discounts 
or  other  advances  of  the  Bank,  must  be  diminished  by  an  amount  equal  to  that 
of  the  metal  exported,  though  it  be  to  the  full  extent  of  seven  or  ten  millions. 
And  this,  be  it  remembered,”  &c.] 

* [From  this  point  to  the  end  of  tne  section  the  text  was  largely  rewritten 
in  the  4th  ed.  (1857),  and  the  note  added  in  tbe  5th  (1862).] 


REGULATION  OF  CURRENCY 


671 


parted  with  (say)  three  millions  of  bullion  in  exchange  for  three 
millions  of  its  notes,  from  again  lending  those  notes,  in  discounts  or 
other  advances.  But  the  Act  really  does  much  more  than  this. 
It  is  well  known,  that  the  first  operation  of  a drain  is  always  on  the 
Banking  Department.  The  bank  deposits  constitute  the  bulk  of  the 
unemployed  and  disposable  capital  of  the  country ; and  capital 
wanted  for  foreign  payments  is  almost  always  obtained  mainly  by 
drawing  out  deposits.  Supposing  three  millions  to  be  the  amount 
wanted,  three  millions  of  notes  are  drawn  from  the  Banking  Depart- 
ment (either  directly  or  through  the  private  bankers,  who  keep  the 
bulk  of  their  reserves  with  the  Bank  of  England),  and  the  three 
millions  of  notes,  thus  obtained,  are  presented  at  the  Issue  Depart- 
ment, and  exchanged  against  gold  for  exportation.  Thus  a drain 
upon  the  country  at  large  of  only  three  millions  is  a drain  upon  the 
Bank  virtually  of  six  millions.  The  deposits  have  lost  three  millions, 
and  the  reserve  of  the  Issue  Department  has  lost  an  equal  amount. 
As  the  two  departments,  so  long  as  the  Act  remains  in  operation, 
cannot  even  in  the  utmost  extremity  help  one  another,  each  must 
take  its  separate  precautions  for  its  own  safety.  Whatever  measures, 
therefore,  on  the  part  of  the  Bank,  would  have  been  required  under 
the  old  system  by  a drain  of  six  millions,  are  now  rendered  necessary 
by  a drain  only  of  three.  The  Issue  Department  protects  itself 
in  the  manner  prescribed  by  the  Act,  by  not  re-issuing  the  three 
millions  of  notes  which  have  been  returned  to  it.  But  the  Banking 
Department  must  take  measures  to  replenish  its  reserve,  which  has 
been  reduced  by  three  millions.  Its  liabilities  having  also  decreased 
three  millions,  by  the  loss  of  that  amount  of  deposits,  the  reserve, 
on  the  ordinary  banking  principle  of  a third  of  the  liabilities,  will 
bear  a reduction  of  one  million.  But  the  other  two  millions  it  must 
procure  by  letting  that  amount  of  advances  run  out,  and  not  renewing 
them.  Not  only  must  it  raise  its  rate  of  interest,  but  it  must  effect, 
by  whatever  means,  a diminution  of  two  millions  in  the  total  amount 
of  its  discounts : or  it  must  sell  securities  to  an  equal  amount. 
This  violent  action  on  the  money  market  for  the  purpose  of  reple- 
nishing the  Banking  reserve,  is  wholly  occasioned  by  the  Act  of 
1844.  If  the  restrictions  of  that  Act  did  not  exist,  the  Bank,  instead 
of  contracting  its  discounts,  would  simply  transfer  two  millions, 
either  in  gold  or  in  notes,  from  the  Issue  to  the  Banking  Department ; 
not  in  order  to  lend  them  to  the  public,  but  to  secure  the  solvency  of 
the  Banking  Department  in  the  event  of  further  unexpected  demands 
by  the  depositors.  And  unless  the  drain  continued,  and  reached 


672 


BOOK  III.  CHAPTER  XXIV.  § 4 


SO  great  an  amount  as  to  seem  likely  to  exceed  tke  whole  of  the  gold 
in  the  reserves  of  both  departments,  the  Bank  would  be  under  no 
necessity,  while  the  pressure  lasted,  of  withholding  from  commerce 
its  accustomed  amount  of  accommodation,  at  a rate  of  interest 
corresponding  to  the  increased  demand.* 

I am  aware  it  will  be  said  that  by  allowing  drains  of  this  character 
to  operate  freely  upon  the  Bank  reserve  until  they  cease  of  them- 
selves^^  a contraction  of  the  currency  and  of  credit  would  not  be  pre- 
vented, but  only  postponed  ; since  if  a limitation  of  issues  were  not 
resorted  to  for  the  purpose  of  checking  the  drain  in  its  commence- 
ment, the  same  or  a still  greater  limitation  must  take  place  after- 
wards, in  order,  by  acting  on  prices,  to  bring  back  this  large  quantity 
of  gold,  for  the  indispensable  purpose  of  replenishing  the  Bank 
reserve.  But  in  this  argument  several  things  are  overlooked.  In 
the  first  place,  the  gold  might  be  brought  back,  not  by  a fall  of  prices, 
but  by  the  much  more  rapid  and  convenient  medium  of  a rise  of  the 
rate  of  interest,  involving  no  fall  of  any  prices  except  the  price  of 
securities.  Either  English  securities  would  be  bought  on  account  of 
foreigners,  or  foreign  securities  held  in  England  would  be  sent 
abroad  for  sale,  both  which  operations  took  place  largely  during  the 
mercantile  difficulties  of  1847,  and  not  only  checked  the  efflux  of 
gold,  but  turned  the  tide  and  brought  the  metal  back.  It  was  not, 
therefore,  brought  back  by  a contraction  of  the  currency,  though 

* [1862]  This,  which  I have  called  “ the  double  action  of  drains,”  has  been 
strangely  understood  as  i£  I had  asserted  that  the  Bank  is  compelled  to  part 
with  six  millions’  worth  of  property  by  a drain  of  three  millions.  Such 
an  assertion  would  be  too  absurd  to  require  any  refutation.  Drains  have  a 
double  action,  not  upon  the  pecuniary  position  of  the  Bank  itself,  but  upon  the 
measures  it  is  forced  to  take  in  order  to  stop  the  drain.  Though  the  Bank 
itself  is  no  poorer,  its  two  reserves,  the  reserve  in  the  banking  department  and 
the  reserve  m the  issue  department,  have  each  been  reduced  three  millions  by  a 
drain  of  only  three.  And  as  the  separation  of  the  departments  renders  it 
necessary  that  each  of  them  separately  should  be  kept  as  strong  as  the  two 
together  need  be  if  they  could  help  one  another,  the  Bank’s  action  on  the 
money  market  must  be  as  violent  on  a drain  of  three  millions,  as  would  have 
been  required  on  the  old  system  for  one  of  six.  The  reserve  in  the  banking 
department  being  less  than  it  otherwise  would  be  by  the  entire  amount  of  the 
bullion  in  the  issue  department,  and  the  whole  amount  of  the  drain  falling  in 
the  first  instance  on  that  diminished  reserve,  the  pressure  of  the  whole  drain 
on  the  half  reserve  is  as  much  felt,  and  requires  as  strong  measures  to  stop  it, 
as  a pressure  of  twice  the  amount  on  the  entire  reserve.  As  I have  said 
elsewhere,*  “ it  is  as  if  a man  having  to  lift  a weight  were  restricted  from  using 
both  hands  to  do  it,  and  were  only  allowed  to  use  one  hand  at  a time ; in 
which  case  it  would  be  necessary  that  each  of  his  hands  should  be  as  strong  as 
the  two  together.” 

• Evidence  before  the  Committee  of  the  House  of  Commons  on  the  Bank  Acte, 
in  1857. 


REGULATION  OF  CURRENCY 


673 


b this  case  it  certainly  was  so  by  a contraction  of  loans.  But  even 
this  is  not  always  indispensable.  For  in  the  second  place,  it  is  not 
necessary  that  the  gold  should  return  with  the  same  suddenness  with 
which  it  went  out.  A great  portion  would  probably  return  in  the 
ordinary  way  of  commerce,  in  payment  for  exported  commodities. 
The  extra  gains  made  by  dealers  and  producers  in  foreign  countries 
through  the  extra  payments  they  receive  from  this  country,  are  very 
likely  to  be  partly  expended  in  increased  purchases  of  English 
commodities,  either  for  consumption  or  on  speculation,  though  the 
effect  may  not  manifest  itself  with  sufficient  rapidity  to  enable  the 
transmission  of  gold  to  be  dispensed  with  in  the  first  instance- 
These  extra  purchases  would  turn  the  balance  of  payments  in  favour 
of  the  country,  and  gradually  restore  a portion  of  the  exported 
gold ; and  the  remainder  would  probably  be  brought  back,  without 
any  considerable  rise  of  the  rate  of  interest  in  England,  by  the  fall 
of  it  in  foreign  countries,  occasioned  by  the  addition  of  some  millions 
of  gold  to  the  loanable  capital  of  those  countries.  Indeed,  in  the 
state  of  things  consequent  on  the  gold  discoveries,  when  the  enormous 
quantity  of  gold  annually  produced  in  Australia,  and  much  of  that 
from  California,  is  distributed  to  other  countries  through  England, 
and  a month  seldom  passes  without  a large  arrival,  the  Bank  reserves 
can  replenish  themselves  without  any  re-importation  of  the  gold 
previously  carried  off  by  a drain.  All  that  is  needful  is  an  inter- 
mission, and  a very  brief  intermission  is  sufficient,  of  the  exportation. 

For  these  reasons  it  appears  to  me,  that  notwithstanding  the 
beneficial  operation  of  the  Act  of  1844  in  the  first  stages  of  one  kind 
of  commercial  crisis  (that  produced  by  over-speculation),  it  on  the 
whole  materially  aggravates  the  severity  of  commercial  revulsions. 
And  not  only  are  contractions  of  credit  made  more  severe  by  the  Act, 
they  are  also  made  greatly  more  frequent.  “ Suppose,”  says  Mr. 
George  Walker,  in  a clear,  impartial,  and  conclusive  series  of  papers 
in  the  Aberdeen  Herald,  forming  one  of  the  best  existing  discussions  of 
the  present  question — “ suppose  that,  of  eighteen  millions  of  gold, 
ten  are  in  the  Issue  Department  and  eight  are  in  the  Banking  Depart- 
ment. The  result  is  the  same  as  under  a metallic  currency  with  only 

eight  millions  in  reserve,  instead  of  eighteen The  effect  of 

the  Bank  Act  is,  that  the  proceedings  of  the  Bank  under  a drain  aro 
not  determined  by  the  amount  of  gold  within  its  vaults,  but  are, 
or  ought  to  be,  determined  by  the  portion  of  it  belonging  to  the 
Banking  Department.  With  the  whole  of  the  gold  at  its  disposal,  it 
may  find  it  unnecessary  to  interfere  with  credit,  or  force  down  prices, 


674 


BOOK  III.  CHAPTER  XXIV.  § 5 


if  a drain  leave  a fair  reserve  behind.  With  only  the  banking  reserve 
at  its  disposal,  it  must,  from  the  narrow  margin  it  has  to  operate  on, 
meet  all  drains  by  counteractives  more  or  less  strong,  to  the  injury 
of  the  commercial  world  ; and  if  it  fail  to  do  so,  as  it  may  fail,  the 
consequence  is  destruction.  Hence  the  extraordinary  and  frequent 
variations  of  the  rate  of  interest  under  the  Bank  Act.  Since  1847, 
when  the  eyes  of  the  Bank  were  opened  to  its  true  position,  it  has 
felt  it  necessary,  as  a precautionary  measure,  that  every  variation 
in  the  reserve  should  be  accompanied  by  an  alteration  in  the  rate  of 
interest.”  To  make  the  Act  innocuous,  therefore,  it  would  be 
necessary  that  the  Bank,  in  addition  to  the  whole  of  the  gold  in  the 
Issue  Department,  should  retain  as  great  a reserve  in  gold  or  notes 
in  the  Banking  Department  alone,  as  would  suffice  under  the  old 
system  for  the  security  both  of  the  issues  and  of  the  deposits. 

§ 5.  There  remain  two  questions  respecting  a bank-note  cur- 
rency, which  have  also  been  a subject  of  considerable  discussion  of 
late  years  : whether  the  privilege  of  providing  it  should  be  confined 
to  a single  estabhshment,  such  as  the  Bank  of  England,  or  a plurality 
of  issuers  should  be  allowed ; and  in  the  latter  case,  whether  any 
peculiar  precautions  are  requisite  or  advisable,  to  protect  the  holders 
of  notes  against  losses  occasioned  by  the  insolvency  of  the  issuers. 

The  course  of  the  preceding  speculations  has  led  us  to  attach 
so  much  less  of  pecuhar  importance  to  bank  notes,  as  compared  with 
other  forms  of  credit,  than  accords  with  the  notions  generally  current, 
that  questions  respecting  the  regulation  of  so  very  small  a part  of 
the  general  mass  of  credit  cannot  appear  to  us  of  such  momentous 
import  as  they  are  sometimes  considered.  Bank  notes,  however, 
have  so  far  a real  pecuharity,  that  they  are  the  only  form  of  credit 
sufficiently  convenient  for  all  the  purposes  of  circulation  to  be  able 
entirely  to  supersede  the  use  of  metallic  money  for  internal  purposes. 
Though  the  extension  of  the  use  of  cheques  has  a tendency  more  and 
more  to  diminish  the  number  of  bank  notes,  as  it  would  that  of 
the  sovereigns  or  other  coins  which  would  take  their  place  if  they 
were  abolished  ; there  is  sure,  for  a long  time  to  come,  to  be  a con- 
siderable supply  of  them,  wherever  the  necessary  degree  of  commer- 
cial confidence  exists,  and  their  free  use  is  permitted.  The  exclusive 
privilege,  therefore,  of  issuing  them,  if  reserved  to  the  Government 
or  to  some  one  body,  is  a source  of  great  pecuniary  gain.  That  this 
gain  should  be  obtained  for  the  nation  at  large  is  both  practicable 
and  desirable ; and  if  the  management  of  a bank-note  currency 


REGULATION  OF  CURRENCY 


676 


ought  to  be  so  completely  mechanical,  so  entirely  a thing  of  fixed 
rule,  as  it  is  made  by  the  Act  of  1844,  there  seems  no  reason  why  this 
mechanism  should  be  worked  for  the  profit  of  any  private  issuer, 
rather  than  for  the  public  treasury.  If,  however,  a plan  be  preferred 
which  leaves  the  variations  in  the  amount  of  issues  in  any  degree 
whatever  to  the  discretion  of  the  issuers,  it  is  not  desirable  that  to 
the  ever-growing  attributions  of  the  Government  so  delicate  a 
function  should  be  superadded  ; and  that  the  attention  of  the  heads 
of  the  state  should  be  diverted  from  larger  objects,  by  their  being 
besieged  with  the  applications,  and  made  a mark  for  all  the  attacks, 
which  are  never  spared  to  those  deemed  to  be  responsible  for  any 
acts,  however  minute,  connected  with  the  regulation  of  the  currency. 
It  would  be  better  that  treasury  notes,  exchangeable  for  gold  on 
demand,  should  be  issued  to  a fixed  amount,  not  exceeding  the 
minimum  of  a bank-note  currency  ; the  remainder  of  the  notes  which 
may  be  required  being  left  to  be  supplied  either  by  one  or  by  a num- 
ber of  private  banking  establishments.  Or  an  establishment  like 
the  Bank  of  England  might  supply  the  whole  country,  on  condition 
of  lending  fifteen  or  twenty  millions  of  its  notes  to  the  government 
without  interest ; which  would  give  the  same  pecuniary  advantage 
to  the  state  as  if  it  issued  that  number  of  its  own  notes. 

The  reason  ordinarily  alleged  in  condemnation  of  the  system 
of  plurality  of  issuers  which  existed  in  England  before  the  Act  of 
1844,  and  under  certain  limitations  still  subsists,  is  that  the  compe- 
tition of  these  different  issuers  induces  them  to  increase  the  amount 
of  their  notes  to  an  injurious  extent.  But  we  have  seen  that  the  power 
which  bankers  have  of  augmenting  their  issues,  and  the  degree  of 
mischief  which  they  can  produce  by  it,  are  quite  trifling  compared 
with  the  current  over-estimate.  As  remarked  by  Mr.  Fullarton,* 
the  extraordinary  increase  of  banking  competition  occasioned  by  the 
establishment  of  the  joint-stock  banks,  a competition  often  of  the 
most  reckless  kind,  has  proved  utterly  powerless  to  enlarge  the  aggre- 
gate mass  of  the  bank-note  circulation  ; that  aggregate  circulation 
having,  on  the  contrary,  actually  decreased.  In  the  absence  of  any 
special  case  for  an  exception  to  freedom  of  industry,  the  general  rule 
ought  to  prevail.  It  appears  desirable,  however,  to  maintain  one 
great  establishment  like  the  Bank  of  England,  distinguished  from 
other  banks  of  issue  in  this,  that  it  alone  is  required  to  pay  in  gold, 
the  others  being  at  liberty  to  pay  their  notes  with  notes  of  the  central 
establishment.  The  object  of  this  is  that  vhere  may  be  one  body 
* Pp.  89-92. 


676 


BOOK  III.  CHAPTER  XXIV.  § 6 


responsible  for  maintaining  a reserve  of  the  precious  metals  sufficient 
to  meet  any  drain  that  can  reasonably  be  expected  to  take  place. 
By  disseminating  this  responsibility  among  a number  of  banks, 
it  is  prevented  from  operating  efficaciously  upon  any  : or  if  it  be  still 
enforced  against  one,  the  reserves  of  the  metals  retained  by  all  the 
others  are  capital  kept  idle  in  pure  waste,  which  may  be  dispensed 
with  by  allowing  them  at  their  option  to  pay  in  Bank  of  England 
notes. 

§ 6.  The  question  remains  whether,  in  case  of  a plurahty  of 
issuers,  any  peculiar  precautions  are  needed  to  protect  the  holders 
of  notes  from  the  consequences  of  failure  of  payment.  Before 
1826,  the  insolvency  of  banks  of  issue  was  a frequent  and  very  serious 
evil,  often  spreading  distress  through  a whole  neighbourhood,  and 
at  one  blow  depriving  provident  industry  of  the  results  of  long  and 
painful  saving.  This  was  one  of  the  chief  reasons  which  induced 
Parliament,  in  that  year,  to  prohibit  the  issue  of  bank  notes  of  a 
denomination  below  five  pounds,  that  the  labouring  classes  at  least 
might  be  as  little  as  possible  exposed  to  participate  in  this  suffering. 
As  an  additional  safeguard,  it  has  been  suggested  to  give  the  holders 
of  notes  a priority  over  other  creditors,  or  to  require  bankers  to 
deposit  stock  or  other  public  securities  as  a pledge  for  the  whole 
amount  of  their  issues.  The  insecurity  of  the  former  bank-note 
currency  of  England  was  partly  the  work  of  the  law,  which,  in  order 
to  give  a qualified  monopoly  of  banking  business  to  the  Bank  of 
England,  had  actually  made  the  formation  of  safe  banking  establish- 
ments a punishable  offence,  by  prohibiting  the  existence  of  any 
banks,  in  town  or  country,  whether  of  issue  or  deposit,  with  a 
number  of  partners  exceeding  six.  This  truly  characteristic  specimen 
of  the  old  system  of  monopoly  and  restriction  was  done  away  with 
in  1826,  both  as  to  issues  and  deposits,  everywhere  but  in  a district 
of  sixty-five  miles  radius  round  London,  and  in  1833  in  that  district 
also,  as  far  as  relates  to  deposits.  ^ It  was  hoped  that  the  numerous 

' [The  remainder  of  this  paragraph  replaced  in  the  4th  ed.  (1857)  the 
following  sentences  of  the  original  (1848)  text : 

“ The  numerous  joint-stock  banks  since  established  have,  by  furnishing 
a more  trustworthy  currency,  made  it  almost  impossible  for  any  private 
banker  to  maintain  his  circulation,  unless  his  capital  and  character  inspire  the 
mosli  complete  confidence.  And  although  there  has  been  in  some  instances 
very  gross  mismanagement  by  joint-stock  banks  (less,  however,  in  the  depart- 
ment of  issues  than  in  that  of  deposits)  the  failure  of  these  banks  is  extremely 
rare,  and  the  cases  still  rarer  in  which  loss  has  ultimately  been  sustained  by 
any  one  except  the  shareholders.  The  banking  system  of  England  is  now 


REGULATION  OF  CURRENCY 


677 


joint-stock  banks  since  established  would  have  furnished  a more 
trustworthy  currency,  and  that  under  their  influence  the  banking 
system  of  England  would  have  been  almost  as  secure  to  the  public 
as  that  of  Scotland  (where  banking  was  always  free)  has  been  for 
two  centuries  past.  But  the  almost  incredible  instances  of  reckless 
and  fraudulent  mismanagement  which  these  institutions  have  of 
late  afforded  (though  in  some  of  the  most  notorious  cases  the  delin* 
quent  establishments  have  not  been  banks  of  issue),  have  shown 
only  too  clearly  that,  south  of  the  Tweed  at  least,  the  joint-stock 
principle  applied  to  banking  is  not  the  adequate  safeguard  it  was  so 
confidently  supposed  to  be  : and  it  is  difficult  now  to  resist  the  con- 
viction, that  if  plurality  of  issuers  is  allowed  to  exist,  some  kind  of 
special  security  in  favour  of  the  holders  of  notes  should  be  exacted 
as  an  imperative  condition.^ 

almost  as  secure  to  the  public,  as  that  of  Scotland  (where  banking  was  always 
free)  has  been  for  two  centuries  past ; and  the  legislature  might  without  any 
bad  consequences,  at  least  of  this  kind,  revoke  its  interdict  (which  was  never 
extended  to  Scotland)  against  one  and  two  pound  notes.  I cannot,  therefore, 
think  it  at  all  necessary,  or  that  it  would  be  anything  but  vexatious  meddling, 
to  enforce  any  kind  of  special  security  in  favour  of  the  holders  of  notes.  The 
true  protection  to  creditors  of  all  kinds  is  a good  law  of  insolvency  (a  part  of 
the  law  at  present  shamefully  deficient),  and,  in  the  case  of  joint-stock  companies 
at  least,  complete  publicity  of  their  accounts  : the  publicity  now  very  properly 
given  to  their  issues  being  a very  small  portion  of  what  a state  has  a right 
to  require  in  return  for  their  being  allowed  to  constitute  themselves,  and  be 
recognised  by  the  law,  as  a collective  body.”] 

* [See  Appendix  W.  The,  Regulation  of  Currency.\ 


CHAPTER  XXV 


OW  THE  COMPETITION  OP  DIFFERENT  COUNTRIES  IN  THE 
SAME  MARKET 

§ 1.  In  the  phraseology  of  the  Mercantile  System,  the  language 
and  doctrines  of  which  are  still  the  basis  of  what  may  be  called  the 
pohtical  economy  of  the  selling  classes,  as  distinguished  from  the 
buyers  or  consumers,  there  is  no  word  of  more  frequent  recurrence 
or  more  perilous  import  than  the  word  underselling^  To  undersell 
other  countries — not  to  be  undersold  by  other  countries — were 
spoken  of,  and  are  still  very  often  spoken  of,  almost  as  if  they  were 
the  sole  purposes  for  which  production  and  commodities  exist.  The 
feehngs  of  rival  tradesmen,  prevailing  among  nations,  overruled  for 
centuries  all  sense  of  the  general  community  of  advantage  which 
commercial  countries  derive  from  the  prosperity  of  one  another  : 
and  that  commercial  spirit,  which  is  now  one  of  the  strongest 
obstacles  to  wars,  was  during  a certain  period  of  European  history 
their  principal  cause. 

Even  in  the  more  enlightened  view  now  attainable  of  the  nature 
and  consequences  of  international  commerce,  some,  though  a com- 
paratively small,  space  must  still  be  made  for  the  fact  of  commercial 
rivality.  Nations  may,  hke  individual  dealers,  be  competitors, 
with  opposite  interests,  in  the  markets  of  some  commodities,  while 
in  others  they  are  in  the  more  fortunate  relation  of  reciprocal 
customers.  The  benefit  of  commerce  does  not  consist,  as  it  was  once 
thought  to  do,  in  the  commodities  sold  ; but,  since  the  commodities 
sold  are  the  means  of  obtaining  those  which  are  bought,  a nation 
would  be  cut  off  from  the  real  advantage  of  commerce,  the  imports, 
if  it  could  not  induce  other  nations  to  take  any  of  its  commodities 
in  exchange ; and  in  proportion  as  the  competition  of  other  countries 
compels  it  to  offer  its  commodities  on  cheaper  terms,  on  pain  of 
not  selling  them  at  all,  the  imports  which  it  obtains  by  its  foreign 
trade  are  procured  at  greater  cost. 


COMPETITION  OF  COUNTRIES  IN  THE  SAME  MARKET  679 


These  points  have  been  adequately,  though  incidentally,  illus- 
trated in  some  of  the  preceding  chapters.  But  the  great  space  which 
the  topic  has  filled,  and  continues  to  fill,  in  economical  speculations, 
and  in  the  practical  anxieties  both  of  politicians  and  of  dealers  and 
manufacturers,  makes  it  desirable,  before  quitting  the  subject  of 
international  exchange,  to  subjoin  a few  observations  on  the  things 
which  do,  and  on  those  which  do  not,  enable  countries  to  undersell 
one  another. 

One  country  can  only  undersell  another  in  a given  market, 
to  the  extent  of  entirely  expelling  her  from  it,  on  two  conditions. 
In  the  first  place,  she  must  have  a greater  advantage  than  the  second 
country  in  the  production  of  the  article  exported  by  both  ; meaning 
by  a greater  advantage  (as  has  been  already  so  fully  explained)  not 
absolutely,  but  in  comparison  with  other  commodities  ; and  in  the 
second  place,  such  must  be  her  relation  with  the  customer  country 
in  respect  to  the  demand  for  each  other’s  products,  and  such  the 
consequent  state  of  international  values,  as  to  give  away  to  the 
customer  country  more  than  the  whole  advantage  possessed  by 
the  rival  country ; otherv/^ise  the  rival  will  still  be  able  to  hold 
her  ground  in  the  market. 

Let  us  revert  to  the  imaginary  hypothesis  of  a trade  between 
England  and  Germany  in  cloth  and  Hnen  : England  being  capable 
of  producing  10  yards  of  cloth  at  the  same  cost  with  15  yards  of 
linen,  Germany  at  the  same  cost  with  20,  and  the  two  commodities 
being  exchanged  between  the  two  countries  (cost  of  carriage  apart) 
at  some  intermediate  rate,  say  10  for  17.  Germany  could  not  be 
permanently  undersold  in  the  English  market,  and  expelled  from  it, 
unless  by  a country  which  offered  not  merely  more  than  17,  but 
more  than  20  yards  of  linen  for  10  of  cloth.  Short  of  that,  the  com- 
petition would  only  obhge  Germany  to  pay  dearer  for  cloth,  but 
would  not  disable  her  from  exporting  hnen.  The  country,  there- 
fore, which  could  undersell  Germany,  must,  in  the  first  place,  be 
able  to  produce  hnen  at  less  cost,  compared  with  cloth,  than  Germany 
herself ; and  in  the  next  place,  must  have  such  a demand  for  cloth,  or 
other  Enghsh  commodities,  as  would  compel  her,  even  when  she 
became  sole  occupant  of  the  market,  to  give  a greater  advantage  to 
England  than  Germany  could  give  by  resigning  the  whole  of  hers ; 
to  give,  for  example,  21  yards  for  10.  For  if  not — if,  for  example, 
the  equation  of  international  demand,  after  Germany  was  excluded, 
gave  a ratio  of  18  for  10,  Germany  could  again  enter  into  the  com- 
petition ; Germany  would  be  now  the  underselhng  nation ; and 


BOOK  III.  CHAPTER  KXV.  § 2 


there  would  be  a point,  perhaps  19  for  10,  at  which  both  countries 
would  be  able  to  maintain  their  ground,  and  to  sell  in  England 
enough  linen  to  pay  for  the  cloth,  or  other  Enghsh  commodities,  for 
which,  on  these  newly-adjusted  terms  of  interchange,  they  had  a 
demand.  In  like  manner,  England,  as  an  exporter  of  cloth,  could 
only  be  driven  from  the  German  market  by  some  rival  whose  superior 
advantages  in  the  production  of  cloth  enabled  her,  and  the  intensity 
of  whose  demand  for  German  produce  compelled  her,  to  offer  10 
yards  of  cloth,  not  merely  for  less  than  17  yards  of  hnen,  but  for  less 
than  15.  In  that  case,  England  could  no  longer  carry  on  the  trade 
without  loss ; but  in  any  case  short  of  this,  she  would  merely  be 
obliged  to  give  to  Germany  more  cloth  for  less  linen  than  she  had 
previously  given. 

It  thus  appears  that  the  alarm  of  being  permanently  undersold 
may  be  taken  much  too  easily  ; may  be  taken  when  the  thing  really 
to  be  anticipated  is  not  the  loss  of  the  trade,  but  the  minor  incon- 
venience of  carrying  it  on  at  a diminished  advantage ; an  incon- 
venience chiefly  falling  on  the  consumers  of  foreign  commodities, 
and  not  on  the  producers  or  sellers  of  the  exported  article.  It  is  no 
sufficient  ground  of  apprehension  to  the  Enghsh  producers  to  find 
that  some  other  country  can  sell  cloth  in  foreign  markets,  at  some 
particular  time,  a trifle  cheaper  than  they  can  themselves  afford  to 
do  in  the  existing  state  of  prices  in  England.  Suppose  them  to  be 
temporarily  undersold,  and  their  exports  diminished ; the  imports 
will  exceed  the  exports,  there  will  be  a new  distribution  of  the 
precious  metals,  prices  will  fall,  and  as  all  the  money  expenses  of 
the  Enghsh  producers  will  be  diminished,  they  will  be  able  (if  the 
case  faUs  short  of  that  stated  in  the  preceding  paragraph)  again  to 
compete  with  their  rivals.  The  loss  which  England  wiU  incur,  will 
not  faU  upon  the  exporters,  but  upon  those  who  consume  imported 
commodities ; who,  with  money  incomes  reduced  in  amount,  will 
have  to  pay  the  same  or  even  an  increased  price  for  all  things 
produced  in  foreign  countries. 

§ 2.  Such,  I conceive,  is  the  true  theory,  or  rationale,  of  under- 
selhng.  It  will  be  observed  that  it  takes  no  account  of  some  things 
which  we  hear  spoken  of,  oftener  perhaps  than  any  others,  in  the 
character  of  causes  exposing  a country  to  be  undersold. 

According  to  the  preceding  doctrine,  a country  cannot  be  under- 
sold in  any  commodity,  unless  the  rival  country  has  a stronger 
inducement  than  itself  for  devoting  its  labour  and  capital  to  the 


eOMPETITION  OF  COUNTRIES  IN  THE  SAME  MARKET  081 


production  of  the  commodity ; arising  from  the  fact  that  by  doing  so  it 
occasions  a greater  saving  of  labour  and  capital,  to  be  shared  between 
itself  and  its  customers — a greater  increase  of  the  aggregate  produce 
of  the  world.  The  underselling,  therefore,  though  a loss  to  the  under- 
sold country,  is  an  advantage  to  the  world  at  large  ; the  substituted 
commerce  being  one  which  economizes  more  of  the  labour  and 
capital  of  mankind,  and  adds  more  to  their  collective  wealth,  than 
the  commerce  superseded  by  it.  The  advantage,  of  course,  con- 
sists in  being  able  to  produce  the  commodity  of  better  quality,  or 
with  less  labour  (compared  with  other  things)  ; or  perhaps  not  with 
less  labour,  but  in  less  time  ; with  a less  prolonged  detention  of  the 
capital  employed.  This  may  arise  from  greater  natural  advantages 
(such  as  soil,  climate,  richness  of  mines) ; superior  capability, 
either  natural  or  acquired,  in  the  labourers ; better  division  of 
labour,  and  better  tools,  or  machinery.  But  there  is  no  place  left 
in  this  theory  for  the  case  of  lower  wages.  This,  however,  in  the 
theories  commonly  current,  is  a favourite  cause  of  underselling.  We 
continually  hear  of  the  disadvantage  under  which  the  British  pro- 
ducer labours,  both  in  foreign  markets  and  even  in  his  own,  through 
the  lower  wages  paid  by  his  foreign  rivals.  These  lower  wages,  we 
are  told,  enable,  or  are  always  on  the  point  of  enabling  them  to  sell 
at  lower  prices,  and  to  dislodge  the  English  manufacturer  from  all 
markets  in  which  he  is  not  artificially  protected. 

Before  examining  this  opinion  on  grounds  of  principle,  it  is 
worth  while  to  bestow  a moment’s  consideration  upon  it  as  a ques- 
tion of  fact.  Is  it  true,  that  the  wages  of  manufacturing  labour  are 
lower  in  foreign  countries  than  in  England,  in  any  sense  in  which 
low  wages  are  an  advantage  to  the  capitalist  ? The  artisan  of  Ghent 
or  Lyons  may  earn  less  wages  in  a day,  but  does  he  not  do  less  work  ? 
Degrees  of  efficiency  considered,  does  his  labour  cost  less  to  his 
employer  ? Though  wages  may  be  lower  on  the  Continent,  is  not  the 
Cost  of  Labour,  which  is  the  real  element  in  the  competition,  very 
nearly  the  same  ? That  it  is  so  seems  the  opinion  of  competent 
judges,  and  is  confirmed  by  the  very  little  difference  in  the  rate  of 
profit  between  England  and  the  Continental  countries.  But  if  so, 
the  opinion  is  absurd  that  English  producers  can  be  undersold  by 
their  Continental  rivals  from  this  cause.  It  is  only  in  America  that 
the  supposition  is  'primd  facie  admissible.  In  America,  wages  are 
much  higher  than  in  England,  if  we  mean  by  wages  the  daily  earn- 
ings of  a labourer  : but  the  productive  power  of  American  labour  is 
so  great — its  efficiency,  combined  with  the  favourable  circumstances 


682 


BOOK  III.  CHAPTER  XXV.  § 3 


in  which  it  is  exerted,  makes  it  worth  so  much  ta  the  purchaser,  that 
the  Cost  of  Labour  is  lower  in  America  than  in  England  ; as  is 
indicated  by  the  fact  that  the  general  rate  of  profits  and  of  interest 
is  higher.i 

§ 3.  But  is  it  true  that  low  wages,  even  in  the  sense  of  low 
Cost  of  Labour,  enable  a country  to  sell  cheaper  in  the  foreign 
market  ? I mean,  of  course,  low  wages  which  are  common  to  the 
whole  productive  industry  of  the  country. 

If  wages,  in  any  of  the  departments  of  industry  which  supply 
exports,  are  kept,  artificially,  or  by  some  accidental  cause,  below 
the  general  rate  of  wages  in  the  country,  this  is  a real  advantage  in 
the  foreign  market.  It  lessens  the  comparative  cost  of  production 
of  those  articles,  in  relation  to  others  ; and  has  the  same  effect  as  if 
their  production  required  so  much  less  labour.  Take,  for  instance, 
the  case  of  the  United  States  in  respect  to  certain  commodities, 
prior  to  the  civil  war.2  Tobacco  and  cotton,  two  great  articles  of 
export,  were  produced  by  slave  labour,  while  food  and  manufactures 
generally  were  produced  by  free  labourers,  either  working  on  their 
own  account  or  paid  by  wages.  In  spite  of  the  inferior  efiiciency  of 
slave  labour,  there  can  be  no  reasonable  doubt  that  in  a country 
where  the  wages  of  free  labour  were  so  high,  the  work  executed  by 
slaves  was  a better  bargain  to  the  capitalist.  To  whatever  extent 
it  was  so,  this  smaller  cost  of  labour,  being  not  general,  but  limited 
to  those  employments,  was  just  as  much  a cause  of  cheapness  in  the 
products,  both  in  the  home  and  in  the  foreign  market,  as  if  they 
had  been  made  by  a less  quantity  of  labour.  If,  when  the  slaves 
in  the  Southern  States  were  emancipated,  their  wages  rose  to  the 
general  level  of  the  earnings  of  free  labour  in  America,  that  country 
might  have  been  obliged  to  erase  some  of  the  slave-grown  articles 
from  the  catalogue  of  its  exports,  and  would  certainly  be  unable  to 
sell  any  of  them  in  the  foreign  market  at  the  accustomed  price. 
Accordingly,  American  cotton  is  now  habitually  at  a much  higher 
price  than  before  the  war.  Its  previous  cheapness  was  partly  an 
artificial  cheapness,  which  may  be  compared  to  that  produced  by 
a bounty  on  production  or  on  exportation : or,  considering  the 

^ [Until  the  6th  ed.  (1865)  the  concluding  clause  ran  : “ as  is  proved  by  the 
fact  that  the  general  rate  of  profits  and  of  interest  is  very  much  higher.”] 

2 [The  concluding  clause  of  this  sentence  was  added  in  the  7 th  ed.  (1871) ; 
the  following  sentences  changed  from  the  present  to  the  past  tense ; and  the 
sentence  about  the  price  of  American  cotton  was  inserted.] 


COMPETITION  OF  COUNTRIES  IN  THE  SAME  MARKET  683 


means  by  which  it  was  obtained,  an  apter  comparison  would  be  with 
the  cheapness  of  stolen  goods. 

An  advantage  of  a similar  economical,  though  of  a very  different 
moral  character,  is  that  possessed  by  domestic  manufactures ; fabrics 
produced  in  the  leisure  hours  of  families  partially  occupied  in  other 
pursuits,  who,  not  depending  for  subsistence  on  the  produce  of  the 
manufacture,  can  afford  to  sell  it  at  any  price,  however  low,  for 
which  they  think  it  worth  while  to  take  the  trouble  of  producing. 
In  an  account  of  the  Canton  of  Zurich,  to  which  I have  had  occasion 
to  refer  on  another  subject,  it  is  observed,*  “ The  workman  of 
Zurich  is  to-day  a manufacturer,  to-morrow  again  an  agriculturist, 
and  changes  his  occupations  with  the  seasons,  in  a continual  round. 
Manufacturing  industry  and  tillage  advance  hand  in  hand,  in  in- 
separable alliance,  and  in  this  union  of  the  two  occupations  the 
secret  may  be  found,  why  the  simple  and  unlearned  Swiss  manu- 
facturer can  always  go  on  competing,  and  increasing  in  prosperity, 
in  the  face  of  those  extensive  establishments  fitted  out  with  great 
economic,  and  (what  is  still  more  important)  intellectual,  resources. 
Even  in  those  parts  of  the  Canton  where  manufactures  have  extended 
themselves  the  most  widely,  only  one-seventh  of  all  the  families 
belong  to  manufactures  alone  ; four-sevenths  combine  that  employ- 
ment with  agriculture.  The  advantage  of  this  domestic  or  family 
manufacture  consists  chiefly  in  the  fact,  that  it  is  compatible  with 
all  other  avocations,  or  rather  that  it  may  in  part  be  regarded  as 
only  a supplementary  employment.  In  winter,  in  the  dwellings  of 
the  operatives,  the  whole  family  employ  themselves  in  it : but  as 
soon  as  spring  appears,  those  on  whom  the  early  field  labours 
devolve  abandon  the  in-door  work ; many  a shuttle  stands  still ; 
by  degrees  as  the  field-work  increases,  one  member  of  the  family 
follows  another,  till  at  last,  at  the  harvest,  and  during  the  so-called 
‘ great  works,’  all  hands  seize  the  implements  of  husbandry ; but 
in  unfavourable  weather,  and  in  all  otherwise  vacant  hours,  the 
work  in  the  cottage  is  resumed,  and  when  the  ungenial  season  again 
recurs,  the  people  return  in  the  same  gradual  order  to  their  home 
occupation,  until  they  have  all  resumed  it.” 

In  the  case  of  these  domestic  manufactures,  the  comparative 
cost  of  production,  on  which  the  interchange  between  countries 
depends,  is  much  lower  than  in  proportion  to  the  quantity  of  labour 
employed.  The  workpeople,  looking  to  the  earnings  of  their  loom 

♦ Historisch-geographisch-statistisches  Qemdlde  4er  Schweiz.  Erstes  Heft, 
1834,  p.  105. 


634 


BOOK  III.  CHAPTER  XXV.  § 4 


for  a part  only,  if  for  any  part,  of  their  actual  maintenance,  can 
afford  to  work  for  a less  remuneration  than  the  lowest  rate  of  wages 
which  can  permanently  exist  in  the  employments  by  which  the 
labourer  has  to  support  the  whole  expense  of  the  family.  Working,  as 
they  do,  not  for  an  employer  but  for  themselves,  they  may  be  said 
to  carry  on  the  manufacture  at  no  cost  at  all,  except  the  small  expense 
of  a loom  and  of  the  material ; and  the  limit  of  possible  cheapness 
is  not  the  necessity  of  living  by  their  trade  but  that  of  earning 
enough  by  the  work  to  make  that  social  employment  of  their  leisure 
hours  not  disagreeable. 

§ 4.  These  two  cases,  of  slave  labour  and  of  domestic  manu- 
factures, exemplify  the  conditions  under  which  low  wages  enable  a 
country  to  sell  its  commodities  cheaper  in  foreign  markets,  and 
consequently  to  undersell  its  rivals,  or  to  avoid  being  undersold  by 
them.  But  no  such  advantage  is  conferred  by  low  wages  when 
common  to  all  branches  of  industry.  General  low  wages  never 
caused  any  country  to  undersell  its  rivals,  nor  did  general  high 
wages  ever  hinder  it  from  doing  so. 

To  demonstrate  this,  we  must  return  to  an  elementary  principle 
which  was  discussed  in  a former  chapter.*  General  low  wages  do 
not  cause  low  prices,  nor  high  wages  high  prices,  within  the  country 
itself.  General  prices  are  not  raised  by  a rise  of  wages,  any  more 
than  they  would  be  raised  by  an  increase  of  the  quantity  of  labour 
required  in  all  production.  Expenses  which  affect  all  commodities 
equally,  have  no  influence  on  prices.  If  the  maker  of  broadcloth 
or  cutlery,  and  nobody  else,  had  to  pay  higher  wages,  the  price  of 
his  commodity  would  rise,  just  as  it  would  if  he  had  to  employ  more 
labour;  because  otherwise  he  would  gain  less  profit  than  other 
producers,  and  nobody  would  engage  in  the  employment.  But 
if  everybody  has  to  pay  higher  wages,  or  everybody  to  employ  more 
labour,  the  loss  must  be  submitted  to  ; as  it  affects  everybody  alike, 
no  one  can  hope  to  get  rid  of  it  by  a change  of  employment,  each 
therefore  resigns  himself  to  a diminution  of  profits,  and  prices  remain 
as  they  were.  In  like  manner,  general  low  wages,  or  a general 
increase  in  the  productiveness  of  labour,  does  not  make  prices  low, 
but  profits  high.  If  wages  fall,  (meaning  here  by  wages  the  cost 
of  labour,)  why,  on  that  account,  should  the  producer  lower  his  price  ? 
He  will  be  forced,  it  may  be  said,  by  the  competition  of  other 
capitalists  who  will  crowd  into  his  employment.  But  other  capitalists 
* Supra,  book  iii.  ch.  iv. 


COMPETITION  OF  COUNTRIES  IN  THE  SAME  MARKET  685 


are  algo  paying  lower  wages,  and  by  entering  into  competition  with 
him  they  would  gain  nothing  but  what  they  are  gaining  already. 
The  rate  then  at  which  labour  is  paid,  as  well  as  the  quantity  of  it 
which  is  employed,  affects  neither  the  value  nor  the  price  of  the 
commodity  produced,  except  in  so  far  as  it  is  peculiar  to  that  com- 
modity, and  not  common  to  commodities  generally. 

Since  low  wages  are  not  a cause  of  low  prices  in  the  country 
itself,  so  neither  do  they  cause  it  to  offer  its  commodities  in  foreign 
markets  at  a lower  price.  It  is  quite  true  that  if  the  cost  of  labour 
is  lower  in  America  than  in  England,  America  could  sell  her  cottons 
to  Cuba  at  a lower  price  than  England,  and  still  gain  as  high  a profit 
as  the  English  manufacturer.  But  it  is  not  with  the  profit  of  the 
English  manufacturer  that  the  American  cotton  spinner  will  make 
his  comparison  ; it  is  with  the  profits  of  other  American  capitalists. 
These  enjoy,  in  common  with  himself,  the  benefit  of  a low  cost  of 
labour,  and  have  accordingly  a high  rate  of  profit.  This  high  profit 
the  cotton  spinner  must  also  have  : he  will  not  content  himself  with 
the  English  profit.  It  is  true  he  may  go  on  for  a time  at  that  lower 
rate,  rather  than  change  his  employment ; and  a trade  may  be 
carried  on,  sometimes  for  a long  period,  at  a much  lower  profit  than 
that  for  which  it  would  have  been  originally  engaged  in.  Countries 
which  have  a low  cost  of  labour,  and  high  profits,  do  not  for  that 
reason  undersell  others,  but  they  do  oppose  a more  obstinate  re- 
sistance to  being  undersold,  because  the  producers  can  often  submit 
to  a diminution  of  profit  without  being  unable  to  live,  and  even  to 
thrive,  by  their  business.  But  this  is  all  which  their  advantage 
does  for  them  : and  in  this  resistance  they  wiU  not  long  persevere, 
when  a change  of  times  which  may  give  them  equal  profits  with  the 
rest  of  their  countrymen  has  become  manifestly  hopeless. 

§ 5.  There  is  a class  of  trading  and  exporting  communities, 
on  which  a few  words  of  explanation  seem  to  be  required.  These 
are  hardly  to  be  looked  upon  as  countries,  carrying  on  an  exchange 
of  commodities  with  other  countries,  but  more  properly  as  outlying 
agricultural  or  manufacturing  establishments  belonging  to  a larger 
community.  Our  West  India  colonies,  for  example,  cannot  be 
regarded  as  countries,  with  a productive  capital  of  their  own.  If 
Manchester,  instead  of  being  where  it  is,  were  on  a rock  in  the  North 
Sea,  (its  present  industry  nevertheless  continuing,)  it  would  still 
be  but  a town  of  England,  not  a country  trading  with  England  ; 
it  would  be  merely,  as  now,  a place  where  England  finds  it 


686 


BOOR  III.  CHAPTER  XXV.  § 6 


convenient  to  carry  on  her  cotton  manufacture.  The  West  In^iics, 
in  like  manner,  are  the  place  where  England  finds  it  convenient  to 
carry  on  the  production  of  sugar,  cofiee,  and  a few  other  tropical 
commodities.  All  the  capital  employed  is  English  capital ; almost 
all  the  industry  is  carried  on  for  English  uses ; there  is  little  pro- 
duction of  anything  except  the  staple  commodities,  and  these  are 
sent  to  England,  not  to  be  exchanged  for  things  exported  to  the 
colony  and  consumed  by  its  inhabitants,  but  to  be  sold  in  England 
for  the  benefit  of  the  proprietors  there.  The  trade  with  the  West 
Indies  is  therefore  hardly  to  be  considered  as  external  trade,  but 
more  resembles  the  traffic  between  town  and  country,  and  is  amen- 
able to  the  principles  of  the  home  trade.  The  rate  of  profit  in  the 
colonies  will  be  regulated  by  English  profits ; the  expectation  of 
profit  must  be  about  the  same  as  in  England,  with  the  addition  of 
compensation  for  the  disadvantages  attending  the  more  distant  and 
hazardous  employment ; and  after  allowance  is  made  for  those 
disadvantages,  the  value  and  price  of  West  India  produce  in  the 
English  market  must  be  regulated,  (or  rather  must  have  been  regu- 
lated formerly,)  like  that  of  any  English  commodity,  by  the  cost 
of  production.  For  the  last  twelve  or  fifteen  years  ^ this  principle 
has  been  in  abeyance  : the  price  was  first  kept  up  beyond  the  ratio 
of  the  cost  of  production  by  deficient  supphes,  which  could  not, 
owing  to  the  deficiency  of  labour,  be  increased ; and  more  recently 
the  admission  of  foreign  competition  has  introduced  another  element, 
and  some  of  ^ the  West  India  Islands  are  undersold,  not  so  much 
because  wages  are  higher  than  in  Cuba  and  Brazil,  as  because  they 
are  higher  than  in  England : for  were  they  not  so,  Jamaica  could 
sell  her  sugars  at  Cuban  prices,  and  still  obtain,  though  not  a Cuban, 
an  English  rate  of  profit. 

It  is  worth  while  also  to  notice  another  class  of  small,  but  in  this 
case  mostly  independent  communities,  which  have  supported  and 
enriched  themselves  almost  without  any  productions  of  their  own, 
(except  ships  and  marine  equipments,)  by  a mere  carrying  trade,  and 
commerce  of  entrepot;  by  buying  the  produce  of  one  country,  to 
sell  it  at  a profit  in  another.  Such  were  Venice  and  the  Hanse  Towns, 
The  case  of  these  communities  is  very  simple.  They  made  them- 
selves and  their  capital  the  instruments,  not  of  production,  but  of 
accomplishing  exchanges  between  the  productions  of  other  countries. 
These  exchanges  are  attended  with  an  advantage  to  those  countries 

‘ [So  since  6th  ed.  (1865) ; replacing  “ ten  or  twelve  ” in  1st  ed.  (1848).] 

2 [“  Some  of  ” inserted  in  6th  ed.  (1862).] 


COMPETITION  OF  COUNTRIES  IN  THE  SAME  MARKET  687 


—an  increase  of  the  aggregate  returns  to  industry — part  of  which 
went  to  indemnify  the  agents  for  the  necessary  expenses  of  transport, 
and  another  part  to  remunerate  the  use  of  their  capital  and  mer- 
cantile skill.  The  countries  themselves  had  not  capital  disposable 
for  the  operation.  When  the  Venetians  became  the  agents  of  the 
general  commerce  of  Southern  Europe,  they  had  scarcely  any  com- 
petitors : the  thing  would  not  have  been  done  at  all  without  them, 
and  there  was  really  no  limit  to  their  profits  except  the  limit  to 
what  the  ignorant  feudal  nobihty  could  and  would  give  for  the  un- 
known luxuries  then  first  presented  to  their  sight.  At  a later 
period  competition  arose,  and  the  profit  of  this  operation,  like  that 
of  others,  became  amenable  to  natural  laws.  The  carrying  trade 
was  taken  up  by  Holland,  a country  with  productions  of  its  own  and 
a large  accumulated  capital.  The  other  nations  of  Europe  also  had 
now  capital  to  spare,  and  were  capable  of  conducting  their  foreign 
trade  for  themselves  : but  Holland,  having,  from  a variety  of  cir- 
cumstances, a lower  rate  of  profit  at  home,  could  afford  to  carry  for 
other  countries  at  a smaller  advance  on  the  original  cost  of  the 
goods,  than  would  have  been  required  by  their  own  capitahsts ; 
and  Holland,  therefore,  engrossed  the  greatest  part  of  the  carrying 
trade  of  all  those  countries  which  did  not  keep  it  to  themselves  by 
Navigation  Laws,  constructed,  like  those  of  England,  for  that 
express  purpose. 


CHAPTER  XXVI 


OF  DISTRIBUTION,  AS  AFFECTED  BY  EXCHANGE 

§ 1.  We  have  now  completed,  as  far  as  is  compatible  with  our 
purposes  and  limits,  the  exposition  of  the  machinery  through  which 
the  produce  of  a country  is  apportioned  among  the  different  classes 
of  its  inhabitants ; which  is  no  other  than  the  machinery  of  Exchange, 
and  has  for  the  exponents  of  its  operation  the  laws  of  Value  and  of 
Price.  We  shall  now  avail  ourselves  of  the  light  thus  acquired,  to 
cast  a retrospective  glance  at  the  subject  of  Distribution.  The 
division  of  the  produce  among  the  three  classes.  Labourers,  Capitalists, 
and  Landlords,  when  considered  without  any  reference  to  Exchange, 
appeared  to  depend  on  certain  general  laws.  It  is  fit  that  we  should 
now  consider  whether  these  same  laws  still  operate,  when  the  dis- 
tribution takes  place  through  the  complex  mechanism  of  exchange 
and  money ; or  whether  the  properties  of  the  mechanism  interfere 
with  and  modify  the  presiding  principles. 

The  primary  division  of  the  produce  of  human  exertion  and  fru- 
gality is,  as  we  have  seen,  into  three  shares,  wages,  profits,  and  rent ; 
and  these  shares  are  portioned  out  to  the  persons  entitled  to  them, 
in  the  form  of  money,  and  by  a process  of  exchange ; or  rather, 
the  capitalist,  with  whom  in  the  usual  arrangements  of  society  the 
produce  remains,  pays  in  money,  to  the  other  two  sharers,  the 
market  value  of  their  labour  and  land.  If  we  examine,  on  what 
the  pecuniary  value  of  labour,  and  the  pecuniary  value  of  the  use 
of  land,  depend,  we  shall  find  that  it  is  on  the  very  same  causes  by 
which  we  found  that  wages  and  rent  would  be  regulated  if  there  were 
no  money  and  no  exchange  of  commodities. 

It  is  evident,  in  the  first  place,  that  the  law  of  Wages  is  not  affected 
by  the  existence  or  non-existence  of  Exchange  or  Money.  Wages 
depend  on  the  ratio  between  population  and  capital ; and  would 
do  so  if  all  the  capital  in  the  world  were  the  property  of  one  associa- 
tion, or  if  the  capitalists  among  whom  it  is  shared  maintained  each 


DISTRIBUTION  AS  AFFECTED  BY  EXCHANGE 


689 


an  estaolishment  for  the  production  of  every  article  consumed  in 
the  community,  exchange  of  commodities  having  no  existence. 
As  the  ratio  between  capital  and  population,  In  all  old  countries, 
depends  on  the  strength  of  the  checks  by  which  the  too  rapid  increase 
of  population  ia  restrained,  it  may  be  said,  popularly  speaking,  that 
wages  depend  on  the  checks  to  population ; that  when  the  check  is 
not  death,  by  starvation  or  disease,  wages  depend  on  the  prudence 
of  the  labouring  people  ; and  that  wages  in  any  country  are  habitu- 
ally at  the  lowest  rate  to  which  in  that  country  the  labourer  will 
suffer  them  to  be  depressed  rather  than  put  a restraint  upon  multi- 
plication. 

What  is  here  meant,  however,  by  wages,  is  the  labourer’s  real 
scale  of  comfort ; the  quantity  he  obtains  of  the  things  which  nature 
or  habit  has  made  necessary  or  agreeable  to  him:  wages  in  the 
sense  in  which  they  are  of  importance  to  the  receiver.  In  the  sense 
in  which  they  are  of  importance  to  the  payer,  they  do  not  depend 
exclusively  on  such  simple  principles.  Wages  in  the  first  sense,  the 
wages  on  which  the  labourer’s  comfort  depends,  we  will  call  real 
wages,  or  wages  in  kind.  Wages  in  the  second  sense,  we  may  be 
permitted  to  call,  for  the  present,  money  wages ; assuming,  as  it  is 
allowable  to  do,  that  money  remains  for  the  time  an  invariable 
standard,  no  alteration  taking  place  in  the  conditions  under  which 
the  circulating  medium  itself  is  produced  or  obtained.  If  money 
itself  undergoes  no  variation  in  cost,  the  money  price  of  labour  is 
an  exact  measure  of  the  Cost  of  Labour,  and  may  be  made  use  of  as 
a convenient  symbol  to  express  it. 

The  money  wages  of  labour  are  a compound  result  of  two  elements : 
first,  real  wages,  or  wages  in  kind,  or,  in  other  words,  the  quantity 
which  the  labourer  obtains  of  the  ordinary  articles  of  consumption  ; 
and  secondly,  the  money  prices  of  those  articles.  In  all  old  countries 
— all  countries  in  which  the  increase  of  population  is  in  any  degree 
checked  by  the  difficulty  of  obtaining  subsistence — the  habitual 
money  price  of  labour  is  that  which  will  just  enable  the  labourers, 
one  with  another,  to  purchase  the  commodities  without  which  they 
either  cannot  or  will  not  keep  up  the  population  at  its  customary 
rate  of  increase.^  Their  standard  of  comfort  being  given,  (and  by 
the  standard  of  comfort  in  a labouring  class,  is  meant  that,  rather 
than  forego  which,  they  will  abstain  from  multiplication,)  money 
wages  depend  on  the  money  price,  and  therefore  on  the  cost  of 

1 [So  since  3rd  ed.  (1852).  The  original  text  ran : “ the  commodities 
without  which  they  will  not  consent  to  continue  the  race.”] 


690 


BOOK  III.  CHAPTER  XXVI.  § 2 


production,  of  the  various  articles  which  the  labourers  habitually 
consume  : because  if  their  wages  cannot  procure  them  a given 
quantity  of  these,  their  increase  will  slacken,  and  their  wages  rise. 
Of  these  articles,  food  and  other  agricultural  produce  are  so  much 
the  principal,  as  to  leave  httle  influence  to  anything  else. 

It  is  at  this  point  that  we  are  enabled  to  invoke  the  aid  of  the 
principles  which  have  been  laid  down  in  this  Third  Part.  The  cost 
of  production  of  food  and  agricultural  produce  has  been  analyzed 
in  a preceding  chapter.  It  depends  on  the  productiveness  of  the 
least  fertile  land,  or  of  the  least  productively  employed  portion  of 
capital,  which  the  necessities  of  society  have  as  yet  put  in  requisition 
for  agricultural  purposes.  The  cost  of  production  of  the  food  grown 
in  these  least  advantageous  circumstances,  determines,  as  we  have 
seen,  the  exchange  value  and  money  price  of  the  whole.  In  any 
given  state,  therefore,  of  the  labourers’  habits,  their  money  wages 
depend  on  the  productiveness  of  the  least  fertile  land,  or  least 
productive  agricultural  capital ; on  the  point  which  cultivation  has 
reached  in  its  downward  progress — in  its  encroachments  on  the 
barren  lands,  and  its  gradually  increased  strain  upon  the  powers  of 
the  more  fertile.  Now,  the  force  which  urges  cultivation  in  this 
downward  course  is  the  increase  of  people  ; while  the  counter-force 
which  checks  the  descent,  is  the  improvement  of  agricultural  science 
and  practice,  enabling  the  same  soil  to  yield  to  the  same  labour  more 
ample  returns.  The  costliness  of  the  most  costly  part  of  the  produce 
of  cultivation  is  an  exact  expression  of  the  state,  at  any  given 
moment,  of  the  race  which  population  and  agricultural  skill  are 
always  running  against  each  other. 

§ 2.  It  is  well  said  by  Dr.  Chalmers,  that  many  of  the  most 
important  lessons  in  political  economy  are  to  be  learnt  at  the  extreme 
margin  of  cultivation,  the  last  point  which  the  culture  of  the  soil  has 
reached  in  its  contest  with  the  spontaneous  agencies  of  nature. 
The  degree  of  productiveness  of  this  extreme  margin  is  an  index 
to  the  existing  state  of  the  distribution  of  the  produce  among  the 
three  classes,  of  labourers,  capitahsts,  and  landlords. 

When  the  demand  of  an  increasing  population  for  more  food 
cannot  be  satisfied  without  extending  cultivation  to  less  fertile  land, 
or  incurring  additional  outlay,  with  a less  proportional  return,  on 
land  already  in  cultivation,  it  is  a necessary  condition  of  this  increase 
of  agricultural  produce  that  the  value  and  price  of  that  produce 
must  first  rise.  But  as  soon  as  the  price  has  risen  sufficiently  to  give 


DISTRIBUTION  AS  AFFECTED  BY  EXCHANGE 


691 


to  thfc  additional  outlay  of  capital  the  ordinary  profit,  the  rise  will  not 
go  on  still  further  for  the  purpose  of  enabling  the  new  land,  or  the 
new  expenditure  on  old  land,  to  yield  rent  as  well  as  profit.  The 
land  or  capital  last  put  in  requisition,  and  occupying  what  Dr. 
Chalmers  calls  the  margin  of  cultivation,  will  yield,  and  continue  to 
yield,  no  rent.  But  if  this  yields  no  rent,  the  rent  afforded  by  all 
other  land  or  agricultural  capital  will  be  exactly  so  much  as  it  pro- 
duces more  than  this.  The  price  of  food  will  always  on  the  average 
be  such,  that  the  worst  land,  and  the  least  productive  instalment  of 
the  capital  employed  on  the  better  lands,  shall  just  replace  the 
expenses  with  the  ordinary  profit.  If  the  least  favoured  land  and 
capital  just  do  thus  much,  all  other  land  and  capital  will  yield  an 
extra  profit,  equal  to  the  proceeds  of  the  extra  produce  due  to  their 
superior  productiveness ; and  this  extra  profit  becomes,  by  com- 
petition, the  prize  of  the  landlords.  Exchange,  and  money,  there- 
fore, make  no  difference  in  the  law  of  rent ; it  is  the  same  as  we 
originally  found  it.  Rent  is  the  extra  return  made  to  agricultural 
capital  when  employed  with  peculiar  advantages ; the  exact 
equivalent  of  what  those  advantages  enable  the  producers  to 
economize  in  the  cost  of  production  : the  value  and  price  of  the 
produce  being  regulated  by  the  cost  of  production  to  those  producers 
who  have  no  advantages ; by  the  return  to  that  portion  of  agri- 
cultural capital,  the  circumstances  of  which  are  the  least  favourable. 

§ 3.  Wages  and  Rent  being  thus  regulated  by  the  same  principles, 
when  paid  in  money,  as  they  would  be  if  apportioned  in  kind,  it 
follows  that  Profits  are  so  hkewise.  For  the  surplus,  after  re- 
placing wages  and  paying  rent, ‘'constitutes  Profits. 

We  found  in  the  last  chapter  of  the  Second  Book,  that  the 
advances  of  the  capitalist,  when  analyzed  to  their  ultimate  elements, 
consist  either  in  the  purchase  or  maintenance  of  labour,  or  in  the 
profits  of  former  capitalists  ; and  that  therefore  profits,  in  the  last 
resort,  depend  upon  the  Cost  of  Labour,  falling  as  that  rises,  and 
rising  as  it  falls.  Let  us  endeavour  to  trace  more  minutely  the 
operation  of  this  law. 

There  are  two  modes  in  which  the  Cost  of  Labour,  which  is  cor- 
rectly represented  (money  being  supposed  invariable)  by  the  money 
wages  of  the  labourer,  may  be  increased.  The  labourer  may  obtain 
greater  comforts ; wages  in  kind — real  wages — may  rise.  Or  the 
progress  of  population  may  force  down  cultivation  to  inferior  soils, 
and  more  costly  processes  ; thus  raising  the  cost  of  production,  the 


692 


BOOK  m.  CHAPTER  XXVI.  § S 


value,  and  tlie  price,  of  the  chief  articles  of  the  labourer’s  consump- 
tion. On  either  of  these  suppositions,  the  rate  of  profit  will  fall. 

If  the  labourer  obtains  more  abundant  commodities,  only  by 
reason  of  their  greater  cheapness  ; if  he  obtains  a greater  quantity, 
but  not  on  the  whole  a greater  cost ; real  wages  will  be  increased,  but 
not  money  wages,  and  there  will  be  nothing  to  affect  the  rate  of 
profit.  But  if  he  obtains  a greater  quantity  of  commodities  of 
which  the  cost  of  production  is  not  lowered,  he  obtains  a greater 
cost ; his  money  wages  are  higher.  The  expense  of  these  increased 
money  wages  falls  wholly  on  the  capitalist.  There  are  no  conceivable 
means  by  which  he  can  shake  it  off.  It  may  be  said — it  is,  not 
unfrequently,  said — that  he  will  get  rid  of  it  by  raising  his  price. 
But  this  opinion  we  have  already,  and  more  than  once,  fully  refuted.* 

The  doctrine,  indeed,  that  a rise  of  wages  causes  an  equivalent 
rise  of  prices,  is,  as  we  formerly  observed,  self-contradictory : for 
if  it  did  so,  it  would  not  be  a rise  of  wages  ; the  labourer  would  get 
no  more  of  any  commodity  than  he  had  before,  let  his  money  wages 
rise  ever  so  much ; a rise  of  real  wages  would  be  an  impossibility. 
This  being  equally  contrary  to  reason  and  to  fact,  it  is  evident  that 
a rise  of  money  wages  does  not  raise  prices  ; that  high  wages  are  not 
a cause  of  high  prices.  A rise  of  general  wages  falls  on  profits. 
There  is  no  possible  alternative. 

Having  disposed  of  the  case  in  which  the  increase  of  money 
wages,  and  of  the  Cost  of  Labour,  arises  from  the  labourer’s  obtaining 
more  ample  wages  in  kind,  let  us  now  suppose  it  to  arise  from  the 
increased  cost  of  production  of  the  things  which  he  consumes ; 
owing  to  an  increase  of  population,  unaccompanied  by  an  equivalent 
increase  of  agricultural  skill.  The  augmented  supply  required  by 
the  population  would  not  be  obtained,  unless  the  price  of  food  rose 
sufficiently  to  remunerate  the  farmer  for  the  increased  cost  of 
production.  The  farmer,  however,  in  this  case  sustains  a twofold 
disadvantage.  He  has  to  carry  on  his  cultivation  under  less  favour- 
able conditions  of  productiveness  than  before.  For  this,  as  it  is  a 
disadvantage  belonging  to  him  only  as  a farmer,  and  not  shared  by 
other  employers,  he  will,  on  the  general  principles  of  value,  be 
compensated  by  a rise  of  the  price  of  his  commodity  : indeed,  until 
this  rise  has  taken  place,  he  will  not  bring  to  market  the  required 
increase  of  produce.  But  this  very  rise  of  price  involves  him  in 
another  necessity,  for  which  he  is  not  compensated.  As  the  real 


Supra,  book  iii.  ch.  iv.  § 2,  and  ch.  xxv.  § 4. 


DISTRIBUTION  AS  AFFECTED  BY  EXCHANGE 


693 


wages  of  labour  are  by  supposition  unaltered,  he  must  pay  higher 
money  wages  to  his  labourers.  This  necessity,  being  common  to 
him  with  all  other  capitalists,  forms  no  ground  for  a rise  of  price. 
The  price  will  rise,  until  it  has  placed  him  in  as  good  a situation  in 
respect  of  profits,  as  other  employers  of  labour  : it  will  rise  so  as  to 
indemnify  him  for  the  increased  labour  which  he  must  now  employ 
in  order  to  produce  a given  quantity  of  food  : but  the  increased 
wages  of  that  labour  are  a burthen  common  to  all,  and  for  which  no 
one  can  be  indemnified.  It  will  be  paid  wholly  from  profits. 

Thus  we  see  that  increased  wages,  when  common  to  all  descriptions 
of  productive  labourers,  and  when  really  representing  a greater  Cost 
of  Labour,  are  always  and  necessarily  at  the  expense  of  profits. 
And  by  reversing  the  cases,  we  should  find  in  like  manner  that 
diminished  wages,  when  representing  a really  diminished  Cost  of 
Labour,  are  equivalent  to  a rise  of  profits.  Sut  the  opposition  of 
pecuniary  interest  thus  indicated  between  the  class  of  capitalists 
and  that  of  labourers,  is  to  a great  extent  only  apparent.  Real 
wages  are  a very  different  thing  from  the  Cost  of  Labour,  and  are 
generally  highest  at  the  times  and  places  where,  from  the  easy  terms 
on  which  the  land  yields  all  the  produce  as  yet  required  from  it,  the 
value  and  price  of  food  being  low,  the  cost  of  labour  to  the  employer, 
notwithstanding  its  ample  remuneration,  is  comparatively  cheap, 
and  the  rate  of  profit  consequently  high.i  We  thus  obtain  a full 
confirmation  of  our  original  theorem  that  Profits  depend  on 
the  Cost  of  Labour ; or,  to  express  the  meaning  with  still  greater 
accuracy,  the  rate  of  profit  and  the  cost  of  labour  vary  inversely  as 
one  another,  and  are  joint  effects  of  the  same  agencies  or  causes. 

But  does  not  this  proposition  require  to  be  slightly  modified, 
by  making  allowance  for  that  portion  (though  comparatively  small) 
of  the  expenses  of  the  capitalist,  which  does  not  consist  in  wages 
paid  by  himself  or  reimbursed  to  previous  capitalists,  but  in  the 
profits  of  those  previous  capitalists  ? Suppose,  for  example,  an 
invention  in  the  manufacture  of  leather,  the  advantage  of  which 
should  consist  in  rendering  it  unnecessary  that  the  hides  should 
remain  for  so  great  a length  of  time  in  the  tan-pit.  Shoemakers, 
saddlers,  and  other  workers  in  leather,  would  save  a part  of  that 
portion  of  the  cost  of  their  material  which  consists  of  the  tanner’s 
profits  during  the  time  his  capital  is  locked  up ; and  this  saving, 
it  may  be  said,  is  a source  from  which  they  might  derive  an  increase 

^ The  words  “ as  at  present  in  the  United  States  *'  were  omitted  at  this 
point  from  the  6th  ed.  (1865).] 


694 


BOOK  III.  CHAPTER  XXVI.  § 3 


of  profit,  though  wages  and  the  Cost  of  Labour  remained  exactly  the 
same.  In  the  case  here  supposed,  however,  the  consumer  alone 
would  benefit,  since  the  prices  of  shoes,  harness,  and  all  other  articles 
into  which  leather  enters,  would  fall,  until  the  profits  of  the  producers 
were  reduced  to  the  general  level.  To  obviate  this  objection,  let  us 
suppose  that  a similar  saving  of  expense  takes  place  in  all  depart- 
ments of  production  at  once.  In  that  case,  since  values  and  prices 
would  not  be  afiected,  profits  would  probably  be  raised  ; but  if  we 
look  more  closely  into  the  case  we  shall  find,  that  it  is  because 
the  cost  of  labour  would  be  lowered.  In  this,  as  in  any  other 
case  of  increase  in  the  general  productiveness  of  labour,  if  the 
labourer  obtained  only  the  same  real  wages,  profits  would  be 
raised : but  the  same  real  wages  would  imply  a smaller  Cost  of 
Labour ; the  cost  of  production  of  all  things  having  been,  by  the 
supposition,  diminished.  If,  on  the  other  hand,  the  real  wages  of 
labour  rose  proportionally,  and  the  Cost  of  Labour  to  the  employer 
remained  the  same,  the  advances  of  the  capitalist  would  bear  the 
same  ratio  to  his  returns  as  before,  and  the  rate  of  profit  would  be 
unaltered.  The  reader  who  may  wish  for  a more  minute  examina- 
tion of  this  point,  will  find  it  in  the  volume  of  separate  Essays 
to  which  reference  has  before  been  made.*  The  question  is  too 
intricate  in  comparison  with  its  importance,  to  be  further  entered 
into  in  a work  hke  the  present ; and  I will  merely  say,  that  it  seems 
to  result  from  the  considerations  adduced  in  the  Essay,  that  there 
is  nothing  in  the  case  in  question  to  affect  the  integrity  of  the  theory 
which  affirms  an  exact  correspondence,  in  an  inverse  direction, 
between  the  rate  of  profit  and  the  Cost  of  Labour. 


Essay  IV.  on  Profits  and  IntereaU 


BOOK  IV 


INFLUENCE  OF  THE  PROGEESS  OF 
SOCIETY  ON  PRODUCTION  AND 
DISTRIBUTION 

CHAPTER  I 

GENERAL  CHARACTERISTICS  OF  A PROGRESSIVE  STATE  OF  WEALTH 

§ 1.  The  three  preceding  Parts  include  as  detailed  a view  as 
our  limits  permit,  of  what,  by  a happy  generalization  of  a mathe- 
matical phrase,  has  been  called  the  Statics  of  the  subject.  We  have 
surveyed  the  field  of  economical  facts,  and  have  examined  how 
they  stand  related  to  one  another  as  causes  and  effects ; what 
circumstances  determine  the  amount  of  production,  of  employment 
for  labour,  of  capital  and  population ; what  laws  regulate  rent, 
profits,  and  wages  ; under  what  conditions  and  in  what  proportions 
commodities  are  interchanged  between  individuals  and  between 
countries.  We  have  thus  obtained  a collective  view  of  the  economical 
phenomena  of  society,  considered  as  existing  simultaneously.  We 
have  ascertained,  to  a certain  extent,  the  principles  of  their  inter- 
dependence ; and  when  the  state  of  some  ol  the  elements  is  known, 
we  should  now  be  able  to  infer,  in  a general  way,  the  contempora- 
neous state  of  most  of  the  others.  All  this,  however,  has  only  put 
us  in  possession  of  the  economical  laws  of  a stationary  and  un- 
changing society.  We  have  still  to  consider  the  economical  condition 
of  mankind  as  liable  to  change,  and  indeed  (in  the  more  advanced 
portions  of  the  race,  and  in  all  regions  to  which  their  influence 
reaches)  as  at  all  times  undergoing  progressive  changes.  We  have  to 
consider  what  these  changes  are,  what  are  their  laws,  and  what  their 
ultimate  tendencies ; thereby  adding  a theory  of  motion  to  our  theory 
of  equilibrium — the  Dynamics  of  political  economy  to  the  Statics. 


696 


BOOK  IV.  CHAPTER  I.  § 2 


In  this  inquiry,  it  is  natural  to  commence  by  tracing  the  operation 
of  known  and  acknowledged  agencies.  Whatever  may  be  the 
other  changes  which  the  economy  of  society  is  destined  to  undergo, 
there  is  one  actually  in  progress,  concerning  which  there  can  be  no 
dispute.  In  the  leading  countries  of  the  world,  and  in  all  others  as 
they  coine  within  the  influence  of  those  leading  countries,  there  is 
at  least  one  progressive  movement  which  continues  with  little 
interruption  from  year  to  year  and  from  generation  to  generation ; 
a progress  in  wealth ; an  advancement  of  what  is  called  material 
prosperity.  All  the  nations  which  we  are  accustomed  to  call 
civihzed,  increase  gradually  in  production  and  in  population  : and 
there  is  no  reason  to  doubt,  that  not  only  these  nations  will  for 
some  time  continue  so  to  increase,  but  that  most  of  the  other  nations 
of  the  world,  including  some  not  yet  founded,  will  successively 
enter  upon  the  same  career.  It  will,  therefore,  be  our  first  object 
to  examine  the  nature  and  consequences  of  this  progressive  change ; 
the  elements  which  constitute  it,  and  the  effects  it  produces  on  the 
various  economical  facts  of  which  we  have  been  tracing  the  laws, 
and  especially  on  wages,  profits,  rents,  values,  and  prices. 

§ 2.  Of  the  features  which  characterize  this  progressive  econo- 
mical movement  of  civilized  nations,  that  which  first  excites 
attention,  through  its  intimate  connexion  with  the  phenomena  of 
Production,  is  the  perpetual,  and  so  far  as  human  foresight  can 
extend,  the  unhmited,  growth  of  man’s  power  over  nature.  Our 
knowledge  of  the  properties  and  laws  of  physical  objects  shows  no 
sign  of  approaching  its  ultimate  boundaries  : it  is  advancing  more 
rapidly,  and  in  a greater  number  of  directions  at  once,  than  in  any 
previous  age  or  generation,  and  affording  such  frequent  glimpses 
of  unexplored  fields  beyond,  as  to  justify  the  belief  that  our  acquain- 
tance with  nature  is  still  almost  in  its  infancy.  This  increasing 
physical  knowledge  is  now,  too,  more  rapidly  than  at  any  former 
period,  converted,  by  practical  ingenuity,  into  physical  power. 
The  most  marvellous  of  modern  inventions,  one  which  realizes  the 
imaginary  feats  of  the  magician,  not  metaphorically  but  literally — 
the  electro-magnetic  telegraph — sprang  into  existence  but  a few 
years  after  the  establishment  of  the  scientific  theory  which  it 
realizes  and  exemphfies.  Lastly,  the  manual  part  of  these  great 
scientific  operations  is  now  never  wanting  to  the  intellectual : there 
is  no  difficulty  in  finding  or  forming,  in  a sufficient  number  of  the 
working  hands  of  the  community,  the  skill  requisite  for  executing 


PROGRESSIVE  STATE  OF  WEALTH 


697 


the  most  delicate  processes  of  the  application  of  science  to  practical 
uses.  From  this  union  of  conditions,  it  is  impossible  not  to  look 
forward  to  a vast  multiplication  and  long  succession  of  contrivances 
for  economizing  labour  and  increasing  its  produce  ; and  to  an  ever 
wider  diffusion  of  the  use  and  benefit  of  those  contrivances. 

Another  change,  which  has  always  hitherto  characterized,  and 
will  assuredly  continue  to  characterize,  the  progress  of  civilized 
society,  is  a continual  increase  of  the  security  of  person  and  property. 
The  people  of  every  country  in  Europe,  the  most  backward  as  well 
as  the  most  advanced,  are,  in  each  generation,  better  protected 
against  the  violence  and  rapacity  of  one  another,  both  by  a more 
efficient  judicature  and  police  for  the  suppression  of  private  crime, 
and  by  the  decay  and  destruction  of  those  mischievous  privileges 
which  enabled  certain  classes  of  the  community  to  prey  with  impunity 
upon  the  rest.  They  are  also,  in  every  generation,  better  protected, 
either  by  institutions  or  by  manners  and  opinion,  against  arbitrary 
exercise  of  the  power  of  government.  Even  in  semi-barbarous 
Kussia,  acts  of  spoliation  directed  against  individuals,  who  have  not 
made  themselves  politically  obnoxious,  are  not  supposed  to  be  now 
so  frequent  as  much  to  affect  any  person’s  feelings  of  security. 
Taxation,  in  all  European  countries,  grows  less  arbitrary  and 
oppressive,  both  in  itself  and  in  the  manner  of  levying  it.  Wars, 
and  the  destruction  they  cause,  are  now  usually  i confined,  in  almost 
every  country,  to  those  distant  and  outlying  possessions  at  which 
it  comes  into  contact  with  savages.  Even  the  vicissitudes  of 
fortune  which  arise  from  inevitable  natural  calamities,  are  more 
and  more  softened  to  those  on  whom  they  fall,  by  the  continual 
extension  of  the  salutary  practice  of  insurance. 

Of  this  increased  security,  one  of  the  most  unfailing  effects  is 
a great  increase  both  of  production  and  of  accumulation.  Industry 
and  frugality  cannot  exist  where  there  is  not  a preponderant 
probabihty  that  those  who  labour  and  spare  will  be  permitted  to 
enjoy.  And  the  nearer  this  probability  approaches  to  certainty, 
the  more  do  industry  and  frugahty  become  pervading  qualities 
in  a people.  Experience  has  shown  that  a large  proportion  of  the 
results  of  labour  and  abstinence  may  be  taken  away  by  fixed 
taxation,  without  impairing,  and  sometimes  even  with  the  effect 
of  stimulating,  the  qualities  from  which  a great  production  and  an 
abundant  capital  take  their  rise.  But  those  qualities  are  not  proof 


^ [“  Usually  ” inserted  in  4th  ed.  (1857).] 


BOOK  IV.  CHAPTER  I.  § 2 


against  a high  degree  of  uncertainty.  The  Government  may  carry 
off  a part ; but  there  must  be  assurance  that  it  will  not  interfere, 
nor  suffer  any  one  to  interfere,  with  the  remainder. 

One  of  the  changes  which  most  infallibly  attend  the  progress 
of  modern  society,  is  an  improvement  in  the  business  capacities 
of  the  general  mass  of  mankind.  I do  not  mean  that  the  practical 
sagacity  of  an  individual  human  being  is  greater  than  formerly.  I 
am  inclined  to  believe  that  economical  progress  has  hitherto  had 
even  a contrary  effect.  A person  of  good  natural  endowments,  in 
a rude  state  of  society,  can  do  a great  number  of  things  tolerably 
well,  has  a greater  power  of  adapting  means  to  ends,  is  more  capable 
of  extricating  himself  and  others  from  an  unforeseen  embarrassment, 
than  ninety-nine  in  a hundred  of  those  who  have  known  only  what 
is  called  the  civilized  form  of  life.  How  far  these  points  of  inferiority 
of  faculties  are  compensated,  and  by  what  means  they  might  be 
compensated  still  more  completely,  to  the  civilized  man  as  an 
individual  being,  is  a question  belonging  to  a different  inquiry  from 
the  present.  But  to  civilized  human  beings  collectively  considered, 
the  compensation  is  ample.  What  is  lost  in  the  separate  efficiency  of 
each,  is  far  more  than  made  up  by  the  greater  capacity  of  united 
action.  In  proportion  as  they  put  off  the  qualities  of  the  savage, 
they  become  amenable  to  discipline ; capable  of  adhering  to  plans 
concerted  beforehand,  and  about  which  they  may  not  have  been 
consulted  ; of  subordinating  their  individual  caprice  to  a precon- 
ceived determination,  and  performing  severally  the  parts  allotted 
to  them  in  a combined  undertaking.  Works  of  all  sorts,  imprac- 
ticable to  the  savage  or  the  half-civilized,  are  daily  accomplished  by 
civilized  nations,  not  by  any  greatness  of  faculties  in  the  actual  agents, 
but  through  the  fact  that  each  is  able  to  rely  with  certainty  on  the 
others  for  the  portion  of  the  work  which  they  respectively  undertake. 
The  peculiar  characteristic,  in  short,  of  civilized  beings,  is  the 
capacity  of  co-operation ; and  this,  like  other  faculties,  tends  to 
improve  by  practice,  and  becomes  capable  of  assuming  a constantly 
wider  sphere  of  action. 

Accordingly  there  is  no  more  certain  incident  of  the  progressive 
change  taking  place  in  society,  than  the  continual  growth  of  the 
principle  and  practice  of  co-operation.  Associations  of  individuals 
voluntarily  combining  their  small  contributions  now  perform 
works,  both  of  an  industrial  and  of  many  other  characters,  which 
no  one  person  or  small  number  of  persons  are  rich  enough  to*  accom- 
plish, or  for  the  performance  of  which  the  few  persons  capable  ol 


PROGRESSIVE  STATE  OF  WEALTH 


699 


accomplisliing  them  were  formerly  enabled  to  exact  the  most 
inordinate  remuneration.  As  wealth  increases  and  business  capacity 
improves,  we  may  look  forward  to  a great  extension  of  establish- 
ments, both  for  industrial  and  other  purposes,  formed  by  the 
collective  contributions  of  large  numbers  ; establishments  like  those 
called  by  the  technical  name  of  joint-stock  companies,  or  the  associ- 
ations less  formally  constituted,  which  are  so  numerous  in  England, 
to  raise  funds  for  pubhc  or  philanthropic  objects,  ^or,  lastly,  those 
associations  of  workpeople  either  for  production,  or  to  buy  goods  for 
their  common  consumption,  which  are  now  specially  known  by  the 
name  of  co-operative  societies. 

The  progress  which  is  to  be  expected  in  the  physical  sciences 
and  arts,  combined  with  the  greater  security  of  property,  and 
greater  freedom  in  disposing  of  it,  which  are  obvious  features  in  the 
civihzation  of  modern  nations,  and  with  the  more  extensive  and 
more  skilful  employment  of  the  joint-stock  principle,  afford  space 
and  scope  for  an  indefinite  increase  of  capital  and  production,  and 
for  the  increase  of  population  which  is  its  ordinary  accompaniment. 
That  the  growth  of  population  will  overpass  the  increase  of  pro- 
duction,  there  is  not  much  reason  to  apprehend  ; and  that  it  should  < 
even  keep  pace  with  it,  is  inconsistent  with  the  supposition  of  any 
real  improvement  in  the  poorest  classes  of  the  people.  It  is,  how- 
ever, quite  possible  that  there  might  be  a great  progress  in  industrial 
improvement,  and  in  the  signs  of  what  is  commonly  called  national 
prosperity ; a great  increase  of  aggregate  wealth,  and  even,  in 
some  respects,  a better  distribution  of  it;  that  not  only  the  rich 
might  grow  richer,  but  many  of  the  poor  noiight  grow  rich,  that  the 
intermediate  classes  might  become  more  numerous  and  powerful, 
and  the  means  of  enjoyable  existence  be  more  and  more  largely 
diffused,  while  yet  the  great  class  at  the  base  of  the  whole  might 
increase  in  numbers  only,  and  not  in  comfort  nor  in  cultivation.  We 
must,  therefore,  in  considering  the  effects  of  the  progress  of  industry, 
admit  as  a supposition,  however  greatly  we  deprecate  as  a fact, 
an  increase  of  population  as  long-continued,  as  indefinite,  and 
possibly  even  as  rapid,  as  the  increase  of  production  and  accumu- 
lation. 

With  these  prehminary  observations  on  the  causes  of  change 
At  work  in  a society  which  is  in  a state  of  economical  progress,  I 
proceed  to  a more  detailed  examination  of  the  changes  themselves. 


[The  remaiiiing  words  of  the  sentence  were  added  in  the  6th  ed.  (1865).] 


CHAPTER  II 


INFLUENCE  OF  THE  PROGRESS  OP  INDUSTRY  AND  POPULATION 
ON  VALUES  AND  PRICES 

§ 1.  The  changes  which  the  progress  of  industry  causes  oi 
presupposes  in  the  circumstances  of  production,  are  necessarily 
attended  with  changes  in  the  values  of  commodities. 

The  permanent  values  of  all  things  which  are  neither  under  a 
natural  nor  under  an  artificial  monopoly,  depend,  as  we  have  seen, 
on  their  cost  of  production.  But  the  increasing  power  which 
mankind  are  constantly  acquiring  over  nature,  increases  more  and 
more  the  efficiency  of  human  exertion,  or,  in  other  words,  diminishes 
cost  of  production.  All  inventions  by  which  a greater  quantity 
of  any  commodity  can  bo  produced  with  the  same  labour  or  the 
same  quantity  with  less  labour,  or  which  abridge  the  process,  so  that 
the  capital  employed  needs  not  be  advanced  for  so  long  a time, 
lessen  the  cost  of  production  of  the  commodity.  As,  however,  value 
is  relative ; if  inventions  and  improvements  in  production  were 
made  in  all  commodities,  and  all  in  the  same  degree,  there  would 
be  no  alteration  in  values.  Things  would  continue  to  exchange  for 
each  other  at  the  same  rates  as  before ; and  mankind  would  obtain 
a greater  quantity  of  all  things  in  return  for  their  labour  and 
abstinence,  without  having  that  greater  abundance  measured  and 
declared  (as  it  is  when  it  afiects  only  one  thing)  by  the  diminished 
exchange  value  of  the  commodity. 

As  for  prices,  in  these  circumstances  they  would  be  affected  or 
not,  according  as  the  improvements  in  production  did  or  did  not 
extend  to  the  precious  metals.  If  the  materials  of  money  were  an 
exception  to  the  general  diminution  of  cost  of  production,  the 
values  of  all  other  things  would  fall  in  relation  to  money,  that  is, 
there  would  be  a fall  of  general  prices  throughout  the  world.  But 
if  money,  hke  other  things,  and  in  the  same  degree  as  other  things, 
were  obtained  in  greater  abundance  and  cheapness,  prices  would  be 


INFLUENCE  OF  INDUSTRIAL  PROGRESS  ON  PRICES  701 


no  more  affected  than  values  would  : and  there  would  be  no  visible 
sign  in  the  state  of  the  markets,  of  any  of  the  changes  which  had 
taken  place ; except  that  there  would  be  (if  people  continued  to 
labour  as  much  as  before)  a greater  quantity  of  all  sorts  of  com- 
modities, circulated  at  the  same  prices  by  a greater  quantity  of  money. 

Improvements  in  production  are  not  the  only  circumstance 
accompanying  the  progress  of  industry  which  tends  to  diminish  the 
cost  of  producing,  or  at  least  of  obtaining,  commodities.  Another 
circumstance  is  the  increase  of  intercourse  between  different  parts 
of  the  world.  As  commerce  extends,  and  the  ignorant  attempts 
to  restrain  it  by  tariffs  become  obsolete,  commodities  tend  more 
and  more  to  be  produced  in  the  places  in  which  their  production 
can  be  carried  on  at  the  least  expense  of  labour  and  capital  to 
mankind.  As  civilization  spreads,  and  security  of  person  and 
property  becomes  estabhshed,  in  parts  of  the  world  which  have  not 
hitherto  had  that  advantage,  the  productive  capabilities  of  those 
places  are  called  into  fuller  activity,  for  the  benefit  both  of  their  own 
inhabitants  and  of  foreigners.  The  ignorance  and  misgovernment 
in  which  many  of  the  regions  most  favoured  by  nature  are  still 
grovelling,  afford  work,  probably,  for  many  generations  before  those 
countries  will  be  raised  even  to  the  present  level  of  the  most  civilized 
parts  of  Europe.  Much  will  also  depend  on  the  increasing  migration 
of  labour  and  capital  to  unoccupied  parts  of  the  earth,  of  which  the 
soil,  chmate,  and  situation  are  found,  by  the  ample  means  of  explora- 
tion now  possessed,  to  promise  not  only  a large  return  to  industry, 
but  great  facilities  of  producing  commodities  suited  to  the  markets 
of  old  countries.  Much  as  the  collective  industry  of  the  earth  is 
likely  to  be  increased  in  efficiency  by  the  extension  of  science  and  of 
the  industrial  arts,  a still  more  active  source  of  increased  cheapness 
of  production  will  be  found,  probably,  for  some  time  to  come,  in  the 
gradually  unfolding  consequences  of  Free  Trade,  and  in  the  increasing 
scale  on  which  Emigration  and  Colonization  will  be  carried  on. 

From  the  causes  now  enumerated,  unless  counteracted  by  others, 
the  progress  of  things  enables  a country  to  obtain  at  less  and  less  of 
real  cost,  not  only  its  own  productions  but  those  of  foreign  countries. 
Indeed,  whatever  diminishes  the  cost  of  its  own  productions,  when  of 
an  exportable  character,  enables  it,  as  we  have  already  seen,  to 
obtain  its  imports  at  less  real  cost. 

§ 2,  But  is  it  the  fact,  that  these  tendencies  are  not  counter- 
acted ? Has  the  progress  of  wealth  and  industry  no  effect  in  regard 


702 


BOOK  IV.  CHAPTER  II.  § 2 


to  cost  of  production,  but  to  diminish  it  ? Are  no  causes  of  an 
opposite  character  brought  into  operation  by  the  same  progress, 
sufficient  in  some  cases  not  only  to  neutralize,  but  to  overcome  the 
former,  and  convert  the  descending  movement  of  cost  of  production 
into  an  ascending  movement  ? We  are  already  aware  that  there  are 
such  causes,  and  that,  in  the  case  of  the  most  important  classes  of 
commodities,  food  and  materials,  there  is  a tendency  diametrically 
opposite  to  that  of  which  we  have  been  speaking.  The  cost  of 
production  of  these  commodities  tends  to  increase. 

This  is  not  a property  inherent  in  the  commodities  themselves. 
If  population  were  stationary,  and  the  produce  of  the  earth  never 
needed  to  be  augmented  in  quantity,  there  would  be  no  cause  for 
greater  cost  of  production.  Mankind  would,  on  the  contrary,  have 
the  full  benefit  of  all  improvements  in  agriculture,  or  in  the  arts 
subsidiary  to  it,  and  there  would  be  no  difference,  in  this  respect, 
between  the  products  of  agriculture  and  those  of  manufactures.^ 
The  only  products  of  industry  which,  if  population  did  nort  increase, 
would  be  liable  to  a real  increase  of  cost  of  production,  are  those 
which,  depending  on  a material  which  is  not  renewed,  are  either 
wholly  or  partially  exhaustible ; such  as  coal,  and  most  if  not  all 
metals  ; for  even  iron,  the  most  abundant  as  well  as  most  useful  of 
metallic  products,  which  forms  an  ingredient  of  most  minerals  and 
of  almost  all  rocks,  is  susceptible  of  exhaustion  so  far  as  regards  its 
richest  and  most  tractable  ores. 

When,  however,  population  increases,  as  it  has  never  yet  failed 
to  do  when  the  increase  of  industry  and  of  the  means  of  subsistence 
made  room  for  it,  the  demand  for  most  of  the  productions  of  the 
earth,  and  particularly  for  food,  increases  in  a corresponding  propor- 
tion. And  then  comes  into  effect  that  fundamental  law  of  produc- 
tion from  the  soil,  on  which  we  have  so  frequently  had  occasion  to 
expatiate ; the  law,  that  increased  labour,  in  any  given  state  of 
agricultural  skill,  is  attended  with  a less  than  proportional  increase 
of  produce.  The  cost  of  production  of  the  fruits  of  the  earth 
increases,  cceteris  paribus,  with  every  increase  of  the  demand. 

No  tendency  of  a like  kind  exists  with  respect  to  manufactured 
articles.  The  tendency  is  in  the  contrary  direction.  The  larger 

1 [The  following  passage  of  the  original  (1848)  text  was  omitted  in  the  6th 
ed.  (1862)  : “ The  former,  indeed,  so  far  as  present  foresight  can  extend, 
does  not  seem  to  be  susceptible  to  improved  processes  to  so  great  a degree 
as  some  branches  of  manufacture ; but  inventions  may  be  in  reserve  for  the 
future  which  may  invert  this  relation.”] 


INFLUENCE  OF  INDUSTRIAL  PROGRESS  ON  PRICES  703 


the  scale  on  which  manufacturing  operations  are  carried  on,  Ihe 
more  cheaply  they  can  in  general  be  performed.  Mr.  Senior  has 
gone  the  length  of  enunciating  as  an  inherent  law  of  manufacturing 
industry,  that  in  it  increased  production  takes  place  at  a smaller 
cost,  while  in  agricultural  industry  increased  production  takes  place 
at  a greater  cost.  I cannot  think,  however,  that  even  in  manufac- 
tures, increased  cheapness  follows  increased  production  by  anything 
amounting  to  a law.  It  is  a probable  and  usual,  but  not  a necessary 
consequence. 

As  manufactures,  however,  depend  for  their  materials  either 
upon  agriculture,  or  mining,  or  the  spontaneous  produce  of  the  earth, 
manufacturing  industry  is  subject,  in  respect  of  one  of  its  essentials, 
to  the  same  law  as  agriculture.  But  the  crude  material  generally 
forms  so  small  a portion  of  the  total  cost,  that  any  tendency 
which  may  exist  to  a progressive  increase  in  that  single  item,  is 
much  over-balanced  by  the  diminution  continually  taking  place  in 
all  the  other  elements ; to  which  diminution  it  is  impossible  at 
present  to  assign  any  limit. 

The  tendency,  then,  being  to  a perpetual  increase  of  the  pro- 
ductive power  of  labour  in  manufactures,  while  in  agriculture  and 
mining  there  is  a conflict  between  two  tendencies,  the  one  towards 
an  increase  of  productive  power,  the  other  towards  a diminution  of 
it,  the  cost  of  production  being  lessened  by  every  improvement  in 
the  processes,  and  augmented  by  every  addition  to  population  ; it 
follows  that  the  exchange  values  of  manufactured  articles,  compared 
with  the  products  of  agriculture  and  of  mines,  have,  as  population 
and  industry  advance,  a certain  and  decided  tendency  to  fall. 
Money  being  a product  of  mines,  it  may  also  be  laid  down  as  a rule, 
that  manufactured  articles  tend,  as  society  advances,  to  fall  in  money 
price.  The  industrial  history  of  modern  nations,  especially  during 
the  last  hundred  years,  fuUy  bears  out  this  assertion. 

§ 3.  Whether  agricultural  produce  increases  in  absolute  as  well 
as  comparative  cost  of  production,  depends  on  the  conflict  of  the 
two  antagonist  agencies,  increase  of  population,  and  improvement 
in  agricultural  skill.  In  some,  perhaps  in  most,  states  of  society, 
(looking  at  the  whole  surface  ol  the  earth,)  both  agricultural  skill 
and  population  are  either  stationary,  or  increase  very  slowly,  and 
the  cost  of  production  of  food,  therefore,  is  nearly  stationary.  In  a 
society  which  is  advancing  in  wealth,  population  generally  increases 
faster  than  agricultural  skill,  and  food  consequently  tends  to  become 


704 


BOOK  IV.  CHAPTER  II.  § 4 


more  costly ; but  there  are  times  when  a strong  impulse  sets  in 
towards  agricultural  improvement.  Such  an  impulse  has  shown 
itself  in  Great  Britain  during  the  last  twenty  or  thirty  ^ years.  In 
England  and  Scotland  agricultural  skill  has  of  late  increased  con- 
siderably faster  than  population,  insomuch  that  food  and  other 
agricultural  produce,  notwithstanding  the  increase  of  people,  can  be 
grown  at  less  cost  than  they  were  thirty  years  ago  ^ : and  the  aboh- 
tion  of  the  Com  Laws  has  given  an  additional  stimulus  to  the  spirit 
of  improvement.  In  some  other  countries,  and  particularly  in 
France,  the  improvement  of  agriculture  gains  ground  still  more 
decidedly  upon  population,  because  though  agriculture,  except  in  a 
few  provinces,  advances  slowly,  population  advances  still  more 
slowly,  and  even  with  increasing  slowness ; its  growth  being  kept 
down,  not  by  poverty,  which  is  diminishing,  but  by  pmdence. 

Which  of  the  two  conflicting  agencies  is  gaining  upon  the  other  at 
any  particular  time,  might  be  conjectured  with  tolerable  accuracy 
from  the  money  price  of  agricultural  produce  (supposing  bullion  not 
to  vary  materially  in  value),  provided  a sufficient  number  of  years 
could  be  taken,  to  form  an  average  independent  of  the  fluctuations 
of  seasons.  This,  however,  is  hardly  practicable,  since  Mr.  Tooke 
has  shown  that  even  so  long  a period  as  half  a century  may  include  a 
much  greater  proportion  of  abundant  and  a smaller  of  deficient 
seasons  than  is  properly  due  to  it.  A mere  average,  therefore,  might 
lead  to  conclusions  only  the  more  misleading,  for  their  deceptive 
semblance  of  accuracy.  There  would  be  less  danger  of  error  in 
taking  the  average  of  only  a small  number  of  years,  and  correcting 
it  by  a conjectural  allowance  for  the  character  of  the  seasons,  than 
in  trusting  to  a longer  average  without  any  such  correction.  It  is 
hardly  necessary  to  add,  that  in  founding  conclusions  on  quoted 
prices,  allowance  must  also  be  made  as  far  as  possible  for  any  changes 
in  the  general  exchange  value  of  the  precious  metals.*  * 

§ 4.  Thus  far,  of  the  effect  of  the  progress  of  society  on  the 
permanent  or  average  values  and  prices  of  commodities.  It  re- 

^ [The  “ fifteen  or  twenty  ” of  the  1st  ed.  (1848)  was  replaced  in  the  6th  ed. 
(1865)  by  “ twenty  or  twenty-five,”  and  in  the  7th  (1871)  by  “ twenty  or 
thirty.”] 

2 [Written  in  1848.] 

* [1852]  A still  better  criterion,  perhaps,  than  that  suggested  in  the  text 
would  be  the  increase  or  diminution  of  the  amount  of  the  labourer’s  wages 
estimated  in  agricultural  produce. 

^ [See  Appendix  X.  Prices  in  the  19ih  Century.^ 


INFLUENCE  OF  INDUSTRIAL  PROGRESS  ON  PRICES  705 


mains  to  be  considered  in  what  manner  the  same  progress  affects 
their  fluctuations.  Concerning  the  answer  to  this  question  there 
can  be  no  doubt.  It  tends  in  a very  high  degree  to  diminish  them. 

In  poor  and  backward  societies,  as  in  the  East,  and  in  Europe 
during  the  Middle  Ages,  extraordinary  differences  in  the  price  of 
the  same  commodity  might  exist  in  places  not  very  distant  from  each 
other,  because  the  want  of  roads  and  canals,  the  imperfection 
of  marine  navigation,  and  the  insecurity  of  communications 
generally,  prevented  things  from  being  transported  from  the  places 
where  they  were  cheap  to  those  where  they  were  dear.  The  things 
most  liable  to  fluctuations  in  value,  those  directly  influenced  by  the 
seasons,  and  especially  food,  were  seldom  carried  to  any  great 
distances.  Each  locality  depended,  as  a general  rule,  on  its  own 
produce  and  that  of  its  immediate  neighbourhood.  In  most  years, 
accordingly,  there  was,  in  some  part  or  other  of  any  large  country, 
a real  dearth.  Almost  every  season  must  be  unpropitious  to  some 
among  the  many  soils  and  climates  to  be  found  in  an  extensive  tract 
of  country  ; but  as  the  same  season  is  also  in  general  more  than 
ordinarily  favourable  to  others,  it  is  only  occasionally  that  the 
aggregate  produce  of  the  whole  country  is  deficient,  and  even  then 
in  a less  degree  than  that  of  many  separate  portions  ; while  a 
deficiency  at  all  considerable,  extending  to  the  whole  world,  is  a 
thing  almost  unknown.  In  modern  times,  therefore,  there  is  only 
dearth,  where  there  formerly  would  have  been  famine,  and  sufficiency 
everywhere  when  anciently  there  would  have  been  scarcity  in  some 
places  and  superfluity  in  others. 

The  same  change  has  taken  place  with  respect  to  all  other 
articles  of  commerce.  The  safety  and  cheapness  of  communications, 
which  enable  a deficiency  in  one  place  to  be  supplied  from  the  surplus 
of  another,  at  a moderate  or  even  a small  advance  on  the  ordinary 
price,  render  the  fluctuations  of  prices  much  less  extreme  than 
formerly.  This  effect  is  much  promoted  by  the  existence  of  large 
capitals,  belonging  to  what  are  called  speculative  merchants,  whose 
business  it  is  to  buy  goods  in  order  to  resell  them  at  a profit. 

These  dealers  naturally  buying  things  when  they  are  cheapest,  and 
storing  them  up  to  be  brought  again  into  the  market  when  the  price 
has  become  unusually  high  ; the  tendency  of  their  operations  is  to 
equalize  price,  or  at  least  to  moderate  its  inequalities.  The  prices  of 
things  are  neither  so  much  depressed  at  one  time,  nor  so  much  raised 
at  another,  as  they  would  be  if  speculative  dealers  did  not  exist. 

Speculators,  therefore,  have  a highly  useful  ^^ce  in  the  economy 


706 


BOOK  IV.  CHAPTER  II.  § 6 


of  society ; and  (contrary  to  common  opinion)  the  most  useful 
portion  of  the  class  are  those  who  speculate  in  commodities  affected 
by  the  vicissitudes  of  seasons.  If  there  were  no  corn-dealers,  not 
only  would  the  price  of  corn  be  liable  to  variations  much  more 
extreme  than  at  present,  but  in  a deficient  season  the  necessary 
supplies  might  not  be  forthcoming  at  all.  Unless  there  were 
speculators  in  corn,  or  unless,  in  default  of  dealers,  the  farmers 
became  speculators,  the  price  in  a season  of  abundance  would  fall 
without  any  limit  or  check,  except  the  wasteful  consumption  that 
would  invariably  follow.  That  any  part  of  the  surplus  of  one  year 
remains  to  supply  the  deficiency  of  another,  is  owing  either  to 
farmers  who  withhold  corn  from  the  market,  or  to  dealers  who 
buy  it  when  at  the  cheapest  and  lay  it  up  in  store. 

§ 6.  Among  persons  who  have  not  much  considered  the  subject, 
there  is  a notion  that  the  gains  of  speculators  are  often  made  by 
causing  an  artificial  scarcity  ; that  they  create  a high  price  by  theii 
own  purchases,  and  then  profit  by  it.  This  may  easily  be  shown  to 
be  fallacious.  If  a corn-dealer  makes  purchases  on  speculation,  and 
produces  a rise,  when  there  is  neither  at  the  time  nor  afterwards  any 
cause  for  a rise  of  price  except  his  own  proceedings ; he  no  doubt 
appears  to  grow  richer  as  long  as  his  purchases  continue,  because  he 
is  a holder  of  an  article  which  is  quoted  at  a higher  and  higher  price  : 
but  this  apparent  gain  only  seems  within  his  reach  so  long  as  he  does 
not  attempt  to  realize  it.  If  he  has  bought,  for  instance,  a million 
of  quarters,  and  by  withholding  them  from  the  market,  has  raised 
the  price  ten  shillings  a quarter  ; just  so  much  as  the  price  has  been 
raised  by  withdrawing  a million  quarters,  will  it  be  lowered  by 
bringing  them  back,  and  the  best  that  he  can  hope  is  that  he  will 
lose  nothing  except  interest  and  his  expenses.  If  by  a gradual  and 
cautious  sale  he  is  able  to  realize,  on  some  portion  of  his  stores,  a 
part  of  the  increased  price,  so  also  he  will  undoubtedly  have  had  to 
pay  a part  of  that  price  on  some  portion  of  his  purchases.  He  runs 
considerable  risk  of  incurring  a still  greater  loss  ; for  the  temporary 
high  price  is  very  likely  to  have  tempted  others,  who  had  no  share 
in  causing  it,  and  who  might  otherwise  not  have  found  their  way  to 
his  market  at  all,  to  bring  their  corn  there,  and  intercept  a part  of 
the  advantage.  So  that  instead  of  profiting  by  a scarcity  caused 
by  himself,  he  is  by  no  means  unlikely,  after  buying  in  an  average 
market,  to  be  forced  to  sell  in  a superabundant  one. 

As  an  individual  speculator  cannot  gain  by  a rise  of  price  solely 


INFLUENCE  OF  INDUSTRIAL  PROGRESS  ON  PRICES  707 


of  his  own  creating,  so  neither  can  a number  of  speculators  gain 
collectively  by  a rise  which  their  operations  have  artificially  produced. 
Some  among  a number  of  speculators  may  gain,  by  superior  judg- 
ment or  good  fortune  1 in  selecting  the  time  for  realizing,  but  they 
make  this  gain  at  the  expense,  not  of  the  consumer,  but  of  the  other 
speculators  who  are  less  judicious.  They,  in  fact,  convert  to  their 
own  benefit  the  high  price  produced  by  the  speculations  of  the  others, 
leaving  to  these  the  loss  resulting  from  the  recoil.  It  is  not  to  be 
denied,  therefore,  that  speculators  may  enrich  themselves  by  other 
people’s  loss.  But  it  is  by  the  losses  of  other  speculators.  As 
much  must  have  been  lost  by  one  set  of  dealers  as  is  gained  by 
another  set. 

When  a speculation  in  a commodity  proves  profitable  to  the 
speculators  as  a body,  it  is  because,  in  the  interval  between  their 
buying  and  reselling,  the  price  rises  from  some  cause  independent 
of  them,  their  only  connexion  with  it  consisting  in  having  foreseen 
it.  In  this  case,  their  purchases  make  the  price  begin  to  rise  sooner 
than  it  otherwise  would  do,  thus  spreading  the  privation  of  the 
consumers  over  a longer  period,  but  mitigating  it  at  the  time  of  its 
greatest  height : evidently  to  the  general  advantage.  In  this, 
however,  it  is  assumed  that  they  have  not  overrated  the  rise  which 
they  looked  forward  to.  For  it  often  happens  that  speculative 
purchases  are  made  in  the  expectation  of  some  increase  of  demand, 
or  deficiency  of  supply,  which  after  all  does  not  occur,  or  not  to  the 
extent  which  the  speculator  expected.  In  that  case  the  specidation, 
instead  of  moderating  fluctuation,  has  caused  a fluctuation  of  price 
which  otherwise  would  not  have  happened,  or  aggravated  one  which 
would.  But  in  that  case,  the  speculation  is  a losing  one,  to  the 
speculators  collectively,  however  much  some  individuals  may  gain 
by  it.  All  that  part  of  the  rise  of  price  by  which  it  exceeds  what 
there  are  independent  grounds  for,  cannot  give  to  the  speculators  as 
a body  any  benefit,  since  the  price  is  as  much  depressed  by  their 
sales  as  it  was  raised  by  their  purchases  ; and  while  they  gain  nothing 
by  it,  they  lose,  not  only  their  trouble  and  expenses,  but  almost 
always  much  more,  through  the  effects  incident  to  the  artificial  rise 
of  price,  in  checking  consumption,  and  bringing  forward  supplies 
from  unforeseen  quarters.  The  operations,  therefore,  of  speculative 
dealers,  are  useful  to  the  public  whenever  profitable  to  themselves  ; 
and  though  they  are  sometimes  injurious  to  the  public,  by  heighten- 
ing the  fluctuations  which  their  more  usual  office  is  to  alleviate,  yet 
* [“  Or  good  fortune  ” added  in  3rd  ed.  (1852).] 


708 


BOOK  IV.  CHAPTER  II.  § 5 


wlieuever  this  happens  the  speculators  are  the  greatest  losers. 
The  interest,  in  short,  of  the  speculators  as  a body,  coincides  with 
the  interest  of  the  public  ; and  as  they  can  only  fail  to  serve  the 
public  interest  in  proportion  as  they  miss  their  own,  the  best  way  to 
promote  the  one  is  to  leave  them  to  pursue  the  other  in  perfect 
freedom. 

I do  not  deny  that  speculators  may  aggravate  a local  scarcity. 
In  collecting  corn  from  the  villages  to  supply  the  towns,  they  make 
the  dearth  penetrate  into  nooks  and  corners  which  might  otherwise 
have  escaped  from  bearing  their  share  of  it.  To  buy  and  resell  in 
the  same  place,  tends  to  alleviate  scarcity  ; to  buy  in  one  place  and 
resell  in  another,  may  increase  it  in  the  former  of  the  two  places, 
but  relieves  it  in  the  latter,  where  the  price  is  higher,  and  which,  there- 
fore, by  the  very  supposition,  is  hkely  to  be  suffering  more.  And 
these  sufferings  always  fall  hardest  on  the  poorest  consumers, 
since  the  rich,  by  outbidding,  can  obtain  their  accustomed  supply 
undiminished  if  they  choose.  To  no  persons,  therefore,  are  the 
operations  of  corn-dealers  on  the  whole  so  beneficial  as  to  the  poor. 
Accidentally  and  exceptionally,  the  poor  may  suffer  from  them  : it 
might  sometimes  be  more  advantageous  to  the  rural  poor  to  have 
corn  cheap  in  winter,  when  they  are  entirely  dependent  on  it,  even 
if  the  consequence  were  a dearth  in  spring,  when  they  can  perhaps 
obtain  partial  substitutes.  But  there  are  no  substitutes,  procurable 
at  that  season,  which  serve  in  any  great  degree  to  replace  bread- 
corn  as  the  chief  article  of  food : if  there  were,  its  price  would  fall  in 
the  spring,  instead  of  continuing,  as  it  always  does,  to  rise  till  the 
approach  of  harvest. 

There  is  an  opposition  of  immediate  interest,  at  the  moment  of 
sale,  between  the  dealer  in  corn  and  the  consumer,  as  there  always  is 
between  the  seller  and  the  buyer : and  a time  of  dearth  being  that 
in  which  the  speculator  makes  his  largest  profits,  he  is  an  object  of 
dislike  and  jealousy  at  that  time,  to  those  who  are  suffering  while 
he  is  gaining.  It  is  an  error,  however,  to  suppose  that  the  corn- 
dealer’s  business  affords  him  any  extraordinary  profit : he  makes 
his  gains  not  constantly,  but  at  particular  times,  and  they  must 
therefore  occasionally  be  great,  but  the  chances  of  profit  in  a business 
in  which  there  is  so  much  competition,  cannot  on  the  whole  be 
greater  than  in  other  employments.  A year  of  scarcity,  in  which 
great  gains  are  made  by  corn-dealers,  rarely  comes  to  an  end  without 
a recoil  which  places  many  of  them  in  the  hst  of  bankrupts.  There 
have  been  few  more  promising  seasons  for  corn-dealers  than  the 


INFLUENCE  OF  INDUSTRIAL  PROGRESS  ON  PRICES  709 


year  1847,  and  seldom  was  there  a greater  break-up  among  the 
speculators  than  in  the  autumn  of  that  year.  The  chances  of 
failure,  in  this  most  precarious  trade,  are  a set-off  against  great 
occasional  profits.  If  the  corn-dealer  were  to  sell  his  stores,  during 
a dearth,  at  a lower  price  than  that  which  the  competition  of  the 
consumers  assigns  to  him,  he  would  make  a sacrifice,  to  charity  or 
philanthropy,  of  the  fair  profits  of  his  employment,  which  may  be 
quite  as  reasonably  required  from  any  other  person  of  equal  means. 
His  business  being  a useful  one,  it  is  the  interest  of  the  pubhc  that 
the  ordinary  motives  should  exist  for  carrying  it  on,  and  that  neither 
law  nor  opinion  should  prevent  an  operation  beneficial  to  the 
public  from  being  attended  with  as  much  private  advantage  as  is 
compatible  with  full  and  free  competition. 

It  appears,  then,  that  the  fluctuations  of  values  and  prices 
arising  from  variations  of  supply,  or  from  alterations  in  real  (as 
distinguished  from  speculative)  demand,  may  be  expected  to 
become  more  moderate  as  society  advances.  With  regard  to  those 
which  arise  from  miscalculation,  and  especially  from  the  alternations 
of  undue  expansion  and  excessive  contraction  of  credit,  which 
occupy  so  conspicuous  a place  among  commercial  phenomena,  the 
same  thing  cannot  be  affirmed  -with  equal  confidence.  Such  vicissi- 
tudes, beginning  with  irrational  speculation  and  ending  with  a 
commercial  crisis,  have  not  hitherto  become  either  less  frequent  or 
less  violent  with  the  growth  of  capital  and  extension  of  industry 
Rather  they  may  be  said  to  have  become  more  so  : in  consequence, 
as  is  often  said,  of  increased  competition ; but,  as  I prefer  to  say, 
of  a low  rate  of  profits  and  interest,  which  makes  capitalists  dis- 
satisfied with  the  ordinary  course  of  safe  mercantile  gains.i  The 
connexion  of  this  low  rate  of  profit  with  the  advance  of  population 
and  accumulation,  is  one  of  the  points  to  be  illustrated  in  the 
ensuing  chapters. 


^ [See  Appendix  Y*  Commercial  Cycles,'] 


CHAPTER  III 


INFLUENCE  OF  THE  PROGRESS  OF  INDUSTRY  AND  POPULATION,  ON 
RENTS,  PROFITS,  AND  WAGES 

§ 1.  Continuing  the  inquiry  into  the  nature  of  the  economical 
changes  taking  place  in  a society  which  is  in  a state  of  industrial 
progress,  we  shall  next  consider  what  is  the  effect  of  that  progress 
on  the  distribution  of  the  produce  among  the  various  classes  who 
share  in  it.  We  may  confine  our  attention  to  the  system  of  dis- 
tribution which  is  the  most  complex,  and  which  virtually  includes 
all  others — that  in  which  the  produce  of  manufactures  is  shared 
between  two  classes,  labourers  and  capitalists,  and  the  produce  of 
agriculture  among  three,  labourers,  capitalists,  and  landlords. 

The  characteristic  features  of  what  is  commonly  meant  by  in- 
dustrial progress  resolve  themselves  mainly  into  three,  increase  of 
capital,  increase  of  population,  and  improvements  in  production ; 
understanding  the  last  expression  in  its  widest  sense,  to  include  the 
process  of  procuring  commodities  from  a distance,  as  well  as  that  of 
producing  them.  The  other  changes  which  take  place  are  chiefly 
consequences  of  these  ; as,  for  example,  the  tendency  to  a progressive 
increase  of  the  cost  of  production  of  food  ; arising  from  an  increased 
demand,  which  may  be  occasioned  either  by  increased  population,  or 
by  an  increase  of  capital  and  wages,  enabling  the  poorer  classes  to 
increase  their  consumption.  It  will  be  convenient  to  set  out  by 
considering  each  of  the  three  causes,  as  operating  separately  ; after 
which  we  can  suppose  them  combined  in  any  manner  we  think  fit. 

Let  us  first  suppose  that  population  increases,  capital  and  the 
arts  of  production  remaining  stationary.  One  of  the  effects  of  this 
change  of  circumstances  is  sufficiently  obvious  : wages  will  fall ; 
the  labouring  class  will  be  reduced  to  an  inferior  condition.  The 
state  of  the  capitalist,  on  the  contrary,  will  be  improved.  With 
the  same  capital,  he  can  purchase  more  labour,  and  obtain  more 
produce.  His  rate  of  profit  is  increased.  The  dependence  of  the 


INFLUENCE  OF  PROGRESS  ON  RENTS,  PROFITS,  &c.  711 


rate  of  profits  on  the  cost  of  labour  is  here  verified  ; for  the  labourer 
obtaining  a diminished  quantity  of  commodities,  and  no  alteration 
being  supposed  in  the  circumstances  of  their  produetion,  the 
diminished  quantity  represents  a diminished  cost.  The  labourer 
obtains  not  only  a smaller  real  reward,  but  the  product  of  a smaller 
quantity  of  labour.  The  first  circumstance  is  the  important  one  to 
himself,  the  last  to  his  employer. 

Nothing  has  occurred,  thus  far,  to  afiect  in  any  way  the  value 
of  any  commodity  ; and  no  reason,  therefore,  has  yet  shown  itself, 
why  rent  should  be  either  raised  or  lowered.  But  if  we  look  forward 
another  stage  in  the  series  of  effects,  we  may  see  our  way  to  such 
a consequence.  The  labourers  have  increased  in  numbers  • their 
condition  is  reduced  in  the  same  proportion  ; the  increased  numbers 
divide  among  them  only  the  produce  of  the  same  amount  of  labour 
as  before.  But  they  may  economize  in  their  other  comforts,  and  not 
in  their  food  : each  may  consume  as  much  food,  and  of  as  costly  a 
quahty  as  previously  ; or  they  may  submit  to  a reduction,  but  not 
in  proportion  to  the  increase  of  numbers.  On  this  supposition, 
notwithstanding  the  diminution  of  real  wages,  the  increased 
population  will  require  an  increased  quantity  of  food.  But  since 
industrial  skill  and  knowledge  are  supposed  to  be  stationary,  more 
food  can  only  be  obtained  by  resorting  to  worse  land,  or  to  methods 
of  cultivation  which  are  less  productive  in  proportion  to  the  outlay. 
Capital  for  this  extension  of  agriculture  will  not  be  wanting ; for 
though,  by  hypothesis,  no  addition  takes  place  to  the  capital  in 
existence,  a sufficient  amount  can  be  spared  from  the  industry 
which  previously  supphed  the  other  and  less  pressing  wants  which 
the  labourers  have  been  obliged  to  curtail.  The  additional  supply 
of  food,  therefore,  will  be  produced,  but  produced  at  a greater  cost ; 
and  the  exchange  value  of  agricultural  produce  must  rise.  It  may 
be  objected,  that  profits  having  risen,  the  extra  cost  of  producing 
food  can  be  defrayed  from  profits,  without  any  increase  of  price. 
It  could,  undoubtedly,  but  it  will  not ; because,  if  it  did,  the  agricul- 
turist would  be  placed  in  an  inferior  position  to  other  capitalists. 
The  increase  of  profits,  being  the  effect  of  diminished  wages,  is 
common  to  all  employers  of  labour.  The  increased  expenses  arising 
from  the  necessity  of  a more  costly  cultivation,  affect  the  agriculturist 
alone.  For  this  peculiar  burthen  he  must  be  pecuharly  compensated, 
whether  the  general  rate  of  profit  be  high  or  low.  He  will  not 
submit  indefinitely  to  a deduction  from  his  profits  to  which  other 
capitahsts  are  not  subject.  He  will  not  extend  his  cultivation  by 


712 


BOOK  IV.  CHAPTER  III.  § 1 


laying  out  fresh  capital,  unless  for  a return  sufficient  to  yield  him 
as  high  a profit  as  could  be  obtained  by  the  same  capital  in  other 
investments.  The  value,  therefore,  of  his  commodity  will  rise,  and 
rise  in  proportion  to  the  increased  cost.  The  farmer  will  thus  be 
indemnified  for  the  burthen  which  is  peculiar  to  himself,  and  will 
also  enjoy  the  augmented  rate  of  profit  which  is  common  to  all 
capitalists. 

It  follows,  from  principles  with  which  we  are  already  familiar,  that 
in  these  circumstances  rent  will  rise.  Any  land  can  afiord  to  pay, 
and  under  free  competition  will  pay,  a rent  equal  to  the  excess  of  its 
produce  above  the  return  to  an  equal  capital  on  the  worst  land,  or 
under  the  least  favourable  conditions.  Whenever,  therefore, 
agriculture  is  driven  to  descend  to  worse  land,  or  more  onerous 
processes,  rent  rises.  Its  rise  will  be  twofold,  for,  in  the  first  place, 
rent  in  kind,  or  com  rent,  will  rise ; and  in  the  second,  since  the 
value  of  agricultural  produce  has  also  risen,  rent,  estimated  in 
manufactured  or  foreign  commodities  (which  is  represented,  cceteris 
paribuSy  by  money  rent)  will  rise  still  more. 

The  steps  of  the  process  (if,  after  what  has  been  formerly  said, 
it  is  necessary  to  retrace  them)  are  as  follows.  Corn  rises  in  price, 
to  repay  with  the  ordinary  profit  the  capital  required  for  producing 
additional  corn  on  worse  land  or  by  more  costly  processes.  So  far 
as  regards  this  additional  corn,  the  increased  price  is  but  an  equiva- 
lent for  the  additional  expense  ; but  the  rise,  extending  to  all  corn, 
affords  on  all,  except  the  last  produced,  an  extra  profit.  If  the 
farmer  was  accustomed  to  produce  100  quarters  of  wheat  at  40^.,  and 
120  quarters  are  now  required,  of  which  the  last  twenty  cannot 
be  produced  under  45«.,  he  obtains  the  extra  five  shillings  on  the 
entire  120  quarters,  and  not  on  the  last  twenty  alone.  He  has 
thus  an  extra  25Z.  beyond  the  ordinary  profits,  and  this,  in  a state 
of  free  competition,  he  will  not  be  able  to  retain.  He  cannot 
however  be  compelled  to  give  it  up  to  the  consumer,  since  a less 
price  than  45s.  would  be  inconsistent  with  the  production  of  the  last 
twenty  quarters.  The  price,  then,  will  remain  at  45^.,  and  the  25k 
wiU  be  transferred  by  competition  not  to  the  consumer  but  to  the 
landlord.  A rise  of  rents  is  therefore  inevitably  consequent  on  an 
increased  demand  for  agricultural  produce,  when  unaccompanied  by 
increased  facilities  for  its  production.  A truth  which,  after  this 
final  illustration,  we  may  henceforth  take  for  granted. 

The  new  element  now  introduced — an  increased  demand  for  food 
—besides  occasioning  an  increase  of  rent,  still  further  disturbs  the 


INFLUENCE  OF  PROGRESS  ON  RENTS,  PROFITS,  &c.  713 


distribution  of  the  produce  between  capitalists  and  labourers.  The 
increase  of  population  will  have  diminished  the  reward  of  labour : and 
if  its  cost  is  diminished  as  greatly  as  its  real  remuneration,  profits 
will  be  increased  by  the  full  amount.  If,  however,  the  increase  of 
population  leads  to  an  increased  production  of  food,  which  cannot 
be  supplied  but  at  an  enhanced  cost  of  production,  the  cost  of  labour 
will  not  be  so  much  diminished  as  the  real  reward  of  it,  and  profits, 
therefore,  will  not  be  so  much  raised.  It  is  even  possible  that  they 
might  not  be  raised  at  all.  The  labourers  may  previously  have 
been  so  well  provided  for,  that  the  whole  of  what  they  now  lose  may 
be  struck  off  from  their  other  indulgences,  and  they  may  not,  either 
by  necessity  or  choice,  undergo  any  reduction  in  the  quantity  or 
quality  of  their  food.  To  produce  the  food  for  the  increased  number 
may  be  attended  with  such  an  increase  of  expense,  that  wages, 
though  reduced  in  quantity,  may  represent  as  great  a cost,  may 
be  the  product  of  as  much  labour,  as  before,  and  the  capitalist  may 
not  be  at  all  benefited.  On  this  supposition  the  loss  to  the  labourer 
is  partly  absorbed  in  the  additional  labour  required  for  producing 
the  last  instalment  of  agricultural  produce ; and  the  remainder 
is  gained  by  the  landlord,  the  only  sharer  who  always  benefits  by 
an  increase  of  population. 

§ 2.  Let  us  now  reverse  our  hypothesis,  and  instead  of  sup- 
posing capital  stationary  and  population  advancing,  let  us  suppose 
capital  advancing  and  population  stationary ; the  facilities  of 
production,  both  natural  and  acquired,  being,  as  before,  unaltered. 
The  real  wages  of  labour,  instead  of  falling,  will  now  rise ; and 
since  the  cost  of  production  of  the  things  consumed  by  the  labourer 
is  not  diminished,  this  rise  of  wages  implies  an  equivalent  increase 
of  the  cost  of  labour,  and  diminution  of  profits.  To  state  the  same 
deduction  in  other  terms  ; the  labourers  not  being  more  numerous, 
and  the  productive  power  of  their  labour  being  only  the  same  as  before, 
there  is  no  increase  of  the  produce  ; the  increase  of  wages,  therefore, 
must  be  at  the  charge  of  the  capitalist.  It  is  not  impossible  that 
the  cost  of  labour  might  be  increased  in  even  a greater  ratio  than  its 
real  remuneration.  The  improved  condition  of  the  labourers  may 
increase  the  demand  for  food.  The  labourers  may  have  been  so  ill 
off  before,  as  not  to  have  food  enough ; and  may  now  consume 
more  : or  they  may  choose  to  expend  their  increased  means  partly  or 
wholly  in  a more  costly  quality  of  food,  requiring  more  labour  and 
more  land  ; wheat,  for  example,  instead  of  oats,  or  potatoes.  This 


714 


BOOK  IV.  CHAPTER  III.  § S 


extension  of  agriculture  implies,  as  usual,  a greater  cost  of  production 
and  a higher  price,  so  that  besides  the  increase  of  the  cost  of  labour 
arising  from  the  increase  of  its  reward,  there  will  be  a further  increase 
(and  an  additional  fall  of  profits)  from  the  increased  costliness  of 
the  commodities  of  which  that  reward  consists.  The  same  causes 
will  produce  a rise  of  rent.  What  the  capitahsts  lose,  above  what 
the  labourers  gain,  is  partly  transferred  to  the  landlord,  and  partly 
swallowed  up  in  the  cost  of  growing  food  on  worse  land  or  by  a less 
productive  process. 

§ 3.  Having  disposed  of  the  two  simple  cases,  an  increasing 
population  and  stationary  capital,  and  an  increasing  capital  and 
stationary  population,  we  are  prepared  to  take  into  consideration  the 
mixed  case,  in  which  the  two  elements  of  expansion  are  combined, 
both  population  and  capital  increasing.  If  either  element  increases 
faster  than  the  other,  the  case  is  so  far  assimilated  with  one  or  other 
of  the  two  preceding  : we  shall  suppose  them,  therefore,  to  increase 
with  equal  rapidity ; the  test  of  equahty  being,  that  each  labourer 
obtains  the  same  commodities  as  before,  and  the  same  quantity  of 
those  commodities.  Let  us  examine  what  will  be  the  efiect,  on  rent 
and  profits,  of  this  double  progress. 

Population  having  increased,  without  any  falling  off  in  the 
labourer’s  condition,  there  is  of  course  a demand  for  more  food. 
The  arts  of  production  being  supposed  stationary,  this  food  must 
be  produced  at  an  increased  cost.  To  compensate  for  this  greater 
cost  of  the  additional  food,  the  price  of  agricultural  produce  must 
rise.  The  rise  extending  over  the  whole  amoimt  of  food  produced, 
though  the  increased  expenses  only  apply  to  a part,  there  is  a greatly 
increased  extra  profit,  which,  by  competition,  is  transferred  to  the 
landlord.  Rent  will  rise,  both  in  quantity  of  produce  and  in  cost ; 
while  wages,  being  supposed  to  be  the  same  in  quantity,  will  be 
greater  in  cost.  The  labourer  obtaining  the  same  amount  of  necess- 
aries, money  wages  have  risen ; and  as  the  rise  is  common  to  all 
branches  of  production,  the  capitalist  cannot  indemnify  himself 
by  changing  his  employment,  and  the  loss  must  be  borne  by  profits. 

It  appears,  then,  that  the  tendency  of  an  increase  of  capital  and 
population  is  to  add  to  rent  at  the  expense  of  profits  : though  rent 
does  not  gain  all  that  profits  lose,  a part  being  absorbed  in  increased 
expenses  of  production,  that  is,  in  hiring  or  feeding  a greater  number 
of  labourers  to  obtain  a given  amount  of  agricultural  produce.  By 
profits,  must  of  course  be  understood  the  rate  of  profit;  for  a lower 


INFLUENCE  OF  PROGRESS  ON  RENTS,  PROFITS,  &c.  715 


rate  of  profit  on  a larger  capital  may  yield  a larger  gross  profit, 
considered  absolutely,  though  a smaller  in  proportion  to  the  entire 
produce. 

This  tendency  of  profits  to  fall,  is  from  time  to  time  counteracted 
by  improvements  in  production  : whether  arising  from  increase  of 
knowledge,  or  from  an  increased  use  of  the  knowledge  already 
possessed.  This  is  the  third  of  the  three  elements,  the  effects  of 
which  on  the  distribution  of  the  produce  we  undertook  to  investi- 
gate ; and  the  investigation  will  be  facilitated  by  supposing,  as  in 
the  case  of  the  other  two  elements,  that  it  operates,  in  the  first 
instance,  alone. 

§ 4.  Let  us  then  suppose  capital  and  population  stationary, 
and  a sudden  improvement  made  in  the  arts  of  production  ; by  the 
invention  of  more  efficient  machines,  or  less  costly  processes,  or  by 
obtaining  access  to  cheaper  commodities  through  foreign  trade. 

The  improvement  may  either  be  in  some  of  the  necessaries  or 
Indulgences  which  enter  into  the  habitual  consumption  of  the 
labouring  class  ; or  it  may  be  applicable  only  to  luxuries  consumed 
exclusively  by  richer  people..  Very  few,  however,  of  the  great 
industrial  improvements  are  altogether  of  this  last  description. 
Agricultural  improvements,  except  such  as  specially  relate  to  some 
of  the  rarer  and  more  peculiar  products,  act  directly  upon  the  prin- 
cipal objects  of  the  labourer’s  expenditure.  The  steam-engine, 
and  every  other  invention  which  affords  a manageable  power,  are 
apphcable  to  all  things,  and  of  course  to  those  consumed  by  the 
labourer.  Even  the  power-loom  and  the  spinning- jenny,  though 
apphed  to  the  most  delicate  fabrics,  are  available  no  less  for  the 
coarse  cottons  and  woollens  worn  by  the  labouring  class.  All 
improvements  in  locomotion  cheapen  the  transport  of  necessaries 
as  well  as  of  luxuries.  Seldom  is  a new  branch  of  trade  opened, 
without,  either  directly  or  in  some  indirect  way,  causing  some  of  the 
articles  which  the  mass  of  the  people  consume  to  be  either  produced 
or  imported  at  smaller  cost.  It  may  safely  be  affirmed,  therefore, 
that  improvements  in  production  generally  tend  to  cheapen  the 
commodities  on  which  the  wages  of  the  labouring  class  are  expended. 

In  so  far  as  the  commodities  affected  by  an  improvement  are 
those  which  the  labourers  generally  do  not  consume,  the  improvement 
has  no  effect  in  altering  the  distribution  of  the  produce.  Those 
particular  commodities,  indeed,  are  cheapened  ; being  produced  at 
less  cost,  they  fall  in  value  and  in  price,  and  all  who  consume  them. 


716 


BOOK  IV.  CHAPTER  IH.  § 4 


wlietlier  landlords,  capitalists,  or  skilled  and  privileged  labourers, 
obtain  increased  means  of  enjoyment.  The  rate  of  profits,  how- 
ever, is  not  raised.  There  is  a larger  gross  profit,  reckoned  in 
quantity  of  commodities.  But  the  capital  also,  if  estimated  in  those 
commodities,  has  risen  in  value.  The  profit  is  the  same  percentage 
on  the  capital  that  it  was  before.  The  capitalists  are  not  benefited 
as  capitalists,  but  as  consumers.  The  landlords  and  the  privileged 
classes  of  labourers,  if  they  are  consumers  of  the  same  commodities, 
share  the  same  benefit. 

The  case  is  different  with  improvements  which  diminish  the  cost 
of  production  of  the  necessaries  of  fife,  or  of  commodities  which  enter 
habitually  into  the  consumption  of  the  great  mass  of  labourers. 
The  play  of  the  different  forces  being  here  rather  complex,  it  is 
necessary  to  analyse  it  with  some  minuteness. 

As  formerly  observed,*  there  are  two  kinds  of  agricultural 
improvements.  Some  consist  in  a mere  saving  of  labour,  and  enable 
a given  quantity  of  food  to  be  produced  at  less  cost,  but  not  on  a 
smaller  surface  of  land  than  before.  Others  enable  a given  extent 
of  land  to  yield  not  only  the  same  produce  with  less  labour,  but  a 
greater  produce  ; so  that,  if  no  greater  produce  is  required,  a part  of 
the  land  already  under  culture  may  be  dispensed  with.  As  the  part 
rejected  will  be  the  least  productive  portion,  the  market  will  thence- 
forth be  regulated  by  a better  description  of  land  than  what  was 
previously  the  worst  under  cultivation. 

To  place  the  effect  of  the  improvement  in  a clear  light,  we  must 
suppose  it  to  take  place  suddenly,  so  as  to  leave  no  time,  during  its 
introduction,  for  any  increase  of  capital  or  of  population.  Its  first 
effect  will  be  a fall  of  the  value  and  price  of  agricultural  produce. 
This  is  a necessary  consequence  of  either  kind  of  improvement,  but 
especially  of  the  last. 

An  improvement  of  the  first  kind,  not  increasing  the  produce, 
does  not  dispense  with  any  portion  of  the  land  ; the  margin  of  culti- 
vation (as  Dr.  Chalmers  terms  it)  remains  where  it  was  ; agriculture 
does  not  recede,  either  in  extent  of  cultivated  land,  or  in  elaborateness 
of  method  : and  the  price  continues  to  be  regulated  by  the  same  land, 
and  by  the  same  capital,  as  before.  But  since  that  land  or  capital,  and 
all  other  land  or  capital  which  produces  food,  now  yields  its  produce 
at  smaller  cost,  the  price  of  food  will  fall  proportionally.  If  one- 
tenth  of  the  expense  of  production  has  been  saved,  the  price  of 
produce  will  fall  one-tenth. 

* Supra,  pp.  183-4. 


INFLUENCE  OF  PROGRESS  ON  RENTS,  PROFITS,  &c.  717 


But  suppose  the  improvement  to  be  of  the  second  kind ; enabling 
the  land  to  produce,  not  only  the  same  corn  with  one-tenth  less 
labour,  but  a tenth  more  corn  with  the  same  labour.  Here  the  effect 
is  still  more  decided.  Cultivation  can  now  be  contracted,  and  the 
market  supplied  from  a smaller  quantity  of  land.  Even  if  this 
smaller  surface  of  land  were  of  the  same  average  quality  as  the  larger 
surface,  the  price  would  fall  one-tenth,  because  the  same  produce 
would  be  obtained  with  a tenth  less  labour.  But  since  the  portion 
of  land  abandoned  will  be  the  least  fertile  portion,  the  price  of 
produce  will  thenceforth  be  regulated  by  a better  quality  of  land 
than  before.  In  addition,  therefore,  to  the  original  diminution  of 
one-tenth  in  the  cost  of  production,  there  will  be  a further  diminution, 
corresponding  with  the  recession  of  the  “ margin  ” of  agriculture  to 
land  of  greater  fertility.  There  will  thus  be  a twofold  fall  of  price. 

Let  us  now  examine  the  effect  of  the  improvements,  thus  suddenly 
made,  on  the  division  of  the  produce  ; and  in  the  first  place,  on  rent. 
By  the  former  of  the  two  kinds  of  improvement,  rent  would  be 
diminished.  By  the  second,  it  would  be  diminished  still  more. 

Suppose  that  the  demand  for  food  requires  the  cultivation  of 
three  qualities  of  land,  yielding,  on  an  equal  surface,  and  at  an  equal 
expense,  100,  80,  and  60  bushels  of  wheat.  The  price  of  wheat  will, 
on  the  average,  be  just  sufficient  to  enable  the  third  quality  to  be 
cultivated  with  the  ordinary  profit.  The  first  quahty  therefore  will 
yield  forty  and  the  second  twenty  bushels  of  extra  profit,  constituting 
the  rent  of  the  landlord.  And  first,  let  an  improvement  be  made, 
which,  without  enabling  more  corn  to  be  grown,  enables  the  same 
corn  to  be  grown  with  one-fourth  less  labour.  The  price  of  wheat 
will  fall  one-fourth,  and  80  bushels  will  be  sold  for  the  price  for 
which  60  were  sold  before.  But  the  produce  of  the  land  which 
produces  60  bushels  is  still  required,  and  the  expenses  being  as 
much  reduced  as  the  price,  that  land  can  still  be  cultivated  with 
the  ordinary  profit.  The  first  and  second  qualities  will  therefore 
continue  to  yield  a surplus  of  40  and  20  bushels,  and  corn  rent  will 
remain  the  same  as  before.  But  corn  having  fallen  in  price  one-fourth, 
the  same  corn  rent  is  equivalent  to  a fourth  less  of  money  and  of 
aU  other  commodities.  So  far,  therefore,  as  the  landlord  expends 
his  income  in  manufactured  or  foreign  products,  he  is  one-fourth 
worse  off  than  before.  His  income  as  landlord  is  reduced  to  three- 
quarters  of  its  amount : it  is  only  as  a consumer  of  corn  that  he 
is  as  well  off. 

If  the  improvement  is  of  the  other  kind,  rent  will  fall  in  a still 


718 


BOOK  IV.  CHAPTER  III.  § 4 


greater  ratio.  Suppose  that  the  amount  of  produce  which  the 
market  requires,  can  be  grown  not  only  with  a fourth  less  labour, 
but  on  a fourth  less  land.  If  aU  the  land  already  in  cultivation 
continued  to  be  cultivated,  it  would  yield  a produce  much  larger 
than  necessary.  Land,  equivalent  to  a fourth  of  the  produce,  must 
now  be  abandoned ; and  as  the  third  quality  yielded  exactly  one- 
fourth,  (being  60  out  of  240,)  that  quality  will  go  out  of  cultivation. 
The  240  bushels  can  now  be  grown  on  land  of  the  first  and  second 
qualities  only;  being,  on  the  first,  100  bushels  plus  one-third, or  133 J 
bushels  ; on  the  second,  80  bushels^plus  one-third,  or  106f  bushels  ; 
together  240.  The  second  quality  of  land,  instead  of  the  third, 
is  now  the  lowest,  and  regulates  the  price.  Instead  of  60,  it  is 
sufficient  if  106f  bushels  repay  the  capital  with  the  ordinary  profit. 
The  price  of  wheat  will  consequently  fall,  not  in  the  ratio  of  60  to  80, 
as  in  the  other  case,  but  in  the  ratio  of  60  to  106f . Even  this  gives 
an  insufficient  idea  of  the  degree  in  which  rent  will  be  affected.  The 
whole  produce  of  the  second  quality  of  land  will  now  be  required  to 
repay  the  expenses  of  production.  That  land,  being  the  worst  in 
cultivation,  will  pay  no  rent.  And  the  first  quality  will  only  yield 
the  difference  between  133J  bushels  and  106f,  being  26f  bushels 
instead  of  40.  The  landlords  collectively  will  have  lost  33  J out  of  60 
bushels  in  corn  rent  alone,  while  the  value  and  price  of  what  is  left 
will  have  been  diminished  in  the  ratio  of  60  to  106f . 

It  thus  appears,  that  the  interest  of  the  landlord  is  decidedly 
hostile  to  the  sudden  and  general  introduction  of  agricultural 
improvements.  This  assertion  has  been  called  a paradox,  and  made 
a ground  for  accusing  its  first  promulgator,  Kicardo,  of  great  intel- 
lectual perverseness,  to  say  nothing  worse.  I cannot  discern  in 
what  the  paradox  consists  ; and  the  obliquity  of  vision  seems  to  me 
to  be  on  the  side  of  his  assailants.  The  opinion  is  only  made  to 
appear  absurd  by  stating  it  unfairly.  If  the  assertion  were  that  a 
landlord  is  injured  by  the  improvement  of  his  estate,  it  would  cer- 
tainly be  indefensible  ; but  what  is  asserted  is,  that  he  is  injured  by 
the  improvement  of  the  estates  of.  other  people,  although  his  own  is 
included.  Nobody  doubts  that  he  would  gain  greatly  by  the  im- 
provement if  he  could  keep  it  to  himself,  and  unite  the  two  benefits, 
an  increased  produce  from  his  land,  and  a price  as  high  as  before. 
But  if  the  increase  of  produce  took  place  simultaneously  on  all  lands, 
the  price  would  not  be  as  high  as  before  ; and  there  is  nothing  un- 
reasonable in  supposing  that  the  landlords  would  be,  not  benefited, 
but  injured.  It  is  admitted  that  whatever  permanently  reduces 


INFLUENCE  OF  PROGRESS  ON  RENTS,  PROFITS,  &o.  719 


the  price  of  produce  diminishes  rent : and  it  is  quite  in  accordance 
with  common  notions  to  suppose  that  if,  by  the  increased  produc- 
tiveness of  land,  less  land  were  required  for  cultivation,  its  value, 
like  that  of  other  articles  for  which  the  demand  had  diminished, 
would  fall. 

I am  quite  willing  to  admit  that  rents  have  not  really  been 
lowered  by  the  progress  of  agricultural  improvement ; but  why  ? 
Because  improvement  has  never  in  reality  been  sudden,  but  always 
slow ; at  no  time  much  outstripping,  and  often  falling  far  short  of, 
the  growth  of  capital  and  population,  which  tends  as  much  to  raise 
rent,  as  the  other  to  lower  it,  and  which  is  enabled,  as  we  shall 
presently  see,  to  raise  it  much  higher,  by  means  of  the  additional 
margin  afforded  by  improvements  in  agriculture.  First,  however, 
we  must  examine  in  what  manner  the  sudden  cheapening  of  agricul- 
tural produce  would  affect  profits  and  wages. 

In  the  beginning,  money  wages  would  probably  remain  the  same 
as  before,  and  the  labourers  would  have  the  full  benefit  of  the 
cheapness.  They  would  be  enabled  to  increase  their  consumption 
either  of  food  or  of  other  articles,  and  would  receive  the  same  cost, 
and  a greater  quantity.  So  far,  profits  would  be  unaffected.  But 
the  permanent  remuneration  of  the  labourers  essentially  depends  on 
what  we  have  called  their  habitual  standard ; the  extent  of  the 
requirements  which,  as  a class,  they  insist  on  satisfying  before  they 
choose  to  have  children.  If  their  tastes  and  requirements  receive  a 
durable  impress  from  the  sudden  improvement  in  their  condition, 
the  benefit  to  the  class  will  be  permanent.  But  the  same  cause  which 
enables  them  to  purchase  greater  comforts  and  indulgences  with  the 
same  wages,  would  enable  them  to  purchase  the  same  amount 
of  comforts  and  indulgences  with  lower  wages  ; and  a greater  popu- 
lation may  now  exist,  without  reducing  the  labourers  below  the 
condition  to  which  they  are  accustomed.  Hitherto  this  and  no  other 
has  been  the  use  which  the  labourers  have  commonly  made  of  any 
increase  of  their  means  of  living ; they  have  treated  it  simply  as 
convertible  into  food  for  a greater  number  of  children.  It  is  prob- 
able, therefore,  that  population  would  be  stimulated,  and  that  after 
the  lapse  of  a generation  the  real  wages  of  labour  would  be  no  higher 
than  before  the  improvement : the  reduction  being  partly  brought 
about  by  a fall  of  money  wages,  and  partly  through  the  price  of 
food,  the  cost  of  which,  from  the  demand  occasioned  by  the  in- 
crease of  population,  would  be  increased.  To  the  extent  to  which 
money  wages  fell,  profits  would  rise ; the  capitalist  obtainijig  a 


720 


BOOK  IV.  CHAPTER  IH.  § 5 


greater  quantity  of  equally  efficient  labour  by  the  same  outlay  ol 
capital.  We  thus  see  that  a diminution  of  the  cost  of  hving, 
whether  arising  from  agricultural  improvements  or  from  the 
importation  of  foreign  produce,  if  the  habits  and  requirements  of 
the  labourers  are  not  raised,  usually  lowers  money  wages  and  rent, 
and  raises  the  general  rate  of  profit. 

What  is  true  of  improvements  which  cheapen  the  production  of 
food,  is  true  also  of  the  substitution  of  a cheaper  for  a more  costly 
variety  of  it.  The  same  land  yields  to  the  same  labour  a much 
greater  quantity  of  human  nutriment  in  the  form  of  maize  or  potatoes, 
than  in  the  form  of  wheat.  If  the  labourers  were  to  give  up  bread, 
and  feed  only  on  those  cheaper  products,  taking  as  their  compensa- 
tion, not  a greater  quantity  of  other  consumable  commodities,  but 
earlier  marriages  and  larger  families,  the  cost  of  labour  would  be 
much  diminished,  and  if  labour  continued  equally  efficient,  profits 
would  rise ; while  rent  would  be  much  lowered,  since  food  for  the 
whole  population  could  be  raised  on  half  or  a third  part  of  the  land 
now  sown  with  corn.  At  the  same  time,  it  being  evident  that  land 
too  barren  to  be  cultivated  for  wheat  might  be  made  in  case  of 
necessity  to  yield  potatoes  sufficient  to  support  the  httle  labour 
necessary  for  producing  them,  cultivation  might  ultimately  descend 
lower,  and  rent  eventually  rise  higher,  on  a potato  or  maize  system, 
than  on  a corn  system  ; because  the  land  would  be  capable  of  feeding 
a much  larger  population  before  reaching  the  limit  of  its  powers. 

If  the  improvement,  which  we  suppose  to  take  place,  is  not  in  the 
production  of  food,  but  of  some  manufactured  article  consumed  by 
the  labouring  class,  the  efiect  on  wages  and  profits  wiU  at  first  be 
the  same  ; but  the  efiect  on  rent  very  difierent.  It  will  not  be 
lowered  ; it  will  even,  if  the  ultimate  efiect  of  the  improvement  is 
an  increase  of  population,  be  raised  : in  which  last  case  profits  will 
be  lowered.  The  reasons  are  too  evident  to  require  statement. 

§ 5.  We  have  considered,  on  the  one  hand,  the  manner  in 
which  the  distribution  of  the  produce  into  rent,  profits,  and  wages, 
is  afiected  by  the  ordinary  increase  of  population  and  capital,  and  on 
the  other,  how  it  is  afiected  by  improvements  in  production,  and  more 
especially  in  agriculture.  We  have  found  that  the  former  cause 
lowers  profits  ; and  raises  rent  and  the  cost  of  labour  : while  the 
tendency  of  agricultural  improvements  is  to  diminish  rent ; and  all 
improvements  which  cheapen  any  article  of  the  labourer’s  consump- 
tion, tend  to  diminish  the  cost  of  labour  and  to  raise  profits.  The 


INFLUENCE  OF  PROGRESS  ON  RENTS,  PROFITS,  &o.  721 


tendency  of  each  cause  in  its  separate  state  being  thus  ascertained, 
it  is  easy  to  determine  the  tendency  of  the  actual  course  of  things, 
in  which  the  two  movements  are  going  on  simultaneously,  capital 
and  population  increasing  with  tolerable  steadiness,  while  improve- 
ments in  agriculture  are  made  from  time  to  time,  and  the  knowledge 
and  practice  of  improved  methods  become  diffused  gradually  through 
the  community. 

The  habits  and  requirements  of  the  labouring  classes  being  given 
(which  determine  their  real  wages),  rents,  profits,  and  money  wages 
at  any  given  time,  are  the  result  of  the  composition  of  these  rival 
forces.  If  during  any  period  agricultural  improvement  advances 
faster  than  population,  rent  and  money  wages  during  that  period  will 
tend  downward,  and  profits  upward.  If  population  advances  more 
rapidly  than  agricultural  improvement,  either  the  labourers  will 
Bubmit  to  a reduction  in  the  quantity  or  quality  of  their  food,  or  if  not, 
rent  and  money  wages  will  progressively  rise,  and  profits  will  fall. 

Agricultural  skill  and  knowledge  are  of  slow  growth,  and  still 
slower  difiusion.  Inventions  and  discoveries,  too,  occur  only 
occasionally,  while  the  increase  of  population  and  capital  are  con- 
tinuous agencies.  It  therefore  seldom  happens  that  improvement, 
even  during  a short  time,  has  so  much  the  start  of  population  and 
capital  as  actually  to  lower  rent,  or  raise  the  rate  of  profits.  There 
are  many  countries  in  which  the  growth  of  population  and  capital 
is  not  rapid,  but  in  these  agricultural  improvement  is  less  active 
still.  Population  almost  everywhere  treads  close  on  the  heels  of 
agricultural  improvement,  and  effaces  its  effects  as  fast  as  they 
are  produced. 

The  reason  why  agricultural  improvement  seldom  lowers  rent, 
is  that  it  seldom  cheapens  food,  but  only  prevents  it  from  growing 
dearer  ; and  seldom,  if  ever,  throws  land  out  of  cultivation,  but  only 
enables  worse  and  worse  land  to  be  taken  in  for  the  supply  of  an 
increasing  demand.  What  is  sometimes  called  the  natural  state  of 
a country  which  is  but  half  cultivated,  namely,  that  the  land  is 
highly  productive,  and  food  obtained  in  great  abundance  by  httle 
labour,  is  only  true  of  unoccupied  countries  colonized  by  a civilized 
people.  In  the  United  States  the  worst  land  in  cultivation  is  of  a 
high  quahty  (except  sometimes  in  the  immediate  vicinity  of  markets 
or  means  of  conveyance,  where  a bad  quality  is  compensated  by  a good 
situation)  ^ ; and  even  if  no  further  improvements  were  made  in 


^ [Parenthesis  added  in  2nd  ed.  (1849).] 


722 


BOOR  IV.  CHAPTER  HI.  § 5 


agriculture  or  locomotion,  cultivation  would  have  many  steps  yet  to 
descend,  before  the  increase  of  population  and  capital  would  be 
brought  to  a stand  ; but  in  Europe  five  hundred  years  ago,  though 
so  thinly  peopled  in  comparison  to  the  present  population,  it  is 
probable  that  the  worst  land  under  the  plough  was,  from  the  rude 
state  of  agriculture,  quite  as  unproductive  as  the  worst  land  now 
cultivated ; and  that  cultivation  had  approached  as  near  to  the 
ultimate  limit  of  profitable  tillage,  in  those  times  as  in  the  present. 
What  the  agricultural  improvements  since  made  have  really  done  is, 
by  increasing  the  capacity  of  production  of  land  in  general,  to  enable 
tillage  to  extend  downwards  to  a much  worse  natural  quality  of  land 
than  the  worst  which  at  that  time  would  have  admitted  of  cultiva- 
tion by  a capitalist  for  profit;  thus  rendering  a much  greater 
increase  of  capital  and  population  possible,  and  removing  always  a 
little  and  a little  further  ofi  the  barrier  which  restrains  them  ; popu- 
lation meanwhile  always  pressing  so  hard  against  the  barrier,  that 
there  is  never  any  visible  margin  left  for  it  to  seize,  every  inch  of 
ground  made  vacant  for  it  by  improvement  being  at  once  filled  up 
by  its  advancing  columns.  Agricultural  improvement  may  thus 
be  considered  to  be  not  so  much  a counterforce  conflicting  with 
increase  of  population,  as  a partial  relaxation  of  the  bonds  which 
confine  that  increase. 

The  effects  produced  on  the  division  of  the  produce  by  an 
increase  of  production,  under  the  joint  influence  of  increase  of  popu- 
lation and  capital  and  improvements  of  agriculture,  are  very  different 
from  those  deduced  from  the  hypothetical  cases  previously  discussed. 
In  particular,  the  effect  on  rent  is  most  materially  different.  We 
remarked  that — while  a great  agricultural  improvement  made  sud- 
denly and  universally  would  in  the  first  instance  inevitably  lowei 
rent — such  improvements  enable  rent,  in  the  progress  of  society,  to 
rise  gradually  to  a much  higher  limit  than  it  could  otherwise  attain, 
since  they  enable  a much  lower  quality  of  land  to  be  ultimately 
cultivated.  But  in  the  case  we  are  now  supposing,  which  nearly 
corresponds  to  the  usual  course  of  things,  this  ultimate  effect  becomes 
the  immediate  effect.  Suppose  cultivation  to  have  reached,  or 
almost  reached,  the  utmost  hmit  permitted  by  the  state  of  the 
industrial  arts,  and  rent,  therefore,  to  have  attained  nearly  the 
highest  point  to  which  it  can  be  carried  by  the  progress  of  population 
and  capital,  with  the  existing  amount  of  skill  and  knowledge.  If 
a great  agricultural  improvement  were  suddenly  introduced,  it  might 
throw  back  rent  for  a considerable  space,  leaving  it  to  regain  its 


INFLUENCE  OF  PROGRESS  ON  RENTS,  PROFITS,  &c.  723 


lost  ground  by  the  progress  of  population  and  capital,  and  after- 
wards to  go  on  further.  But,  taking  place,  as  such  improvement 
always  does,  very  gradually,  it  causes  no  retrograde  movement 
of  either  rent  or  cultivation  ; it  merely  enables  the  one  to  go  on  rising, 
and  the  other  extending,  long  after  they  must  otherwise  have 
stopped.  It  would  do  this  even  without  the  necessity  of  resorting 
to  a worse  quality  of  land  ; simply  by  enabling  the  lands  already  in 
cultivation  to  peld  a greater  produce,  with  no  increase  of  the  pro- 
portional cost.  If,  by  improvements  of  agriculture,  all  the  lands  in 
cultivation  could  be  made,  even  with  double  labour  and  capital, 
to  yield  a double  produce,  (supposing  that  in  the  meantime  popula- 
tion increased  so  as  to  require  this  double  quantity)  all  rents  would  be 
doubled. 

To  illustrate  the  point,  let  us  revert  to  the  numerical  example  in  a 
former  page.  Three  qualities  of  land  yield  respectively  100,  80,  and 
60  bushels  to  the  same  outlay  on  the  same  extent  of  surface.  If 
No.  1 could  be  made  to  yield  200,  No.  2, 160,  and  No.  3, 120  bushels, 
at  only  double  the  expense* and  therefore  without  any  increase  of 
the  cost  of  production,  and  if  the  population,  having  doubled, 
required  all  this  increased  quantity,  the  rent  of  No.  1 would  be  80 
bushels  instead  of  40,  and  of  No.  2,  40  instead  of  20,  while  the  price 
and  value  per  bushel  would  be  the  same  as  before  : so  that  corn  rent 
and  money  rent  would  both  be  doubled.  I need  not  point  out  the 
difference  between  this  result,  and  what  we  have  shown  would  take 
place  if  there  were  an  improvement  in  production  without  the 
accompaniment  of  an  increased  demand  for  food. 

Agricultural  improvement,  then,  is  always  ultimately,  and  in 
the  manner  in  which  it  generally  takes  place  also  immediately, 
beneficial  to  the  landlord.  We  may  add,  that  when  it  takes  place 
in  that  manner,  it  is  beneficial  to  no  one  else.  When  the  demand 
for  produce  fully  keeps  pace  with  the  increased  capacity  of  pro- 
duction, food  is  not  cheapened ; the  labourers  are  not,  even  tem- 
porarily, benefited  ; the  cost  of  labour  is  not  diminished,  nor  profits 
raised.  There  is  a greater  aggregate  production,  a greater  produce 
divided  among  the  labourers,  and  a larger  gross  profit ; but  the 
wages  being  shared  among  a larger  population,  and  the  profits 
spread  over  a larger  capital,  no  labourer  is  better  off,  noi  does  any 
capitahst  derive  from  the  same  amount  of  capital  a larger  income. 

The  result  of  this  long  investigation  may  be  summed  up  as 
follows.  The  economical  progTess  of  a society  constituted  of 
landlords,  capitahsts,  and  labourers,  tends  to  the  progressive 


724 


BOOK  IV.  CHAPTER  III.  § 5 


enricliment  of  the  landlord  class  ; ’ while  the  cost  of  the  labourer’s 
subsistence  tends  on  the  whole  to  increase, ^ and  profits  to  fall. 
Agricultural  improvements  are  a counteracting  force  to  the  two  last 
effects  ; but  the  first,  though  a case  is  conceivable  in  which  it  would 
be  temporarily  checked,  is  ultimately  in  a high  degree  promoted  by 
those  improvements  ; and  the  increase  of  population  tends  to 
transfer  all  the  benefits  derived  from  agricultural  improvement 
to  the  landlords  alone.  What  other  consequences,  in  addition  to 
these,  or  in  modification  of  them,  arise  from  the  industrial  progress 
of  a society  thus  constituted,  I shall  endeavour  to  show  in  the 
succeeding  chapter. 


^ [See  Appendix  Z.  Renta  in  the  \^th  Century.] 

2 [See  Appendix  A A.  Wages  in  the  I9th  Century.] 


CHAPTER  IV 


OP  THE  TENDENCY  OP  PROFITS  TO  A MINIMUM 


§ 1.  The  tendency  of  profits  to  fall  as  society  advances,  which 
has  been  brought  to  notice  in  the  preceding  chapter,  was  early 
recognized  by  writers  on  industry  and  commerce ; but  the  laws 
which  govern  profits  not  being  then  understood,  the  phenomenon 
was  ascribed  to  a wrong  cause.  Adam  Smith  considered  profits  to 
be  determined  by  what  he  called  the  competition  of  capital ; and 
concluded  that  when  capital  increased,  this  competition  must  like- 
wise increase,  and  profits  must  fall.  It  is  not  quite  certain  what 
sort  of  competition  Adam  Smith  had  here  in  view.  His  words  in 
the  chapter  on  Profits  of  Stock  * are,  “ When  the  stocks  of  many 
rich  merchants  are  turned  into  the  same  trade,  their  mutual  com- 
petition naturally  tends  to  lower  its  profits ; and  when  there  is  a 
like  increase  of  stock  in  all  the  difierent  trades  carried  on  in  the 
same  society,  the  same  competition  must  produce  the  same  efiect  in 
them  all.”  This  passage  would  lead  us  to  infer  that,  in  Adam  Smith’s 
opinion,  the  manner  in  which  the  competition  of  capital  lowers 
profits  is  by  lowering  prices ; that  being  usually  the  mode  in  which 
an  increased  investment  of  capital  in  any  particular  trade,  lowers 
the  profits  of  that  trade.  But  if  this  was  his  meaning,  he  over- 
looked the  circumstance,  that  the  fall  of  price,  which  if  confined  to 
one  commodity  really  does  lower  the  profits  of  the  producer,  ceases 
to  have  that  effect  as  soon  as  it  extends  to  all  commodities  ; because, 
when  all  things  have  fallen,  nothing  has  really  fallen,  except  nomin- 
ally ; and  even  computed  in  money,  the  expenses  of  every  producer 
have  diminished  as  much  as  his  returns.  Unless  indeed  labour  be 
the  one  commodity  which  has  not  fallen  in  money  priQe,  when  all 
other  things  have : if  so,  what  has  really  taken  place  is  a rise  of 
wages  ; and  it  is  that,  and  not  the  fall  of  prices,  which  has  lowered 


* Wealth  of  Nations,  book  i.  ch.  9. 


726 


BOOK  IV.  CHAPTER  IV.  § 1 


tlifi_pxofits  of  capital.  There  is  another  thing  which  escaped  the 
notice  of  Adam  Smith ; that  the  supposed  universal  fall  of  prices, 
through  increased  competition  of  capitals,  is  a thing  which  cannot 
take  place.  Prices  are  not  determined  by  the  competition  of  the 
sellers  only,  but  also  by  that  of  the  buyers ; by  demand  as  well  as 
supply.  The  demand  which  affects  money  prices  consists  of  all 
the  money  in  the  hands  of  the  community,  destined  to  be  laid  out 
in  commodities  ; and  as  long  as  the  proportion  of  this  to  the  com- 
modities is  not  diminished,  there  is  no  fall  of  general  prices.  Now, 
howsoever  capital  may  increase,  and  give  rise  to  an  increased  pro- 
duction of  commodities,  a full  share  of  the  capital  will  be  drawn  to 
the  business  of  producing  or  importing  money,  and  the  quantity  of 
money  will  be  augmented  in  an  equal  ratio  with  the  quantity  of 
commodities.  For  if  this  were  not  the  case,  and  if  money,  there- 
fore, were,  as  the  theory  supposes,  perpetually  acquiring  increased 
purchasing  power,  those  who  produced  or  imported  it  would  obtain 
constantly  increasing  profits ; and  this  could  not  happen  without 
attracting  labour  and  capital  to  that  occupation  from  other  employ- 
2-‘^<^^*^ents.  If  a general  fall  of  prices,  and  increased  value  of  money, 
were  really  to  occur,  it  could  only  be  as  a consequence  of  increased 
cost  of  production,  from  the  gradual  exhaustion  of  the  mines. 

It  is  not  tenable,  therefore,  in  theory,  that  the  increase  of  capital 
produces,  or  tends  to  produce,  a general  decline  of  money  prices. 
Neither  is  it  true,  that  any  general  dechne  of  prices,  as  capital 
increased,  has  manifested  itself  in  fact.  The  only  things  observed 
to  fall  in  price  with  the  progress  of  society,  are  those  in  which  there 
have  been  improvements  in  production,  greater  than  have  taken 
place  in  the  production  of  the  precious  metals  ; as  for  example,  all 
spun  and  woven  fabrics.  Other  things,  again,  instead  of  falling, 
have  risen  in  price,  because  their  cost  of  production,  compared 
with  that  of  gold  and  silver,  has  increased.  Among  these  are  all 
kinds  of  food,  comparison  being  made  with  a much  earher  period  of 
history.  The  doctrine,  therefore,  that  competition  of  capital  lowers 
profits  by  lowering  prices,  is  incorrect  in  fact,  as  well  as  unsound  in 
principle. 

But  it  is  not  certain  that  Adam  Smith  really  held  that  doctrine  ; 
for  his  language  on  the  subject  is  wavering  and  unsteady,  denoting 
the  absence  of  a definite  and  well-digested  opinion.  Occasionally 
he  seems  to  think  that  the  mode  in  which  the  competition  of  capital 
lowers  profits,  is  by  raising  wages.  And  when  speaking  of  the  rate 
of  profit  in  new  colonies,  he  seems  on  the  very  verge  of  grasping  the 


TENDENCY  OF  PliOFITS  TO  A MINIMUM 


727 


complete  theory  of  the  subject.  “ As  the  colony  increases,  the 
profits  of  stock  gradually  diminish.  When  the  most  fertile  and  best 
situated  lands  have  been  all  occupied,  less  profit  can  be  made  by 
the  cultivators  of  what  is  inferior  both  in  soil  and  situation.”  Had 
Adam  Smith  meditated  longer  on  the  subject,  and  systematized 
his  view  of  it  by  harmonizing  with  each  other  the  various  glimpses 
which  he  caught  of  it  from  different  points,  he  would  have  per- 
ceived that  this  last  is  the  true  cause  of  the  fall  of  profits  usually 
consequent  upon  increase  of  capital. 

§ 2.  Mr.  Wakefield,  in  his  Commentary  on  Adam  Smith,  and 
his  important  writings  on  Colonization,  takes  a much  clearer  view  of 
the  subject,  and  arrives,  through  a substantially  correct  series  of 
deductions,  at  practical  conclusions  which  appear  to  me  just  and 
important ; but  he  is  not  equally  happy  in  incorporating  his  valuable 
speculations  with  the  results  of  previous  thought,  and  reconciling 
them  with  other  truths.  Some  of  the  theories  of  Dr.  Chalmers,  in 
his  chapter  “ On  the  Increase  and  Limits  of  Capital,”  and  the  two 
chapters  which  follow  it,  coincide  in  their  tendency  and  spirit  with 
those  of  Mr.  Wakefield  ; but  Dr.  Chalmers’  ideas,  though  delivered, 
as  is  his  custom,  with  a most  attractive  semblance  of  clearness,  are 
really  on  this  subject  much  more  confused  than  even  those  of  Adam 
Smith,  and  more  decidedly  infected  with  the  often  refuted  notion 
that  the  competition  of  capital  lowers  general  prices ; the  subject 
of  Money  apparently  not  having  been  included  among  the  parts  of 
political  economy  which  this  acute  and  vigorous  writer  had  care- 
fully studied. 

Mr.  Wakefield’s  explanation  of  the  fall  of  profits  is  briefly  this. 
Production  is  limited  not  solely  by  the  quantity  of  capital  and  of 
labour,  but  also  by  the  extent  of  the  “ field  of  employment.”  The 
field  of  employment  for  capital  is  twofold  ; the  land  of  the  country, 
and  the  capacity  of  foreign  markets  to  take  its  manufactured  com- 
modities. On  a limited  extent  of  land,  only  a limited  quantity  of 
capital  can  find  employment  at  a profit.  As  the  quantity  of  capital 
approaches  this  limit,  profit  falls  ; when  the  limit  is  attained,  profit 
is  annihilated ; and  can  only  be  restored  through  an  extension  of 
the  field  of  employment,  either  by  the  acquisition  of  fertile  land,  or 
by  opening  new  markets  in  foreign  countries,  from  which  food  and 
materials  can  be  purchased  with  the  products  of  domestic  capital. 
These  propositions  are,  in  my  opinion,  substantially  true  ; and, 
even  to  the  phraseology  in  which  they  are  expressed,  considered  as 


728 


BOOK  IV.  CHAPTER  IV.  § 3 


adapted  to  popular  and  practical  rather  than  scientific  uses,  I have 
nothing  to  object.  The  error  which  seems  to  me  imputable  bo  Mr. 
Wakefield  is  that  of  supposing  his  doctrines  to  be  in  contradiction 
to  the  principles  of  the  best  school  of  preceding  political  economists, 
instead  of  being,  as  they  really  are,  corollaries  from  those  principles  ; 
though  corollaries  which,  perhaps,  would  not  always  have  been 
admitted  by  those  political  economists  themselves. 

The  most  scientific  treatment  of  the  subject  which  I have  met 
with  is  in  an  essay  on  the  effects  of  Machinery,  published  in  the 
Westminster  Review  for  January  1826,  by  Mr.  William  Ellis ; * 
which  was  doubtless  unknown  to  Mr.  Wakefield,  but  which  had  pre- 
ceded him,  though  by  a different  path,  in  several  of  his  leading 
conclusions.  This  essay  excited  little  notice,  partly  from  being 
published  anonymously  in  a periodical,  and  partly  because  it  was 
much  in  advance  of  the  state  of  political  economy  at  the  time.  In  Mr. 
Ellis’s  view  of  the  subject,  the  questions  and  difficulties  raised  by 
Mr.  Wakefield’s  speculations  and  by  those  of  Dr.  Chalmers,  find  a 
solution  consistent  with  the  principles  of  political  economy  laid 
down  in  the  present  treatise. 

§ 3.  There  is  at  every  time  and  place  some  particular  rate  of 
profit,  which  is  the  lowest  that  will  induce  the  people  of  that  country 
and  time  to  accumulate  savings,  and  to  employ  those  savings  pro- 
ductively. This  minimum  rate  of  profit  varies  according  to  cir- 
cumstances. It  depends  on  two  elements.  One  is,  the  strength  of 
the  effective  desire  of  accumulation ; the  comparative  estimate, 
made  by  the  people  of  that  place  and  era,  of  future  interests  when 
weighed  against  present.  This  element  chiefly  affects  the  inclina- 
tion to  save.  The  other  element,  which  affects  not  so  much  the 
willingness  to  save  as  the  disposition  to  employ  savings  produc- 
tively, ia.  the  _ degree  of  security  of  capital  engaged  in  industrial 
operations.  A state  of  general  insecurity  no  doubt  affects  also  the 
disposition  to  save.  A hoard  may  be  a source  of  additional  danger 
to  its  reputed  possessor.  But  as  it  may  also  be  a powerful  means 
of  averting  dangers,  the  effects  in  this  respect  may  perhaps  be  looked 
upon  as  balanced.  But  in  employing  any  funds  which  a person 
may  possess  as  capital  on  his  own  account,  or  in  lending  it  to  others 
to  be  so  employed,  there  is  always  some  additional  risk,  over  and 

* [1862]  Now  so  much  better  known  through  his  apostolic  exertions,  by 
pen,  purse,  and  person,  for  the  improvement  of  popular  education,  and  especi 
ally  for  the  introduction  into  it  of  the  elements  of  practical  political  economy. 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


729 


above  that  incurred  by  keeping  it  idle  in  his  own  custody.  This 
extra  risk  is  great  in  proportion  as  the  general  state  of  society  is 
insecure  : it  may  be  equivalent  to  twenty,  thirty,  or  fifty  per  cent, 
or  to  no  more  than  one  or  two  ; something,  however,  it  must  always 
be  : and  for  this,  the  expectation  of  profit  must  be  sufficient  to 
compensate. 

There  would  be  adequate  motives  for  a certain  amount  of  saving, 
even  if  capital  yielded  no  profit.  There  would  be  an  inducement  to 
lay  by  in  good  times  a provision  for  bad  ; to  reserve  something  for 
sickness  and  infirmity,  or  as  a means  of  leisure  and  independence  in 
the  latter  part  of  life,  or  a help  to  children  in  the  outset  of  it.  Savings, 
however,  which  have  only  these  ends  in  view,  have  not  much  tend- 
ency to  increase  the  amount  of  capital  permanently  in  existence. 
These  motives  only  prompt  persons  to  save  at  one  period  of  life 
what  they  purpose  to  consume  at  another,  or  what  will  be  con- 
sumed by  their  children  before  they  can  completely  provide  for 
themselves.  The  savings  by  which  an  addition  is  made  to  the 
national  capital  usually  emanate  from  the  desire  of  persons  to 
improve  what  is  termed  their  condition  in  life,  or  to  make  a pro- 
vision for  children  or  others,  independent  of  their  exertions.  Now, 
to  the  strength  of  these  inclinations  it  makes  a very  material  differ- 
ence how  much  of  the  desired  object  can  be  effected  by  a given 
amount  and  duration  of  self-denial ; which  again  depends  on  the 
rate  of  profit.  And  there  is  in  every  country  some  rate  of  profit, 
below  which  persons  in  general  will  not  find  sufficient  motive  to 
save  for  the  mere  purpose  of  growing  richer,  or  of  leaving  others 
better  off  than  themselves.  Any  accumulation,  therefore,  by 
which  the  general  capital  is  increased,  requires  as  its  necessary  con- 
dition a certain  rate  of  profit ; a rate  which  an  average  person  will 
deem  to  be  an  equivalent  for  abstinence,  with  the  addition  of  a 
sufficient  insurance  against  risk.  There  are  always  some  persons  in 
whom  the  effective  desire  of  accumulation  is  above  the  average, 
and  to  whom  less  than  this  rate  of  profit  is  a sufficient  inducement  to 
save  ; but  these  merely  step  into  the  place  of  others  whose  taste  for 
expense  and  indulgence  is  beyond  the  average,  and  who,  instead  of 
saving,  perhaps  even  dissipate  what  they  have  received. 

I have  already  observed  that  this  minimum  rate  of  profit,  less 
than  which  is  not  consistent  with  the  further  increase  of  capital,  is 
lower  in  some  states  of  society  than  in  others  ; and  I may  add,  that 
the  kind  of  social  progress  characteristic  of  our  present  civilization 
tends  to  diminish  it.  In  the  first  place,  one  of  the  acknowledged 


730 


BOOK  IV.  CHAPTER  IV.  § 3 


effects  of  that  progress  is  an  increase  of  general  security.  Destruction 
by  wars,  and  spoliation  by  private  or  public  violence,  are  less  and 
less  to  be  apprehended ; and  the  improvements  which  may  be 
looked  for  in  education  and  in  the  administration  of  justice,  or,  in 
their  default,  increased  regard  for  opinion,  afford  a growing  protec- 
tion against  fraud  and  reckless  mismanagement.  The  risks  attend- 
ing the  investment  of  savings  in  productive  employment  require, 
therefore,  a smaller  rate  of  profit  to  compensate  for  them  than  was 
required  a century  ago,  and  will  hereafter  require  less  than  at 
present.  In  the  second  place,  it  is  also  one  of  the  consequences  of 
civilization  that  mankind  become  less  the  slaves  of  the  momerd,  and 
more  habituated  to  carry  their  desires  and  purposes  iorward-into  a 
distant  future.  This  increase  of  providence  is  a natural  result  of 
the  increased  assurance  with  which  futurity  can  be  looked  forward 
to ; and  is,  besides,  favoured  by  most  of  the  influences  which  an 
industrial  life  exercises  over  the  passions  and  inchnations  of  human 
nature.  In  proportion  as  life  has  fewer  vicissitudes,  as  habits  become 
more  fixed,  and  great  prizes  are  less  and  less  to  be  hoped  for  by  any 
other  means  than  long  perseverance,  mankind  become  more  wilhng 
to  sacrifice  present  indulgence  for  future  objects.  This  increased 
capacity  of  forethought  and  self-control  may  assuredly  find  other 
things  to  exercise  itself  upon  than  increase  of  riches,  and  some 
considerations  connected  with  this  topic  will  shortly  be  touched  upon. 
The  present  kind  of  social  progress,  however,  decidedly  tends, 
though  not  perhaps  to  increase  the  desire  of  accumulation,  yet  to 
weaken  the  obstacles  to  it,  and  to  diminish  the  amount  of  profit 
which  people  absolutely  require  as  an  inducement  to  save  and 
accumulate.  For  these  two  reasons,  diminution  of  risk  and  increase 
^ of  providence,  a profit  or  interest  of  three  or  four  per  cent  is  as 
sufficient  a motive  to  the  increase  of  capital  in  England  at  the 
present  day,  as  thirty  or  forty  per  cent  in  the  Burmese  Empire, 
or  in  England  at  the  time  of  King  John.  In  Holland  during  the  last 
century  a return  of  two  per  cent  on  government  security,  was 
consistent  with  an  undiminished,  if  not  with  an  increasing,  capital. 
But  though  the  minimum  rate  of  profit  is  thus  liable  to  vary,  and 
though  to  specify  exactly  what  it  is  would  at  any  given  time  be 
impossible,  such  a minimum  always  exists  ; and  whether  it  be  high 
or  low,  when  once  it  is  reached,  no  further  increase  of  capital  can 
for  the  present  take  place.  The  country  has  then  attained  what 
is  known  to  political  economists  under  the  name  of  the  stationary 
state. 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


731 


§ 4.  We  now  arrive  at  the  fundamental  proposition  which 
til  is  chapter  is  intended  to  inculcate.  When  a country  has  long 
possessed  a large  production,  and  a large  net  income  to  make 
savings  from,  and  when,  therefore,  the  means  have  long  existed 
of  making  a great  annual  addition  to  capital ; (the  country  not 
having,  hke  America  [1848],  a large  reserve  of  fertile  land  still 
unused ;)  it  is  one  of  the  characteristics  of  such  a country,  that  the 
rate  of  profit  is  habitually  within,  as  it  were,  a hand’s  breadth  of  the 
minimum,  and  the  country  therefore  on  the  very  verge  of  the 
stationary  state.  By  this  I do  not  mean  that  this  state  is  likely, 
in  any  of  the  great  countries  of  Europe,  to  be  soon  actually  reached, 
or  that  capital  does  not  still  yield  a profit  considerably  greater  than 
what  is  barely  sufficient  to  induce  the  people  of  those  countries 
to  save  and  accumulate.  My  meaning  is,  that  it  would  require 
but  a short  time  to  reduce  profits  to  the  minimum,  if  capital  con- 
tinued to  increase  at  its  present  rate,  and  no  circumstances  having  a 
tendency  to  raise  the  rate  of  profit  occurred  in  the  meantime.  The 
expansion  of  capital  would  soon  reach  its  ultimate  boundary,  if 
the  boundary  itself  did  not  continually  open  and  leave  more  space. 

In  England,  the  ordinary  rate  of  interest  on  government  securities, 
in  which  the  risk  is  next  to  nothing,  may  be  estimated  [1848]  at  a 
little  more  than  three  per  cent : in  all  other  investments,  therefore, 
the  interest  or  profit  calculated  upon  (exclusively  of  what  is  properly 
a remuneration  for  talent  or  exertion)  must  be  as  much  more  than 
this  amount  as  is  equivalent  to  the  degree  of  risk  to  which  the 
capital  is  thought  to  be  exposed.  Let  us  suppose  that  in  England 
even  so  small  a net  profit  as  one  per  cent,  exclusive  of  insurance 
against  risk,  would  constitute  a sufficient  inducement  to  save,  but 
that  less  than  this  would  not  be  a sufficient  inducement.  I now  say, 
that  the  mere  continuance  of  the  present  annual  increase  of  capital, 
if  no  circumstance  occurred  to  counteract  its  effect,  would  suffice 
in  a small  number  of  years  to  reduce  the  rate  of  net  profit  to  one 
per  cent. 

To  fulfil  the  conditions  of  the  hypothesis,  we  must  suppose  an 
entire  cessation  of  the  exportation  of  capital  for  foreign  investment. 
No  more  capital  sent  abroad  for  railways  or  loans ; no  more  emi- 
grants taking  capital  with  them,  to  the  colonies,  or  to  other  countries  ; 
no  fresh  advances  made,  or  credits  given,  by  bankers  or  merchants 
to  their  foreign  correspondents.  We  must  also  assume  that  there 
are  no  fresh  loans  for  improductive  expenditure,  by  the  government, 
or  on  mortgage,  or  otherwise ; and  none  of  the  waste  of  capital 


732 


BOOK  IV.  CHAPTER  IV.  § 4 


which  now  takes  place  by  the  failure  of  undertakings  which  people 
are  tempted  to  engage  in  by  the  hope  of  a better  income  than  can 
be  obtained  in  safe  paths  at  the  present  habitually  low  rate  of  profit. 
We  must  suppose  the  entire  savings  of  the  community  to  be  annually 
invested  in  really  productive  employment  within  the  country  itself  ; 
and  no  new  channels  opened  by  industrial  inventions,  or  by  a more 
extensive  substitution  of  the  best  known  processes  for  inferior  ones. 

Few  persons  would  hesitate  to  say,  that  there  would  be  great 
difficulty  in  finding  remunerative  employment  every  year  for  so 
much  new  capital,  and  most  would  conclude  that  there  would  be 
what  used  to  be  termed  a general  glut ; that  commodities  would 
be  produced,  and  remain  unsold,  or  be  sold  only  at  a loss.  But  the 
full  examination  which  we  have  already  given  to  this  question,* 
has  shown  that  this  is  not  the  mode  in  which  the  inconvenience 
would  be  experienced.  The  difficulty  would  not  consist  in  any 
want  of  a market.  If  the  new  capital  were  duly  shared  among 
many  varieties  of  employment,  it  would  raise  up  a demand  for  its 
own  produce,  and  there  would  be  no  cause  why  any  part  of  that 
produce  should  remain  longer  on  hand  than  formerly.  What  would 
really  be,  not  merely  difficult,  but  impossible,  would  be  to  employ 
this  capital  without  submitting  to  a rapid  reduction  of  the  rate  of 
profit. 

As  capital  increased,  population  either  would  also  increase,  or 
it  would  not.  If  it  did  not,  wages  would  rise,  and  a greater  capital 
would  be  distributed  in  wages  among  the  same  number  of  labourers. 
There  being  no  more  labour  than  before,  and  no  improvements  to 
render  the  labour  more  efficient,  there  would  not  be  any  increase  of 
the  produce  ; and  as  the  capital,  however  largely  increased,  would 
only  obtain  the  same  gross  return,  the  whole  savings  of  each  year 
would  be  exactly  so  much  subtracted  from  the  profits  of  the  next 
and  of  every  following  year.  It  is  hardly  necessary  to  say  that  in 
such  circumstances  profits  would  very  soon  fall  to  the  point  at 
which  further  increase  of  capital  would  cease.  An  augmentation 
of  capital,  much  more  rapid  than  that  of  population,  must  soon 
reach  its  extreme  hmit,  unless  accompanied  by  increased  efficiency 
of  labour  (through  inventions  and  discoveries,  or  improved  mental 
and  physical  education),  or  unless  some  of  the  idle  people,  or  of  the 
unproductive  labourers,  became  productive. 

If  population  did  increase  with  the  increase  of  capital  and  in 


* Book  iii.  ch.  14. 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


733 


proportion  to  it,  the  fall  of  profits  would  still  be  inevitable.  In- 
creased population  implies  increased  demand  for  agricultural  produce. 
In  the  absence  of  industrial  improvements,  this  demand  can  only 
be  supplied  at  an  increased  cost  of  production,  either  by  cultivating 
worse  land,  or  by  a more  elaborate  and  costly  cultivation  of  the 
land  already  under  tillage.  The  cost  of  the  labourer’s  subsistence  is 
therefore  increased  ; and  unless  the  labourer  submits  to  a deterio- 
ration of  his  condition,  profits  must  fall.  In  an  old  country  hke 
England,  if,  in  addition  to  supposing  all  improvement  in  domestic 
agriculture  suspended,  we  suppose  that  there  is  no  increased  pro- 
duction in  foreign  countries  for  the  Enghsh  market,  the  fall  of 
profits  would  be  very  rapid.  If  both  these  avenues  to  an  increased 
supply  of  food  were  closed,  and  population  continued  to  increase, 
as  it  is  said  to  do,  at  the  rate  of  a thousand  a day,  all  waste  land 
which  admits  of  cultivation  in  the  existing  state  of  knowledge 
would  soon  be  cultivated,  and  the  cost  of  production  and  price  of 
food  would  be  so  increased,  that,  if  the  labourers  received  the 
increased  money  wages  necessary  to  compensate  for  their  increased 
expenses,  profits  would  very  soon  reach  the  minimum.  The  fall  of 
profits  would  be  retarded  if  money  wages  did  not  rise,  or  rose  in  a less 
degree  ; but  the  margin  which  can  be  gained  by  a deterioration  of 
the  labourers’  condition  is  a very  narrow  one  : in  general  they 
cannot  bear  much  reduction ; when  they  can,  they  have  also  a 
higher  standard  of  necessary  requirements,  and  will  not.  On  the 
whole,  therefore,  we  may  assume  that  in  such  a country  as  England, 
if  the  present  annual  amount  of  savings  were  to  continue,  without 
any  of  the  counteracting  circumstances  which  now  keep  in  check 
the  natural  influence  of  those  savings  in  reducing  profit,  the  rate  of 
profit  would  speedily  attain  the  minimum,  and  all  further  accumu- 
lation of  capital  would  for  the  present  cease. 

§ 5.  What,  then,  are  these  counteracting  circumstances, 
which,  in  the  existing  state  of  things,  maintain  a tolerably  equal 
struggle  against  the  downward  tendency  of  profits,  and  prevent  the 
great  annual  savings  which  take  place  in  this  country  from  depressing 
the  rate  of  profit  much  nearer  to  that  lowest  point  to  which  it  is 
always  tending,  and  which,  left  to  itself,  it  would  so  promptly 
attain  ? The  resisting  agencies  are  of  several  kinds. 

First  among  them,  we  may  notice  one  which  is  so  simple  and 
so  conspicuous,  that  some  political  economists,  especially  M.  de 
Sismondi  and  Dr.  Chalmers,  have  attended  to  it  almost  to  the 


734 


BOOK  IV,  CHAPTER  IV.  § 5 


a 


, exclusion  of  all  others.  This  is,  the  waste  of  capital  in  periods 
of  over-trading  and  rash  speculation,  and  in  the  commercial  revul- 
ysions  by  which  such  times  are  always  followed.  It  is  true  that  a 
great  part  of  what  is  lost  at  such  periods  is  not  destroyed,  but 
merely  transferred,  hke  a gambler’s  losses,  to  more  successful 
speculators.  But  even  of  these  mere  transfers,  a large  portion  is 
always  to  foreigners,  by  the  hasty  purchase  of  unusual  quantities 
of  foreign  goods  at  advanced  prices.  And  much  also  is  absolutely 
wasted.  Mines  are  opened,  railways  or  bridges  made,  and  many 
other  works  of  uncertain  profit  commenced,  and  in  these  enterprises 
much  capital  is  sunk  which  yields  either  no  return,  or  none  adequate 
to  the  outlay.  Factories  are  built  and  machinery  erected  beyond 
what  the  market  requires,  or  can  keep  in  employment.  Even 
if  they  are  kept  in  employment,  the  capital  is  no  less  sunk ; it  has 
been  converted  from  circulating  into  fixed  capital,  and  has  ceased 
to  have  any  influence  on  wages  or  profits.  Besides  this,  there  is  a 
great  unproductive  consumption  of  capital,  during  the  stagnation 
which  follows  a period  of  general  over-trading.  Establishments 
are  shut  up,  or  kept  working  without  any  profit,  hands  are  discharged, 
and  numbers  of  persons  in  all  ranks,  being  deprived  of  their  income, 
and  thrown  for  support  on  their  savings,  find  themselves,  after  the 
crisis  has  passed  away,  in  a condition  of  more  or  less  impoverishment. 
Such  are  the  effects  of  a commercial  revulsion : and  that  such 
revulsions  are  almost  periodical,  is  a consequence  of  the  very 
tendency  of  profits  which  we  are  considering.  By  the  time  a few 
years  have  passed  over  without  a crisis,  so  much  additional  capital 
has  been  accumulated,  that  it  is  no  longer  possible  to  invest  it 
at  the  accustomed  profit : all  pubhc  securities  rise  to  a high  price,  the 
rate  of  interest  on  the  best  mercantile  security  falls  very  low, 
and  the  complaint  is  general  among  persons  in  business  that  no 
money  is  to  be  made.  Does  not  this  demonstrate  how  speedily 
profit  would  be  at  the  minimum,  and  the  stationary  condition  of 
capital  would  be  attained,  if  these  accumulations  went  on  without 
any  counteracting  principle  ? But  the  diminished  scale  of  all  safe 
gains  inclines  persons  to  give  a ready  ear  to  any  projects  which 
hold  out,  though  at  the  risk  of  loss,  the  hope  of  a higher  rate  of  profit ; 
and  speculations  ensue,  which,  with  the  subsequent  revulsions, 
destroy,  or  transfer  to  foreigners,  a considerable  amount  of  capital, 
produce  a temporary  rise  of  interest  and  profit,  make  room  for  fresh 
accumulations,  and  the  same  round  is  recommenced. 

This,  doubtless,  is  one  considerable  cause  which  arrests  profits 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


73fl 


ill  their  descent  to  the  minimum,  by  sweeping  away  from  time  to 
time  a part  of  the  accumulated  mass  by  which  they  are  forced  down. 
But  this  is  not,  as  might  be  inferred  from  the  language  of  some 
writers,  the  principal  cause.  If  it  were,  the  capital  of  the  country 
would  not  increase ; but  in  England  it  does  increase  greatly  and 
rapidly.  This  is  shown  by  the  increasing  productiveness  of  almost 
all  taxes,  by  the  continual  growth  of  all  the  signs  of  national  wealth, 
and  by  the  rapid  increase  of  population,  while  the  condition  of  the 
labourers  is  certainly  not  declining,  but  on  the  whole  improving.^ 
These  things  prove  that  each  commercial  revulsion,  however 
disastrous,  is  very  far  from  destroying  all  the  capital  which  has  been 
added  to  the  accumulations  of  the  country  since  the  last  revulsion 
preceding  it,  and  that,  invariably,  room  is  either  found  or  made  for 
the  profitable  employment  of  a perpetually  increasing  capital, 
consistently  with  not  forcing  down  profits  to  a lower  rate. 

§ 6.  This  brings  us  to  the  second  of  the  counter-agencies, 
namely,  improvements  in  production.  These  evidently  have 
the  effect  of  extending  what  Mr.  Wakefield  terms  the  field  of  employ- 
ment, that  is,  they  enable  a greater  amount  of  capital  to  be  accumu- 
lated and  employed  without  depressing  the  rate  of  profit : provided 
always  that  they  do  not  raise,  to  a proportional  extent,  the  habits 
and  requirements  of  the  labourer.  If  the  labouring  class  gain  the 
full  advantage  of  the  increased  cheapness,  in  other  words,  if  money 
wages  do  not  fall,  profits  are  not  raised,  nor  their  fall  retarded. 
But  if  the  labourers  people  up  to  the  improvement  in  their  condition, 
and  so  relapse  to  their  previous  state,  profits  will  rise.  All  inven- 
tions which  cheapen  any  of  the  things  consumed  by  the  labourers, 
unless  their  requirements  are  raised  in  an  equivalent  degree,  in  time 
lower  money  wages  : and  by  doing  so,  enable  a greater  capital  to 
be  accumulated  and  employed,  before  profits  fall  back  to  what 
they  were  previously. 

Improvements  which  only  affect  things  consumed  exclusively  by 
the  richer  classes,  do  not  operate  precisely  in  the  same  manner. 
The  cheapening  of  lace  or  velvet  has  no  effect  in  diminishing  the  ft 
cost  of  labour;  and  no  mode  can  be  pointed  out  in  which  it  can 
raise  the  rate  of  profit,  so  as  to  make  room  for  a larger  capital  before 
the  minimum  is  attained.  It,  however,  produces  an  effect  which 
is  virtually  equivalent ; it  lowers,  or  tends  to  lower,  the  minimum 

1 [So  since  the  6th  ed.  (1865).  The  original  (1848)  ran  * **  the  condition 
ct  the  labourers  certainly  is  not  on  the  whole  declining.”] 


736 


BOOK  IV.  CHAPTER  IV.  f 7 


Itself.  In  the  first  place,  increased  cheapness  of  articles  of  consump- 
tion  promotes  the  inclination  to  save,  by  afiording  to  all  consumers 
a surplus  which  they  may  lay  by,  consistently  with  their  accustomed 
manner  of  living  ; and  unless  they  were  previously  suffering  actual 
hardships,  it  will  require  little  self-denial  to  save  some  part  at  least 
of  this  surplus.  In  the  next  place,  whatever  enables  people  to  live 
equally  well  on  a smaller  income,  inclines  them  to  lay  by  capital  for 
a lower  rate  of  profit.  If  people  can  live  on  an  independence  of  5001. 
a year  in  the  same  manner  as  they  formerly  could  on  one  of  lOOOZ., 
some  persons  will  be  induced  to  save  in  hopes  of  the  one,  who 
would  have  been  deterred  by  the  more  remote  prospect  of  the  other. 
(All  improvements,  therefore,  in  the  production  of  almost  any  com- 
modity, tend  in  some  degree  to  widen  the  interval  which  has  to  be 
passed  before  arriving  at  the  stationary  state  : but  this  effect 
belongs  in  a much  greater  degree  to  the  improvements  which  affect 
the  articles  consumed  by  the  labourer,  since  these  conduce  to  it  in 
two  ways ; they  induce  people  to  accumulate  for  a lower  profit, 
and  they  also  raise  the  rate  of  profit  itself. 

§ 7.  Equivalent  in  effect  to  improvements  in  production, 
is  the^acquisition  of  any  new  power  of  obtaining  cheap  commodities 
from  foreign  countries.  If  necessaries  are  cheapened,  whether 
they  are  so  by  improvements  at  home  or  importation  from  abroad, 
is  exactly  the  same  thing  to  wages  and  profits.  Unless  the  labourer 
obtains,  and  by  an  improvement  of  his  habitual  standard,  keeps, 
the  whole  benefit,  the  cost  of  labour  is  lowered,  and  the  rate  of  profit 
raised.  As  long  as  food  can  continue  to  be  imported  for  an  increasing 
population  without  any  diminution  of  cheapness,  so  long  the 
declension  of  profits  through  the  increase  of  population  and  capital 
is  arrested,  and  accumulation  may  go  on  without  making  the  rate 
of  profit  draw  nearer  to  the  minimum.  And  on  this  ground  it  is 
believed  by  some,  that  the  repeal  of  the  corn  laws  has  opened 
to  this  country  a long  era  of  rapid  increase  of  capital  with  an 
undiminished  rate  of  profit. 

Before  inquiring  whether  this  expectation  is  reasonable,  one 
remark  must  be  made,  which  is  much  at  variance  with  commonly 
received  notions.  Eoreign  trade  does  not  necessardy  Jncrease  tbs 
field  of  employment  for  capital.  It  is  not  the  mere  opening  of  a 
market  for  a country’s  productions,  that  tends  to  raise  the  rate 
of  profits.  If  nothing  were  obtained  in  exchange  for  those  pro- 
ductions but  the  luxuries  of  the  rich,  the  expenses  of  no  capitalist 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


737 


would  be  diminished ; profits  would  not  be  at  all  raised,  nor  room 
made  for  the  accumulation  of  more  capital  without  submitting  to  a 
reduction  of  profits  : and  if  the  attainment  of  the  stationary  state 
were  at  all  retarded,  it  would  only  be  because  the  diminished  cost 
at  which  a certain  degree  of  luxury  could  be  enjoyed,  might  induce 
people,  in  that  prospect,  to  make  fresh  savings  for  a lower  profit 
than  they  formerly  were  willing  to  do.  When  foreign  trade  makes 
room  for  more  capital  at  the  same  profit,  it  is  by  enabling  the 
necessaries  of  life,  or  the  habitual  articles  of  the  labourer’s  con- 
sumption, to  be  obtained  at  smaller  cost.  It  may  do  this  in  two 
ways ; by  the  importation  either  of  those  commodities  themselves, 
or  of  the  means  and  appliances  for  producing  them.  Cheap  iron 
has,  in  a certain  measure,  the  same  effect  on  profits  and  the  cost 
of  labour  as  cheap  corn,  because  cheap  iron  makes  cheap  tools  for 
agriculture  and  cheap  machinery  for  clothing.  But  a foreign  trade 
which  neither  directly,  nor  by  any  indirect  consequence,  increases 
the  cheapness  of  anything  consumed  by  the  labourers,  does  not,  any 
more  than  an  invention  or  discovery  in  the  like  case,  tend  to  raise 
profits  or  retard  their  fall ; it  merely  substitutes  the  production 
of  goods  for  foreign  markets  in  the  room' of  the  home  production  of 
luxuries,  leaving  the  employment  for  capital  neither  greater  nor  less 
than  before.  It  is  true,  that  there  is  scarcely  any  export  trade 
which,  in  a country  that  already  imports  necessaries  or  materials, 
comes  within  these  conditions  : for  every  increase  of  exports  enables 
the  country  to  obtain  all  its  imports  on  cheaper  terms  than  before. 

A country  which,  as  is  now  the  case  with  England,^  admits 
food  of  all  kinds,  and  all  necessaries  and  the  materials  of  necessaries, 
to  be  freely  imported  from  all  parts  of  the  world,  no  longer  depends 
on  the  fertility  of  her  own  soil  to  keep  up  her  rate  of  profits,  bub 
on  the  soil  of  the  whole  world.  It  remains  to  consider  how  far  this 
resource  can  be  counted  upon,  for  making  head  during  a very  long 
period  against  the  tendency  of  profits  to  decline  as  capital  increases. 

It  must,  of  course,  be  supposed  that  with  the  increase  of  capital, 
population  also  increases ; for  if  it  did  not,  the  consequent  rise  of 
wages  would  bring  down  profits,  in  spite  of  any  cheapness  of  food. 
Suppose  then  that  the  population  of  Great  Britain  goes  on  increasing 
at  its  present  rate,  and  demands  every  year  a supply  of  imported 
food  considerably  beyond  that  of  the  year  preceding.  This  annual 
increase  in  the  food  demanded  from  the  exporting  countries  can 

* [So  from  the  6th  ed.  (1862).  In  the  1st  ed.  (1848)  the  parenthesis  had 
been  ; “ (which  is  now  very  nearly,  and  will  soon  be  entirely,  our  own  case).”] 


738 


BOOK  IV.  CHAPTER  IV.  § 8 


only  be  obtained  either  by  great  improvements  in  their  agriculture, 
or  by  the  application  of  a great  additional  capital  to  the  growth 
of  food.  The  former  is  likely  to  be  a very  slow  process,  from  the 
rudeness  and  ignorance  of  the  agricultural  classes  in  the  food- 
exporting countries  of  Europe,  while  the  British  colonies  and  the 
United  States  are  already  in  possession  of  most  of  the  improvements 
yet  made,  so  far  as  suitable  to  their  circumstances.  There  remains 
as  a resource,  the  extension  of  cultivation.  And  on  this  it  is  to  be 
remarked,  that  the  capital  by  which  any  such  extension  can  take 
place,  is  mostly  still  to  be  created.  In  Poland,  Eussia,  Hungary, 
Spain,  the  increase  of  capital  is  extremely  slow.  In  America  it 
is  rapid,  but  not  more  rapid  than  the  population.  The  principal 
fund  at  present  available  for  supplying  this  country  with  a yearly 
increasing  importation  of  food,  is  that  portion  of  the  annual  savings 
of  America  which  has  heretofore  been  applied  to  increasing  the 
manufacturing  establishments  of  the  United  States,  and  which 
free  trade  in  corn  may  possibly  divert  from  that  purpose  to  growing 
food  for  our  market.  This  limited  source  of  supply,  unless  great 
improvements  take  place  in  agriculture,  cannot  be  expected  to  keep 
pace  with  the  growing  demand  of  so  rapidly  increasing  a population 
as  that  of  Great  Britain  ; and  if  our  population  and  capital  continue 
to  increase  with  their  present  rapidity,  the  only  mode  in  which 
food  can  continue  to  be  supplied  cheaply  to  the  one,  is  by  sending 
the  other  abroad  to  produce  it.^ 

§ 8.  This  brings  us  to  the  last  of  the  counter-forces  which 
check  the  downward  tendency  of  profits,  in  a country  whose  capital 
increases  faster  than  that  of  its  neighbours  and  whose  profits  are 
therefore  nearer  to  the  minimum.  This  is,  the  perpetual  overflow 
of  capital  into  colonies  or  foreign  countries,  to  seek  higher  profits 
than  can  be  obtained  at  home.  I believe  this  to  have  been  for  many 
years  one  of  the  principal  causes  by  which  the  decline  of  profits 
in  England  has  been  arrested.  It  has  a twofold  operation.  In  the 
first  place,  it  does  what  a fire,  or  an  inundation,  or  a commercial  crisis 
would  have  done  : it  carries  off  a part  of  the  increase  of  capital  from 
which  the  reduction  of  profits  proceeds.  Secondly,  the  capital  so 
carried  off  is  not  lost,  but  is  chiefly  employed  either  in  founding 
colonies,  which  become  large  exporters  of  cheap  agricultural  produce, 
or  in  extending  and  perhaps  improving  the  agriculture  of  older 


* [See  Appendix  BB.  The  Importation  of  Food-I 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


73d 


communities.  It  is  to  the  emigration  of  English  capital,  that  we 
have  chiefly  to  look  for  keeping  up  a supply  of  cheap  food  and  cheap 
materials  of  clothing,  proportional  to  the  increase  of  our  population  ; 
thus  enabling  an  increasing  capital  to  And  employment  in  the  country, 
without  reduction  of  profit,  in  producing  manufactured  articles 
with  which  to  pay  for  this  supply  of  raw  produce.  Thus,  the 
exportation  of  capital  is  an  agent  of  great  efficacy  in  extending  the 
field  of  employment  for  that  which  remains  : and  it  may  be  said 
truly  that,  up  to  a certain  point,  the  more  capital  we  send  away,  the 
more  we  shall  possess  and  be  able  to  retain  at  home. 

In  countries  which  are  further  advanced  in  industry  and  popu- 
lation, and  have  therefore  a lower  rate  of  profit,  than  others,  there 
is  always,  long  before  the  actual  minimum  is  reached,  a practical 
minimum,  viz.,  when  profits  have  fallen  so  much  below  what  they 
are  elsewhere,  that,  were  they  to  fall  lower,  all  further  accumulations 
would  go  abroad.  In  the  present  state  of  the  industry  of  the  world, 
when  there  is  occasion,  in  any  rich  and  improving  country,  to  take 
the  minimum  of  profits  at  all  into  consideration  for  practical 
purposes,  it  is  only  this  practical  minimum  that  needs  be  considered. 
As  long  as  there  are  old  countries  where  capital  increases  very 
rapidly,  and  new  countries  where  profit  is  still  high,  profits  in  the 
old  countries  will  not  sink  to  the  rate  which  would  put  a stop  to 
accumulation ; the  fall  is  stopped  at  the  point  which  sends  capital 
abroad.  It  is  only,  however,  by  improvements  in  production,  and 
even  in  the  production  of  things  consumed  by  labourers,  that  the 
capital  of  a country  hke  England  is  prevented  from  speedily  reaching 
that  degree  of  lowness  of  profit,  which  would  cause  all  further  savings 
to  be  sent  to  find  employment  in  the  colonies,  or  in  foreign  countries.^ 


* [See  Appendix  CO.  The  Tendency  of  Profits  to  a Minimum.} 


CHAPTER  V 


CONSEQUENCES  OF  THE  TENDENCY  OF  PROFITS  TO  A MINIMUM 

§ 1.  The  theory  of  the  effect  of  accumulation  on  profits,  laid 
down  in  the  preceding  chapter,  materially  alters  many  of  the 
practical  conclusions  which  might  otherwise  be  supposed  to  follow  from 
the  general  principles  of  Political  Economy,  and  which  were,  indeed, 
long  admitted  as  true  by  the  highest  authorities  on  the  subject. 

It  must  greatly  abate,  or  rather,  altogether  destroy,  in  countries 
where  profits  are  low,  the  immense  importance  which  used  to  be 
attached  by  political  economists  to  the  effects  which  an  event  or  a 
measure  of  government  might  have  in  adding  to  or  subtracting 
from  the  capital  of  the  country.  We  have  now  seen  that  the  low- 
ness of  profits  is  a proof  that  the  spirit  of  accumulation  is  so  active, 
and  that  the  increase  of  capital  has  proceeded  at  so  rapid  a rate,  as 
to  outstrip  the  two  counter-agencies,  improvements  in  production, 
and  increased  supply  of  cheap  necessaries  from  abroad  : and  that 
unless  a considerable  portion  of  the  annual  increase  of  capital  were 
either  periodically  destroyed,  or  exported  for  foreign  investment, 
the  country  would  speedily  attain  the  point  at  which  further  accu- 
mulation would  cease,  or  at  least  spontaneously  slacken,  so  as  no 
longer  to  overpass  the  march  of  invention  in  the  arts  which  produce 
the  necessaries  of  life.  In  such  a state  of  things  as  this,  a sudden 
addition  to  the  capital  of  the  country,  unaccompanied  by  any  in- 
crease of  productive  power,  would  be  but  of  transitory  duration ; 
since,  by  depressing  profits  and  interest,  it  would  either  diminish  by 
a corresponding  amount  the  savings  which  would  be  made  from 
income  in  the  year  or  two  following,  or  it  would  cause  an  equivalent 
amount  to  be  sent  abroad,  or  to  be  wasted  in  rash  speculations. 
Neither,  on  the  other  hand,  would  a sudden  abstraction  of  capital, 
unless  of  inordinate  amount,  have  any  real  effect  in  impoverishing 
the  country.  After  a few  months  or  years,  there  would  exist  in  the 
country  just  as  much  capital  as  if  none  had  been  taken  away.  _The 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


741 


abstraction,  by  raising  profits  and  interest,  would  give  a fresh 
stimulus  to  the  accumulative  principle,  which  would  speedily  fill 
up  the  vacuum.  Probably,  indeed,  the  only  effect  that  would  ensue, 
would  be  that  for  some  time  afterwards  less  capital  would  be  exported, 
and  less  thrown  away  in  hazardous  speculation. 

In  the  first  place,  then,  this  view  of  things  greatly  weakens,  in  a 
wealthy  and  industrious  country,  the  force  of  the  economical  argu- 
ment against  the  expenditure  of  public  money  for  really  valuable, 
even  though  industriously  unproductive,  purposes.  If  for  any 
great  object  of  justice  or  philanthropic  policy,  such  as  the  industrial 
regeneration  of  Ireland,  or  a comprehensive  measure  of  colonization 
or  of  public  education,  it  were  proposed  to  raise  a large  sum  by 
way  of  loan,  politicians  need  not  demur  to  the  abstraction  of  so 
much  capital,  as  tending  to  dry  up  the  permanent  sources  of  the 
country’s  wealth,  and  diminish  the  fund  which  supplies  the  sub- 
sistence of  the  labouring  population.  The  utmost  expense  which 
could  be  requisite  for  any  of  these  purposes,  would  not  in  all  prob- 
ability deprive  one  labourer  of  employment,  or  diminish  the  next 
year’s  production  by  one  ell  of  cloth  or  one  bushel  of  grain.  In 
poor  countries,  the  capital  of  the  country  requires  the  legislator’s 
sedulous  care ; he  is  bound  to  be  most  cautious  of  encroaching 
upon  it,  and  should  favour  to  the  utmost  its  accumulation  at  home, 
and  its  introduction  from  abroad.  But  in  rich,  populous,  and 
highly  cultivated  countries,  it  is  not  capital  which  is  the  deficient 
element,  but  fertile  land ; and  what  the  legislator  should  desire 
and  promote,  is  not  a greater  aggregate  saving,  but  a greater  return 
to  savings,  either  by  improved  cultivation,  or  by  access  to  the 
produce  of  more  fertile  lands  in  other  parts  of  the  globe.  In  such 
countries,  the  government  may  take  any  moderate  portion  of  the 
capital  of  the  country  and  expend  it  as  revenue,  without  affecting 
the  national  wealth : the  whole  being  either  drawn  from  that  portion 
of  the  annual  savings  which  would  otherwise  be  sent  abroad,  or 
being  subtracted  from  the  unproductive  expenditure  of  individuals 
for  the  next  year  or  two,  since  every  million  spent  makes  room  for 
another  million  to  be  saved  before  reaching  the  overflowing  point. 
When  the  object  in  view  is  worth  the  sacrifice  of  such  an  amount  of 
the  expenditure  that  furnishes  the  daily  enjoyments  of  the  people, 
the  only  well-grounded  economical  objection  against  taking  the 
necessary  funds  directly  from  capital,  consists  of  the  inconveniences 
attending  the  process  of  raising  a revenue  by  taxation,  to  pay  the 
interest  of  a debt. 


742 


BOOK  IV.  CHAPTER  V.  § 2 


The  same  considerations  enable  us  to  throw  aside  as  unworthy 
of  regard,  one  of  the  common  arguments  against  emigration  as  a 
means  of  relief  for  the  labouring  class.  Emigration,  it  is  said,  can 
do  no  good  to  the  labourers,  if,  in  order  to  defray  the  cost,  as  much 
must  be  taken  away  from  the  capital  of  the  country  as  from  its 
population.  That  anything  hke  this  proportion  could  require  to  be 
abstracted  from  capital  for  the  purpose  even  of  the  most  extensive 
colonization,  few,  I should  think,  would  now  assert : but  even  on 
that  untenable  supposition,  it  is  an  error  to  suppose  that  no  benefit 
would  be  conferred  on  the  labouring  class.  If  one-tenth  of  the 
labouring  people  of  England  were  transferred  to  the  colonies,  and 
along  with  them  one-tenth  of  the  circulating  capital  of  the  country, 
either  wages,  or  profits,  or  both,  would  be  greatly  benefited  by  the 
diminished  pressure  of  capital  and  population  upon  the  fertility  of 
the  land.  There  would  be  a reduced  demand  for  food  : the  inferior 
arable  lands  would  be  thrown  out  of  cultivation,  and  would  become 
pasture ; the  superior  would  be  cultivated  less  highly,  but  with  a 
greater  proportional  return ; food  would  be  lowered  in  price,  and 
though  money  wages  would  not  rise,  every  labourer  would  be  con- 
siderably improved  in  circumstances,  an  improvement  which,  if  no 
increased  stimulus  to  population  and  fall  of  wages  ensued,  would  be 
permanent ; while  if  there  did,  profits  would  rise,  and  accumulation 
start  forward  so  as  to  repair  the  loss  of  capital.  The  landlords  alone 
would  sustain  some  loss  of  income  ; and  even  they,  only  if  coloniza- 
tion went  to  the  length  of  actually  diminishing  capital  and  popula- 
tion, but  not  if  it  merely  carried  ofi  the  annual  increase. 

§ 2.  From  the  same  principles  we  are  now  able  to  arrive  at  a 
final  conclusion  respecting  the  effects  which  machinery,  and  gener- 
ally the  sinking  of  capital  for  a productive  purpose,  produce  upon 
the  immediate  and  ultimate  interests  of  the  labouring  class.  The 
characteristic  property  of  this  class  of  industrial  improvements  is 
the  conversion  of  circulating  capital  into  fixed : and  it  was  shown 
in  the  first  Book,*  that  in  a country  where  capital  accumulates 
slowly,  the  introduction  of  machinery,  permanent  improvements 
of  land,  and  the  like,  might  be,  for  the  time,  extremely  injurious ; 
since  the  capital  so  employed  might  be  directly  taken  from  the 
wages  fund,  the  subsistence  of  the  people  and  the  employment  for 
labour  curtailed,  and  the  gross  annual  produce  of  the  country  actually 
diminished.  But  in  a country  of  great  annual  savings  and  low 
* Supra,  p.  94. 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


743 


profits,  no  sucli  effects  need  be  apprehended.  Since  even  the 
emigration  of  capital,  or  its  unproductive  expenditure,  or  its  absolute 
waste,  do  not  in  such  a country,  if  confined  within  any  moderate 
bounds,  at  all  diminish  the  aggregate  amount  of  the  wages  fund — 
still  less  can  the  mere  conversion  of  a like  sum  into  fixed  capital, 
which  continues  to  be  productive,  have  that  effect.  It  merely 
draws  off  at  one  orifice  what  was  already  flowing  out  at  another ; 
or  if  not,  the  greater  vacant  space  left  in  the  reservoir  does  but  cause 
a greater  quantity  to  flow  in.  Accordingly,  in  spite  of  the  mis- 
chievous derangements  of  the  money-market  which  were  at  one 
time  occasioned  by  the  sinking  of  great  sums  in  railways,  I was 
never  able  to  agree  with  those  who  apprehended  mischief,  from 
this  source,  to  the  productive  resources  of  the  country. i Not  on  the 
absurd  ground  (which  to  any  one  acquainted  with  the  elements  of 
the  subject  needs  no  confutation)  that  railway  expenditure  is  a 
mere  transfer  of  capital  from  hand  to  hand,  by  which  nothing  is  lost 
or  destroyed.  This  is  true  of  what  is  spent  in  the  purchase  of  the 
land  ; a portion  too  of  what  is  paid  to  parliamentary  agents,  counsel, 
engineers,  and  surveyors  is  saved  by  those  who  receive  it,  and 
becomes  capital  again  : but  what  is  laid  out  in  the  hond  -fide  con- 
struction of  the  railway  itself  is  lost  and  gone  ; when  once  expended, 
it  is  incapable  of  ever  being  paid  in  wages  or  applied  to  the  mainte- 
nance of  labourers  again  ; as  a matter  of  account,  the  result  is  that 
so  much  food  and  clothing  and  tools  have  been  consumed,  and  the 
country  has  got  a railway  instead.  But  what  I would  urge  is,  that 
sums  so  applied  are  mostly  a mere  appropriation  of  the  annual  over- 
flowing which  would  otherwise  have  gone  abroad,  or  been  thrown 
away  unprofitably,  leaving  neither  a railway  nor  any  other  tangible 
result.  The  railway  gambling  of  1844  and  1845  probably  saved  the 
coimtry  from  a depression  of  profits  and  interest,  and  a rise  of  all 
public  and  private  securities,  which  would  have  engendered  still 
wilder  speculations,  and  when  the  effects  came  afterwards  to  be 
complicated  by  the  scarcity  of  food,  would  have  ended  in  a still 
more  formidable  crisis  than  was  experienced  in  the  years  immediately 
following.  In  the  poorer  countries  of  Europe,  the  rage  for  railway 
construction  might  have  had  worse  consequences  than  in  England, 
were  it  not  that  in  those  countries  such  enterprises  are  in  a great 
measure  carried  on  by  foreign  capital.  The  railway  operations  of 

* [The  present  form  of  this  sentence  dates  from  the  6th  ed.  (1865).  The 
original  [1848]  text  ran  ; “ the  great  sums  in  process  of  being  sunk,”  and  “ 1 
cannot  agree.”] 


744 


BOOR  IV.  CHAPTER  V.  § 2 


the  various  nations  of  the  world  may  be  looked  upon  as  a sort  of 
competition  for  the  overflowing  capital  of  the  countries  where 
profit  is  low  and  capital  abundant,  as  England  and  Holland.  The 
English  railway  speculations  are  a struggle  to  keep  our  annual 
increase  of  capital  at  home  ; those  of  foreign  countries  are  an  effort 
to  obtain  it.* 

It  already  appears  from  these  considerations,  that-Hio  conver- 
\ sion  of  circulating  capital  into  fixed,  whether  by  railways,  or  manu- 
I factories,  or  ships,  or  machinery,  or  canals,  or  mines,  or  works  of 
drainage  and  irrigation,  is  not  likely,  in  any  rich  country,  to  diminish 
the  gross  produce  or  the  amount  of  employment  for  labour.  How 
much  then  is  the  case  strengthened,  when  we  consider  that  these 
transformations  of  capital  are  of  the  nature_  of  improvements  in 
production,  which,  instead  of  ultimately  diminishing  circulating 
capital,  are  the  necessary  conditions  of  its  increase,  since  they  alone 
enable  a country  to  possess  a constantly  augmenting  capital  without 
reducing  profits  to  the  rate  which  would  cause  accumulation  to 
stop.  There  is  hardly  any  increase  of  fixed  capital  which  does  not 
enable  the  country  to  contain  eventually  a larger  circulating  capital 
than  it  otherwise  could  possess  and  employ  within  its  own  limits ; 
for  there  is  hardly  any  creation  of  fixed  capital  which,  when  it 
proves  successful,  does  not  cheapen  the  articles  on  which  wages 
are  habitually  expended.  All  capital  sunk  in  the  permanent  im- 
provement of  land  lessens  the  cost  of  food  and  materials ; almost 
all  improvements  in  machinery  cheapen  the  labourer’s  clothing  or 
lodging,  or  the  tools  with  which  these  are  made ; improvements  in 
locomotion,  such  as  railways,  cheapen  to  the  consumer  all  things 
which  are  brought  from  a distance.  All  these  improvements  make 
the  labourers  better  off  with  the  same  money  wages,  better  off  if 
they  do  not  increase  their  rate  of  multiplication.  But  if  they  do, 
and  wages  consequently  fall,  at  least  profits  rise,  and,  while  accumula- 
tion receives  an  immediate  stimulus,  room  is  made  for  a greater 
amount  of  capital  before  a sufficient  motive  arises  for  sending  it 
abroad.  Even  the  improvements  which  do  not  cheapen  the  things 
consumed  by  the  labourer,  and  which,  therefore,  do  not  raise  profits 
nor  retain  capital  in  the  country,  nevertheless,  as  we  have  seen,  by 
lowering  the  minimum  of  profit  for  which  people  will  ultimately 


* [1852]  It  is  hardly  needful  to  point  out  how  fully  the  remarks  in  the 
text  have  been  verified  by  subsequent  facts.  The  capital  of  the  country,  far 
from  having  been  in  any  degree  impaired  by  the  large  amount  sunk  in  railway 
construction,  was  soon  again  overflowing. 


TENDENCY  OF  PROFITS  TO  A MINIMUM 


746 


consent  to  save,  leave  an  ampler  margin  than  previously  for  eventual 
accumulation,  before  arriving  at  the  stationary  state. 

We  may  conclude,  then,  that  improvements  in  production,  and 
emigration  of  capital  to  the  more  fertile  soils  and  unworked  mines 
of  the  uninhabited  or  thinly  peopled  parts  of  the  globe,  do  not,  as 
appears  to  a superficial  view,  diminish  the  gross  produce  and  the 
demand  for  labour  at  home ; but,  on  the  contrary,  are  what  we  have 
chiefly  to  depend  on  for  increasing  both,  and  are  even  the  necessary 
conditions  of  any  great  or  prolonged  augmentation  of  either.  Nor 
is  it  any  exaggeration  to  say,  that  within  certain,  and  not  very 
narrow,  limits,  the  more  capital  a country  like  England  expends  in 
these  two  ways,  the  more  she  will  have  left. 


CHAPTER  VI 


OF  THE  STATIONARY  STATE 

§ i.  The  preceding  chapters  comprise  the  general  theory  cl 
the  economical  progress  of  society,  in  the  sense  in  which  those  terms 
are  commonly  understood ; the  progress  of  capital,  of  population, 
and  of  the  productive  arts.  But  in  contemplating  any  progressive 
movement,  not  in  its  nature  unlimited,  the  mind  is  not  satisfied  with 
merely  tracing  the  laws  of  the  movement ; it  cannot  but  ask  the 
further  question,  to  what  goal  ? Towards  what  ultimate  point  is 
society  tending  by  its  industrial  progress  ? When  the  progress 
ceases,  in  what  condition  are  we  to  expect  that  it  will  leave 
mankind  ? 

It  must  always  have  been  seen,  more  or  less  distinctly,  by 
political  economists,  that  the  increase  of  wealth  is  not  boundless ; 
that  at  the  end  of  what  they  term  the  progressive  state  lies  the 
stationary  state,  that  all  progress  in  wealth  is  but  a postponement 
of  this,  and  that  each  step  in  advance  is  an  approach  to  it.  We 
have  now  been  led  to  recognise  that  this  ultimate  goal  is  at  all 
times  near  enough  to  be  fully  in  view ; that  we  are  always  on  the 
verge  of  it,  and  that  if  we  have  not  reached  it  long  ago,  it  is  because 
the  goal  itself  flies  before  us.  The  richest  and  most  prosperous 
countries  would  very  soon  attain  the  stationary  state,  if  no  further 
improvements  were  made  in  the  productive  arts,  and  if  there  were 
a suspension  of  the  overflow  of  capital  from  those  countries  into  the 
uncultivated  or  ill-cultivated  regions  of  the  earth. 

This  impossibility  of  ultimately  avoiding  the  stationary  state — 
this  irresistible  necessity  that  the  stream  of  human  industry  should 
finally  spread  itself  out  into  an  apparently  stagnant  sea — must  have 
been,  to  the  political  economists  of  the  last  two  generations,  an 
unpleasing  and  discouraging  prospect ; for  the  tone  and  tendency 
of  their  speculations  goes  completely  to  identify  all  that  is  economi- 
cally desirable  with  the  progressive  state,  and  with  that  alone. 


THE  STATIONARY  STATE 


747 


With  Mr.  M'Culloch,  for  example,  prosperity  does  not  mean  a large 
production  and  a good  distribution  of  wealth,  but  a rapid  increase  of 
it ; his  test  of  prosperity  is  high  profits  ; and  as  the  tendency  of 
that  very  increase  of  wealth,  which  he  calls  prosperity,  is  towards 
low  profits,  economical  progress,  according  to  him,  must  tend  to  the 
extinction  of  prosperity.  Adam  Smith  always  assumes  that  the 
condition  of  the  mass  of  the  people,  though  it  may  not  be  positively 
distressed,  must  be  pinched  and  stinted  in  a stationary  condition 
of  wealth,  and  can  only  be  satisfactory  in  a progressive  state.  The 
doctrine  that,  to  however  distant  a time  incessant  struggling  may  put 
off  our  doom,  the  progress  of  society  must  “ end  in  shallows  and 
in  miseries,”  far  from  being,  as  many  people  still  believe,  a wicked 
invention  of  Mr.  Malthus,  was  either  expressly  or  tacitly  affirmed 
by  his  most  distinguished  predecessors,  and  can  only  be  successfully 
combated  on  his  principles.  Before  attention  had  been  directed  to 
the  principle  of  population  as  the  active  force  in  determining  the 
remuneration  of  labour,  the  increase  of  mankind  was  virtually  treated 
as  a constant  quantity ; it  was,  at  all  events,  assumed  that  in  the 
natural  and  normal  state  of  human  affairs  population  must  constantly 
increase,  from  which  it  followed  that  a constant  increase  of  the  means 
of  support  was  essential  to  the  physical  comfort  of  the  mass  of  man- 
kind. The  publication  of  Mr.  Malthus’  Essay  is  the  era  from  which 
better  views  of  this  subject  must  be  dated ; and  notwithstanding 
the  acknowledged  errors  of  his  first  edition,  few  writers  have  done 
more  than  himself,  in  the  subsequent  editions,  to  promote  these 
juster  and  more  hopeful  anticipations. 

Even  in  a progressive  state  of  capital,  in  old  countries,  a con- 
scientious or  prudential  restraint  on  population  is  indispensable, 
to  prevent  the  increase  of  numbers  from  outstripping  the  increase  of 
capital,  and  the  condition  of  the  classes  who  are  at  the  bottom  of 
society  from  being  deteriorated.  Where  there  is  not,  in  the  people, 
or  in  some  very  large  proportion  of  them,  a resolute  resistance  to 
this  deterioration — a determination  to  preserve  an  established 
standard  of  comfort — the  condition  of  the  poorest  class  sinks, 
even  in  a progressive  state,  to  the  lowest  point  which  they  will 
consent  to  endure.  The  same  determination  would  be  equally 
effectual  to  keep  up  their  condition  in  the  stationary  state,  and 
would  be  quite  as  likely  to  exist.  Indeed,  even  now,  the  countries 
in  which  the  greatest  prudence  is  manifested  in  the  regulating  of 
population  are  often  those  in  which  capital  increases  least  rapidly. 
Where  there  is  an  indefinite  prospect  of  employment  for  increased 


748 


BOOK  IV.  CHAPTER  VI.  § 2 


numbers,  there  is  apt  to  appear  less  necessity  for  prudential  restraint 
If  it  were  evident  that  a new  hand  could  not  obtain  employment  but 
by  displacing,  or  succeeding  to,  one  already  employed,  the  combined 
influences  of  prudence  and  public  opinion  might  in  some  measure  be 
relied  on  for  restricting  the  coming  generation  within  the  numbers 
necessary  for  replacing  the  present. 

§ 2.  I cannot,  therefore,  regard  the  stationary  state  of  capital 
and  wealth  with  the  imaffected  aversion  so  generally  manifested 
towards  it  by  political  economists  of  the  old  school.  I am  inclined 
to  believe  that  it  would  be,  on  the  whole,  a very  considerable  im- 
provement on  our  present  condition.  I confess  I am  not  charmed 
with  the  ideal  of  life  held  out  by  those  who  think  that  the  normal  state 
of  human  beings  is  that  of  struggling  to  get  on  ; that  the  trampling, 
crushing,  elbowing,  and  treading  on  each  other’s  heels,  which  form  the 
existing  type  of  social  life,  are  the  most  desirable  lot  of  human  kind, 
or  anything  but  the  disagreeable  symptoms  of  one  of  the  phases  of 
industrial  progress.  It  may  be  a necessary  stage  in  the  progress  of 
civilization,  and  those  European  nations  which  have  hitherto  been 
so  fortunate  as  to  be  preserved  from  it,  may  have  it  yet  to  undergo. 
It  is  an  incident  of  growth,  not  a mark  of  decline,  for  it  is  not 
necessarily  destructive  of  the  higher  aspirations  and  the  heroic 
virtues  ; as  America,  in  her  great  civil  war,  has  proved  to  the  world, 
both  by  her  conduct  as  a people  and  by  numerous  splendid  individual 
examples,  and  as  England,  it  is  to  be  hoped,  would  also  prove,  on  an 
equally  trying  and  exciting  occasion.^  But  it  is  not  a kind  of  social 
perfection  which  philanthropists  to  come  will  feel  any  very  eager 
desire  to  assist  in  realizing.  Most  fitting,  indeed,  is  it,  that  while 
riches  are  power,  and  to  grow  as  rich  as  possible  the  universal  object 
of  ambition,  the  path  to  its  attainment  should  be  open  to  all,  without 
favour  or  partiality.  But  the  best  state  for  human  nature  is  that 

' [This  and  the  preceding  sentence  replaced  in  the  6th  ed.  (1865)  the  following 
passage  of  the  original  [1848]  text : “ The  northern  and  middle  states  of 
America  are  a specimen  of  this  stage  of  civilization  in  very  favourable  circum- 
stances ; having,  apparently,  got  rid  of  all  social  injustices  and  inequalities 
that  affect  persons  of  Caucasian  race  and  of  the  male  sex,  while  the  proportion 
of  population  to  capital  and  land  is  such  as  to  ensure  abundance  to  every 
able-bodied  member  of  the  community  who  does  not  forfeit  it  by  misconduct. 
They  have  the  six  points  of  Chartism,  and  they  have  no  poverty  : and  all  that 
these  advantages  seem  to  have  done  for  them  is  that  the  life  of  the  whole  of 
one  sex  is  devoted  to  dollar-hunting,  and  of  the  other  to  breeding  dollar- 
hunters.”  Into  this,  however,  had  been  inserted  since  the  2nd  ed.  (1849),  after 
“ done  for  them,”  the  parenthesis  “ (notwithstanding  some  incipient  signs  of 
a better  tendency).”] 


THE  STATIONARY  STATE 


749 


in  which,  while  no  one  is  poor,  no  one  desires  to  be  richer,  nor  has 
any  reason  to  fear  being  thrust  back  by  the  efforts  of  others  to 
push  themselves  forward. 

That  the  energies  of  mankind  should  be  kept  in  employment  by 
the  struggle  for  riches,  as  they  were  formerly  by  the  struggle  of  war, 
until  the  better  minds  succeed  in  educating  the  others  into  better 
things,  is  undoubtedly  more  desirable  than  that  they  should  rust 
and  stagnate.  While  minds  are  coarse  they  require  coarse  stimuli, 
and  let  them  have  them.  In  the  mean  time,  those  who  do  not  accept 
the  present  very  early  stage  of  human  improvement  as  its  ultimate 
type,  may  be  excused  for  being  comparatively  indifferent  to  the 
kind  of  economical  progress  which  excites  the  congratulations  of 
ordinary  politicians  ; the  mere  increase  of  production  and  accumu- 
lation. For  the  safety  of  national  independence  it  is  essential  that 
a country  should  not  fall  much  behind  its  neighbours  in  these  things. 
But  in  themselves  they  are  of  little  importance,  so  long  as  either  the 
increase  of  population  or  anything  else  prevents  the  mass  of  the 
people  from  reaping  any  part  of  the  benefit  of  them.  I know  not 
why  it  should  be  matter  of  congratulation  that  persons  who  are 
already  richer  than  any  one  needs  to  be,  should  have  doubled  their 
means  of  consuming  things  which  give  little  or  no  pleasure  except 
as  representative  of  wealth  ; or  that  numbers  of  individuals  should 
pass  over,  every  year,  from  the  middle  classes  into  a richer  class,  or 
from  the  class  of  the  occupied  rich  to  that  of  the  unoccupied.  It  is 
only  in  the  backward  countries  of  the  world  that  increased  production 
is  still  an  important  object : in  those  most  advanced,  what  is  econo- 
mically needed  is  a better  distribution,  of  which  one  indispensable 
means  is  a stricter  restraint  on  population.  Levelling  institutions, 
either  of  a just  or  of  an  unjust  kind,  cannot  alone  accomplish  it ; 
they  may  lower  the  heights  of  society,  but  they  cannot,  of  themselves, 
permanently  ^ raise  the  depths. 

On  the  other  hand,  we  may  suppose  this  better  distribution  of 
property  attained,  by  the  joint  effect  of  the  prudence  and  frugality 
of  individuals,  and  of  a system  of  legislation  favouring  equality  of 
fortunes,  so  far  as  is  consistent  with  the  just  claim  of  the  individual  to 
the  fruits,  whether  great  or  small,  of  his  or  her  own  industry.  We 
may  suppose,  for  instance  (according  to  the  suggestion  thrown  out 
in  a former  chapter  *),  a limitation  of  the  sum  which  any  one  person 

* [“Permanently”  inserted  in  2nd  ed.  (1849);  “of  themselves’*  in  3rd 
(1852).] 

♦ Supra,  pp.  227-9, 


760 


BOOK  IV.  CHAPTER  VI.  § 2 


may  acquire  by  gift  or  inberitance  to  the  amount  sufficient  to 
constitute  a moderate  independence.  Under  this  twofold  influence 
society  would  exhibit  these  leading  features  : a well-paid  and  affluent 
body  of  labourers  ; no  enormous  fortunes,  except  what  were  earned 
and  accumulated  during  a single  lifetime  ; but  a much  larger  body 
of  persons  than  at  present,  not  only  exempt  from  the  coarser  tods,  but 
with  sufficient  leisure,  both  physical  and  mental,  from  mechanical 
details,  to  cultivate  freely  the  graces  of  life,  and  afford  examples  of 
them  to  the  classes  less  favourably  circumstanced  for  their  growth. 
This  condition  of  society,  sc  greatly  preferable  to  the  present,  is 
not  only  perfectly  compatible  with  the  stationary  state,  but,  it 
would  seem,  more  naturally  allied  with  that  state  than  with  any 
other. 

There  is  room  in  the  world,  no  doubt,  and  even  in  old  countries, 
for  a great  increase  of  population,  supposing  the  arts  of  life  to  go 
on  improving,  and  capital  to  increase.  But  even  if  innocuous,  I 
confess  I see  very  httle  reason  for  desiring  it.  The  density  of 
population  necessary  to  enable  mankind  to  obtain,  in  the  greatest 
degree,  all  the  advantages  both  of  co-operation  and  of  social 
intercourse,  has,  in  all  the  most  populous  countries,  been  attained. 
A population  may  be  too  crowded,  though  all  be  amply  supplied 
with  food  and  raiment.  It  is  not  good  for  man  to  be  kept  perforce 
at  all  times  in  the  presence  of  his  species.  A world  from  which 
solitude  is  extirpated  is  a very  poor  ideal.  Solitude,  in  the  sense 
of  being  often  alone,  is  essential  to  any  depth  of  meditation  or  of 
character;  and  sohtude  in  the  presence  of  natural  beauty  and 
grandeur,  is  the  cradle  of  thoughts  and  aspirations  which  are  not 
only  good  for  the  individual,  but  which  society  could  ill  do  without. 
Nor  is  there  much  satisfaction  in  contemplating  the  world  with 
nothing  left  to  the  spontaneous  activity  of  nature  ; with  every  rood 
of  land  brought  into  cultivation,  which  is  capable  of  growing  food 
for  human  beings  ; every  flowery  waste  or  natural  pasture  ploughed 
up,  all  quadrupeds  or  birds  which  are  not  domesticated  for  man’s 
use  exterminated  as  his  rivals  for  food,  every  hedgerow  or  superfluous 
tree  rooted  out,  and  scarcely  a place  left  where  a wild  shrub  or 
flower  could  grow  without  being  eradicated  as  a weed  in  the  name 
of  improved  agriculture.  If  the  earth  must  lose  that  great  portion 
of  its  pleasantness  which  it  owes  to  things  that  the  unlimited  increase 
of  wealth  and  population  would  extirpate  from  it,  for  the  mere 
purpose  of  enabling  it  to  support  a larger,  but  not  a better  or  a 
happier  population,  I sincerely  hope,  for  the  sake  of  posterity,  that 


THE  STATIONARY  STATE 


761 


they  will  be  content  to  be  stationary,  long  before  necessity  compels 
them  to  it. 

It  is  scarcely  necessary  to  remark  that  a stationary  condition  of 
capital  and  population  implies  no  stationary  state  of  human  im- 
provement. There  would  be  as  much  scope  as  ever  for  all  kinds  of 
mental  culture,  and  moral  and  social  progress  ; as  much  room  for 
improving  the  Art  of  Living,  and  much  more  likelihood  of  its  being 
Improved,  when  minds  ceased  to  be  engrossed  by  the  art  of  getting  on. 
Even  the  industrial  arts  might  be  as  earnestly  and  as  successfully 
cultivated,  with  this  sole  difference,  that  instead  of  serving  no 
purpose  but  the  increase  of  wealth,  industrial  improvements  would 
produce  their  legitimate  effect,  that  of  abridging  labour.  Hitherto 
[1848]  it  is  questionable  if  all  the  mechanical  inventions  yet  made 
have  lightened  the  day’s  toil  of  any  human  being.  They  have 
enabled  a greater  population  to  live  the  same  life  of  drudgery  and 
imprisonment,  and  an  increased  number  of  manufacturers  and 
others  to  make  fortunes.  They  have  increased  the  comforts  of  the 
middle  classes.  But  they  have  not  yet  begun  to  effect  those  great 
changes  in  human  destiny,  which  it  is  in  their  nature  and  in  their 
futurity  to  accomplish.  Only  when,  in  addition  to  just  institutions, 
the  increase  of  mankind  shall  be  under  the  deliberate  guidance  of 
judicious  foresight,  can  the  conquests  made  from  the  powers  of 
nature  by  the  intellect  and  energy  of  scient^c  discoverers  become 
the  common  property  of  the  species,  and  the  means  of  improving 
and  elevatingjthejuniversal  lot. 


CHAPTER  Vn 


ON  THE  PROBABLE  FUTURITY  OP  THE  LABOURING  CLASSES 

§ 1.  The  observations  in  the  preceding  chapter  had  for  their 
principal  object  to  deprecate  a false  ideal  of  human  society.  Their 
applicability  to  the  practical  purposes  of  present  times  consists  in 
moderating  the  inordinate  importance  attached  to  the  mere  increase 
of  production,  and  fixing  attention  upon  improved  distribution,  and 
a large  remuneration  of  labour,  as  the  two  desiderata.  Whether 
the  aggregate  produce  increases  absolutely  or  not,  is  a thing  in  which, 
after  a certain  amount  has  been  obtained,  neither  the  legislator  nor 
the  philanthropist  need  feel  any  strong  interest : but,  that  it  should 
increase  relatively  to  the  number  of  those  who  share  in  it,  is  of 
the  utmost  possible  importance ; and  this,  (whether  the  wealth  of 
mankind  be  stationary,  or  increasing  at  the  most  rapid  rate  ever 
known  in  an  old  country,)  must  depend  on  the  opinions  and  habits  of 
the  most  numerous  class,  the  class  of  manual  labourers. 

1 When  I speak,  either  in  this  place  or  elsewhere,  of  “ the  labouring 
classes,”  or  of  labourers  as  a “ class,”  I use  those  phrases  in  com- 
pliance with  custom,  and  as  descriptive  of  an  existing,  but  by  no 
means  a necessary  or  permanent,  state  of  social  relations.  I do  not 
recognise  as  either  just  or  salutary,  a state  of  society  in  which  there 
is  any  “ class  ” which  is  not  labouring  ; any  human  beings,  exempt 

* [This  paragraph  replaced  in  the  3rd  ed.  (1852)  the  following  paragraph 
of  the  original  (1848)  text ; 

“ The  economic  condition  of  that  class,  and  along  with  it  of  all  society, 
depends  therefore  essentially  on  its  moral  and  intellectual,  and  that  again 
on  its  social,  condition.  In  the  details  of  political  economy,  general  views 
of  society  and  politics  are  out  of  place ; but  in  the  more  comprehensive 
inquiries  it  is  impossible  to  exclude  them ; since  the  various  leading  depart- 
ments of  human  life  do  not  develop  themselves  separately,  but  each  depends 
on  all,  or  is  profoundly  modified  by  them.  To  obtain  any  light  on  the  great 
economic  question  of  the  future,  which  gives  the  chief  interest  to  the  phenomena 
of  the  present — ^the  physical  condition  of  the  labouring  classes — we  must 
consider  it,  not  separately,  but  in  conjunction  with  all  other  points  of  their 
condition.”] 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  763 


from  bearing  their  share  of  the  necessary  labours  of  human  life, 
except  those  unable  to  labour,  or  who  have  fairly  earned  rest  by 
previous  toil.  So  long,  however,  as  the  great  social  evil  exists  of  a 
non-labouring  class,  labourers  also  constitute  a class,  and  may  be 
spoken  of,  though  only  provisionally,  in  that  character. 

Considered  in  its  moral  and  social  aspect,  the  state  of  the  labour- 
ing people  has  latterly  been  a subject  of  much  more  speculation  and 
discussion  than  formerly ; and  the  opinion  that  it  is  not  now  what 
it  ought  to  be,  has  become  very  general.  The  suggestions  which 
have  been  promulgated,  and  the  controversies  which  have  been 
excited,  on  detached  points  rather  than  on  the  foundations  of  the 
subject,  have  put  in  evidence  the  existence  of  two  conflicting 
theories,  respecting  the  social  position  desirable  for  manual  labourers. 
The  one  may  be  called  the  theory  of  dependence  and  protection, 
the  other  that  of  self-dependence. 

According  to  the  former  theory,  the  lot  of  the  poor,  in  all  things 
which  affect  them  collectively,  should  be  regulated  for  them,  not 

them.  They  should  not  be  required  or  encouraged  to  think  fo^ 
themselves,  or  give  to  their  own  reflection  or  forecast  an  influential 
voice  in  the  determination  of  their  destiny.  It  is  supposed  to  be 
the  duty  of  the  higher  classes  to  think  for  them,  and  to  take  the 
responsibility  of  their  lot,  as  the  commander  and  officers  of  an  army 
take  that  of  the  soldiers  composing  it.  This  function,  it  is  contended, 
the  higher  classes  should  prepare  themselves  to  perform  con- 
scientiously, and  their  whole  demeanour  should  impress  the  poor 
with  a reliance  on  it,  in  order  that,  while  yielding  passive  and  active 
obedience  to  the  rules  prescribed  for  them,  they  may  resign  them- 
selves in  all  other  respects  to  a trustful  insouciance,  and  repose  under 
the  shadow  of  their  protectors.  The  relation  between  rich  and 
poor,  according  to  this  theory  (a  theory  also  applied  to  the  relation 
between  men  and  women)  i should  be  only  partly  authoritative ; 
itshould  be  amiable,  moral,  and  sentimental : affectionate  tutelage 
on  the  one  side,  respectful  and  grateful  deference  on  the  other. 
The  rich  should  be  in  loco  'parentis  to  the  poor,  guiding  and  restraining 
them  like  children.  Of  spontaneous  action  on  their  part  there 
should  be  no  need.  They  should  be  called  on  for  nothing  but  to 
do  their  day’s  work,  and  to  be  moral  and  religious.  Their  morality 
and  religion  should  be  provided  for  them  by  their  superiors,  who 
should  see  them  properly  taught  it,  and  should  do  all  that  is  necessary 


' [Parenthesis  inserted  in  3rd  ed.  (1852).] 


764 


BOOK  IV.  CHAPTER  VII.  § 1 


to  ensure  their  being,  in  return  for  labour  and  attachment,  properly 
fed,  clothed,  housed,  spiritually  edified,  and  innocently  amused. 

This  is  the  ideal  of  the  future,  in  the  minds  of  those  whose  dis- 
satisfaction with  the  Present  assumes  the  form  of  affection  and 
regret  towards  the  Past.i  Like  other  ideals,  it  exercises  an  uncon- 
scious infiuence  on  the  opinions  and  sentiments  of  numbers  who 
never  consciously  guide  themselves  by  any  ideal.  It  has  also  this 
in  common  with  other  ideals,  that  it  has  never  been  historically 
realised.  It  makes  its  appeal  to  our  imaginative  sympathies  in 
the  character  of  a restoration  of  the  good  times  of  our  forefathers. 
But  no  times  can  be  pointed  out  in  which  the  higher  classes  of  this 
or  any  other  country  performed  a part  even  distantly  resembling 
the  one  assigned  to  them  in  this  theory.  It  is  an  idealization, 
grounded  on  the  conduct  and  character  of  here  and  there  an  indi- 
vidual. All  privileged  and  powerful  classes,  as  such,  have  used 
their  power  in  the  interest  of  their  own  selfishness,  and  have  indulged 
their  self-importance  in  despising,  and  not  in  lovingly  caring  for, 
those  who  were,  in  their  estimation,  degraded,  by  being  under  the 
necessity  of  working  for  their  benefit.  I do  not  affirm  that  what 
has  always  been  must  always  be,  or  that  human  improvement  has 
no  tendency  to  correct  the  intensely  selfish  feehngs  engendered  by 
power  ; but  though  the  evil  may  be  lessened,  it  cannot  be  eradicated, 
until  the  power  itself  is  withdrawn.  This,  at  least,  seems  to  me 
undeniable,  that  long  before  the  superior  classes  could  be  sufficiently 
improved  to  govern  in  the  tutelary  manner  supposed,  the  inferior 
classes  would  be  too  much  improved  to  be  so  governed. 

I am  quite  sensible  of  all  that  is  seductive  in  the  picture  of 
society  which  this  theory  presents.  Though  the  facts  of  it  have 
no  prototype  in  the  past,  the  feehngs  have.  In  them  hes  all  that 
there  is  of  reahty  in  the  conception.  As  the  idea  is  essentially 
repulsive  of  a society  only  held  together  by  the  relations  and  feehngs 
arising  out  of  pecuniary  interests,  so  there  is  something  naturaUy 
attractive  in  a form  of  society  abounding  in  strong  personal  attach- 
ments and  disinterested  self-devotion.  Of  such  feehngs  it  must  be 
admitted  that  the  relation  of  protector  and  protected  has  hitherto 
been  the  richest  source.  The  strongest  attachments  of  human 
beings  in  general,  are  towards  the  things  or  the  persons  that  stand 
between  them  and  some  dreaded  evil.  Hence,  in  an  age  of  lawless 
violence  and  insecurity,  and  general  hardness  and  roughness  of 


[Carlyle’s  Past  and  Present  appeared  in  1843.] 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  756 


manners,  in  which  life  is  beset  with  dangers  and  sufferings  at  every 
step,  to  those  who  have  neither  a commanding  position  of  their  own, 
nor  a claim  on  the  protection  of  some  one  who  has — a generous 
giving  of  protection,  and  a grateful  receiving  of  it,  are  the  strongest 
ties  which  connect  human  beings ; the  feelings  arising  from  that 
relation  are  their  warmest  feelings  ; all  the  enthusiasm  and  tender- 
ness of  the  most  sensitive  natures  gather  round  it ; loyalty  on  the 
one  part  and  chivalry  on  the  other  are  principles  exalted  into  passions. 
I do  not  desire  to  depreciate  these  qualities.^  The  error  lies  in 
not  perceiving,  that  these  virtues  and  sentiments,  like  the  clanship 
and  the  hospitality  of  the  wandering  Ajab,  belong  emphatically 
to  a rude  and  imperfect  state  of  the  social  union ; and  that  the 
feelings  between  protector  and  protected,  whether  between  kings 
and  subjects,  rich  and  poor,  or  men  and  women, ^ can  no  longer 
have  this  beautiful  and  endearing  character  where  there  are  no 
longer  any  serious  dangers  from  which  to  protect.  What  is  there 
in  the  present  state  of  society  to  make  it  natural  that  human  beings, 
of  ordinary  strength  and  courage,  should  glow  with  the  warmest 
gratitude  and  devotion  in  return  for  protection  ? The  laws  protect 
them,  wherever  the  laws  do  not  criminally  fail  in  their  duty.^  To 
be  under  the  power  of  some  one,  instead  of  being  as  formerly  the 
sole  condition  of  safety,  is  now,  speaking  generally,  the  only  situation 
which  exposes  to  grievous  wrong.  The  so-called  protectors  are  now 
the  only  persons  against  whom,  in  any  ordinary  circumstances, 
protection  is  needed.  The  brutality  and  tyranny  with  which  every 
police  report  is  filled,  are  those  of  husbands  to  wives,  of  parents 
to  children.  That  the  law  does  not  prevent  these  atrocities,  that 
it  is  only  now  making  a first  timid  attempt  to  repress  and  punish 
them,  is  no  matter  of  necessity,  but  the  deep  disgrace  of  those  by 
whom  the  laws  are  made  and  administered.  No  nian  or  woman 
who  either  possesses  or  is  able  to  earn  an  independent  livelihood. 


^ [In  the  3rd  ed.  (1852)  “ qualities  ” replaced  “ virtues,”  and  the  next 
sentence  was  omitted  : “ That  the  most  beautiful  developments  of  feeling  and 
character  often  grow  out  of  the  most  painful,  and  in  many  respects  the  most 
hardening  and  corrupting,  circumstances  of  our  condition,  is  now,  and  probably 
will  long  be,  one  of  the  chief  stumbling-blocks  both  in  the  theory  and  in  the 
practice  of  morals  and  education.”] 

^ [“  Whether  . . . women  ” inserted  in  3rd  ed.] 

* [So  since  the  3rd  ed.  The  original  text  ran  : “ The  laws  protect  them  : 
where  laws  do  not  reach,  manners  and  opinion  shield  them.”  The  reference  to 
police  reports  and  atrocities  later  in  the  paragraph  was  introduced  in  the  3rd 
ed.,  and  “ the  protection  of  the  law  ” was  expanded  into  the  protection  which 
the  law  “ ought  to  give.”] 


756 


BOOK  IV.  CHAPTER  VII.  § 1 


requires  any  other  protection  than  that  which  the  law  could  and 
ought  to  give.  This  being  the  case,  it  argues  great  ignorance  of 
human  nature  to  continue  taking  for  granted  that  relations  founded 
on  protection  must  always  subsist,  and  not  to  see  that  the  assump- 
tion of  the  part  of  protector,  and  of  the  power  which  belongs 
to  it,  without  any  of  the  necessities  which  justify  it,  must  engender 
feelings  opposite  to  loyalty. 

Of  the  working  men,  at  least  in  the  more  advanced  countries 
of  Europe,  it  may  be  pronounced  certain,  that  the  patriarchal  or 
paternal  system  of  government  is  one  to  which  they  will  not  again 
be  subject.  That  question  was  decided,  when  they  were  taught  to 
read,  and  allowed  access  to  newspapers  and  political  tracts ; when 
dissenting  preachers  were  suffered  to  go  among  them,  and  appeal 
to  their  faculties  and  feelings  in  opposition  to  the  creeds  professed 
and  countenanced  by  their  superiors ; when  they  were  brought 
together  in  numbers,  to  work  socially  under  the  same  roof ; when 
railways  enabled  them  to  shift  from  place  to  place,  and  change 
their  patrons  and  employers  as  easily  as  their  coats ; when  they  were 
encouraged  to  seek  a share  in  the  government,  by  means  of  the 
electoral  franchise.^  The  working  classes  have  taken  their  interests 
into  their  own  hands,  and  are  perpetually  showing  that  they  think 
the  interests  of  their  employers  not  identical  with  their  own,  but 
opposite  to  them.  Some  among  the  higher  classes  flatter  themselves 
that  these  tendencies  may  be  counteracted  by  moral  and  religious 
education  : but  they  have  let  the  time  go  by  for  giving  an  education 
which  can  serve  their  purpose.  The  principles  of  the  Reformation 
have  reached  as  low  down  in  society  as  reading  and  writing,  and 
the  poor  will  not  much  longer  accept  morals  and  religion  of  other 
people’s  prescribing.  I speak  more  particularly  of  this  country, 
especially  the  town  population,  and  the  districts  of  the  most  scientific 
agriculture  or  the  highest  wages,  Scotland  and  the  north  of  England. 
Among  the  more  inert  and  less  modernized  agricultural  population 
of  the  southern  counties,  it  might  be  possible  for  the  gentry  to  retain, 
for  some  time  longer,  something  of  the  ancient  deference  and  sub- 
mission of  the  poor,  by  bribing  them  with  high  wages  and  constant 
employment ; by  insuring  them  support,  and  never  requiring  them 
to  do  anything  which  they  do  not  like.  But  these  are  two  conditions 
which  never  have  been  combined,  and  never  can  be,  for  long  together. 
A guarantee  of  subsistence  can  only  be  practically  kept  up,  when 

^ [The  last  clause  inserted  in  3rd  ed.  (1852).^ 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  767 


work  is  enforced  and  superfluous  multiplication  restrained  by  at 
least  a moral  compulsion.  It  is  then,  that  the  would-be  revivers 
of  old  times  which  they  do  not  understand,  would  feel  practically 
in  how  hopeless  a task  they  were  engaged.  The  whole  fabric  of 
patriarchal  or  seignorial  influence,  attempted  to  be  raised  on  the 
foundation  of  caressing  the  poor,  would  be  shattered  against  the 
necessity  of  enforcing  a stringent  Poor-law. 

§ 2.  It  is  on  a far  other  basis  that  the  well-being  and  well- 
doing of  the  labouring  people  must  henceforth  rest.  The  poor  have 
come  out  of  leading-strings,  and  cannot  any  longer  be  governed  or 
treated  like  children.  To  their  own  qualities  must  now  be  com- 
mended the  care  of  their  destiny.  Modern  nations  will  have  to 
learn  the  lesson,  that  the  well-being  of  a people  must  exist  by  means 
of  the  justice  and  self-government,  the  BiKaioavvr)  and  (Tco^poavvr}^ 
of  the  individual  citizens.  The  theory  of  dependence  attempts  to 
dispense  with  the  necessity  of  these  qualities  in  the  dependent 
classes.  But  now,  when  even  in  position  they  are  becoming  less 
and  less  dependent,  and  their  minds  less  and  less  acquiescent  in 
the  degree  of  dependence  which  remains,  the  virtues  of  independence 
are  those  which  they  stand  in  need  of.  Whatever  advice,  exhortation, 
or  guidance  is  held  out  to  the  labouring  classes,  must  henceforth 
be  tendered  to  them  as  equals,  and  accepted  by  them  with  their 
eyes  open.  The  prospect  of  the  future  depends  on  the  degree  in 
which  they  can  be  made  rational  beings. 

There  is  no  reason  to  believe  that  prospect  other  than  hopeful. 
The  progress  indeed  has  hitherto  been,  and  still  is,  slow.  But  there 
is  a spontaneous  education  going  on  in  the  minds  of  the  multitude, 
which  may  be  greatly  accelerated  and  improved  by  artificial  aids. 
The  instruction  obtained  from  newspapers  and  political  tracts  may 
not  be  the  most  solid  kind  of  instruction,  but  it  is  an  immense 
improvement  upon  none  at  all.  ^WTiat  it  does  for  a people  has 
been  admirably  exemplified  during  the  cotton  crisis,  in  the  case  of 
the  Lancashire  spinners  and  weavers,  who  have  acted  with  the 
consistent  good  sense  and  forbearance  so  justly  applauded,  simply 
because,  being  readers  of  newspapers,  they  understood  the  causes  of 
the  calamity  which  had  befallen  them,  and  knew  that  it  was  in  no 
way  imputable  either  to  their  employers  or  to  the  Government. 
It  is  not  certain  that  their  conduct  would  have  been  as  rational  and 

* [This  and  the  following  sentence  were  inserted  in  the  6th  ed.  (1865).] 


758 


BOOK  IV.  CHAPTER  VII.  § 2 


exemplary,  if  the  distress  had  preceded  the  salutary  measure  of 
fiscal  emancipation  which  gave  existence  to  the  penny  press.  The 
institutions  for  lectures  and  discussion,  the  collective  deliberations 
on  questions  of  common  interest,  the  trade  unions,  the  political 
agitation,  all  serve  to  awaken  public  spirit,  to  diffuse  variety  of 
ideas  among  the  mass,  and  to  excite  thought  and  reflection  in  the 
more  intelligent.  Although  the  too  early  attainment  of  political 
franchises  by  the  least  educated  class  might  retard,  instead  of 
promoting,  their  improvement,  there  can  be  little  doubt  that  it  has 
been  greatly  stimulated  by  the  attempt  to  acquire  them.^  In  the 
meantime,  the  working  classes  are  now  part  of  the  public ; in  all 
discussions  on  matters  of  general  interest  they,  or  a portion  of  them, 
are  now  partakers  ; all  who  use  the  press  as  an  instrument  may,  if  it 
so  happens,  have  them  for  an  audience  ; the  avenues  of  instruction 
through  which  the  middle  classes  acquire  such  ideas  as  they  have, 
are  accessible  to,  at  least,  the  operatives  in  the  towns.  With  these 
resources,  it  cannot  be  doubted  that  they  will  increase  in  intelligence, 
even  by  their  own  unaided  efforts ; while  there  is  reason  to  hope 
that  great  improvements  both  in  the  quality  and  quantity  of  school 
education  will  be  effected  by  the  exertions  either  of  government' or 
of  individuals,  and  that  the  progress  of  the  mass  of  the  people  in 
mental  cultivation,  and  in  the  virtues  which  are  dependent  on  it, 
will  take  place  more  rapidly,  and  with  fewer  intermittences  and 
aberrations,  than  if  left  to  itself. 

From  this  increase  of  intelligence,  several  effects  may  be  con- 
fidently anticipated.  First : that  they  will  become  even  less 
willing  than  at  present  to  be  led  and  governed,  and  directed  into 
the  way  they  should  go,  by  the  mere  authority  and  prestige  of 
superiors.  If  they  have  not  now,  still  less  will  they  have  hereafter, 
any  deferential  awe,  or  religious  principle  of  obedience,  holding 
them  in  mental  subjection  to  a class  above  them.  The  theory  of 
dependence  and  protection  will  be  more  and  more  intolerable  to 
them,  and  they  will  require  that  their  conduct  and  condition  shall 
be  essentially  self-governed.  It  is,  at  the  same  time,  quite  possible 

* [Here  was  omitted  from  the  2nd  ed.  (1849)  the  following  passage  of  the 
1st  (1848) : “ It  is  of  little  importance  that  some  of  them  may,  at  a certain 
stage  of  their  progress,  adopt  mistaken  opinions.  Communists  are  already 
numerous,  and  are  likely  to  increase  in  number ; but  nothing  tends  more  to 
the  mental  development  of  the  working  classes  than  that  all  the  questions 
which  Communism  raises  should  be  largely  and  freely  discussed  by  them ; 
nothing  could  be  more  instructive  than  that  some  should  actually  form  com- 
munities, and  try  practically  what  it  is  to  live  without  the  institution  of 
property.”] 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  759 


that  they  may  demand,  in  many  cases,  the  intervention  of  the 
legislature  in  their  affairs,  and  the  regulation  by  law  of  various  things 
which  concern  them,  often  under  very  mistaken  ideas  of  their 
interest.  Still,  it  is  their  own  will,  their  own  ideas  and  suggestions, 
to  which  they  will  demand  that  effect  should  be  given,  and  not  rules 
laid  down  for  them  by  other  people.  It  is  quite  consistent  with 
this,  that  they  should  feel  respect  for  superiority  of  intellect  and 
knowledge,  and  defer  much  to  the  opinions,  on  any  subject,  of  those 
whom  they  think  well  acquainted  with  it.  Such  deference  is 
deeply  grounded  in  human  nature ; but  they  will  judge  for  them- 
selves of  the  persons  who  are  and  are  not  entitled  to  it. 

§ 3.  It  appears  to  me  impossible  but  that  the  increase  of  intelli- 
gence, of  education,  and  of  the  love  of  independence  among  the 
working  classes,  must  be  attended  with  the  corresponding  growth 
of  the  good  sense  which  manifests  itself  in  provident  habits  of 
conduct,  and  that  population,  therefore,  will  bear  a gradually 
diminishing  ratio  to  capital  and  employment.  This  most  desirable 
result  would  be  much  accelerated  by  another  change,  which  lies 
in  the  direct  line  of  the  best  tendencies  of  the  time ; the  opening 
of  industrial  occupations  freely  to  both  sexes.  The  same  reasons 
which  make  it  no  longer  necessary  that  the  poor  should  depend  on 
the  rich,  make  it  equally  unnecessary  that  women  should  depend 
on  men  ; and  the  least  which  justice  requires  is  that  law  and  custom 
should  not  enforce  dependence  (when  the  correlative  protection 
has  become  superfluous)  by  ordaining  that  a woman,  who  does  not 
happen  to  have  a provision  by  inheritance,  shall  have  scarcely  any 
means  open  to  her  of  gaining  a livelihood,  except  as  a wife  and 
mother.  Let  women  who  prefer  that  occupation,  adopt  it ; but 
that  there  should  be  no  option,  no  other  carriere  possible  for  the 
great  majority  of  women,  except  in  the  humbler  departments  of 
life,  is  a flagrant  social  injustice.^  The  ideas  and  institutions  by 

* [The  original  (1848)  text  ran ; “ that  there  should  be  no  other  carrike 
possible  ...  is  one  of  those  social  injustices  which  call  loudest  for  remedy. 
Among  the  salutary  consequences  of  correcting  it,  one  of  the  most  probable 
would  be  a great  diminution,”  &c. 

In  the  2nd  ed.  (1849)  the  following  sentence  was  inserted  after  “ remedy  ” : 
“ The  ramifications  of  this  subject  are  far  too  numerous  and  intricate  to  be 
pursued  here.  The  social  and  pohtical  equality  of  the  sexes  is  not  a question 
of  economical  detail,  but  one  of  principle,  so  intimately  connected  with  all 
the  more  vital  points  of  human  improvement,  that  none  of  them  can  be 
thoroughly  discussed  independently  of  it.  But  for  this  very  reason  it  cannot 
be  disposed  of  by  way  of  parenthesis,  in  a treatise  devoted  to  other  subjects. 


760 


BOOK  IV.  CHAPTER  VH.  § 4 


wMcli  the  accident  of  sex  is  made  the  groundwork  of  an  inequality 
of  legal  rights,  and  a forced  dissimilarity  of  social  functions,  must 
ere  long  be  recognised  as  the  greatest  hindrance  to  moral,  social,  and 
even  intellectual  improvement.  On  the  present  occasion  I shall 
only  indicate,  among  the  probable  consequences  of  the  industrial  and 
social  independence  of  women,  a great  diminution  of  the  evil  of 
cvei  popula^Gi:  It  is  by  devoting  one-half  of  the  human  species 

tc  that  exclusive  function,  by  making  it  fill  the  entire  life  of  one 
seXf  and  interwe^Te  itself  with  almost  all  the  objects  of  the  other, 
that  the  animal  instinct  in  question  is  nursed  into  the  dispropor- 
tionate preponderance  which  it  has  hitherto  exercised  in  human 
life. 


§ 4.  The  political  consequences  of  the  increasing  power  and 
importance  of  the  operative  classes,  and  of  the  growing  ascendancy 
of  numbers,  which,  even  in  England  and  under  the  present  institu- 
tions, is  rapidly  giving  to  the  will  of  the  majority  at  least  a negative 
voice  in  the  acts  of  government,  are  too  wide  a subject  to  be  discussed 
in  this  place.  But,  confining  ourselves  to  economical  considerations, 
and  notwithstanding  the  effect  which  improved  intelligence  in  the 
working  classes,  together  with  just  laws,  may  have  in  altering  the 
distribution  of  the  produce  to  their  advantage,  I cannot  think  that 
they  wiU  be  permanently  contented  with  the  condition  of  labouring 
for  wages  as  their  ultimate  state.^  They  may  be  willing  to  pass 

It  is  sufficient  for  the  immediate  purpose,  to  point  out,  among  the  probable 
consequences  of  the  industrial  and  social  independence  of  women,  a great 
diminution,”  &c. 

This  was  replaced  in  the  3rd  ed.  (1852)  by  the  present  text,  and  a note 
attached : “ It  is  truly  disgraceful  that  in  a woman’s  reign  not  one  step  has 
been  made  by  law  towards  removing  even  the  smallest  portion  of  the  existing 
injustice  to  women.  The  brutal  part  of  the  populace  can  still  maltreat,  not  to 
say  kill,  their  wives,  with  the  next  thing  to  impunity ; and  as  to  civil  and 
social  statusy  in  framing  a new  reform  bill  for  the  extension  of  the  elective 
franchise,  the  opportunity  was  not  taken  for  so  small  a recognition  of  some- 
thing like  equahty  of  rights,  as  would  have  been  made  by  admitting  to  the 
suffrage  women  of  the  same  class  and  the  same  householding  and  tax-paying 
qualifications  as  the  men  who  already  possess  it.” 

Further  comments  were  added  to  the  note  in  the  4th  ed.  (1857) : **  Mr. 
Fitzroy’s  Act  for  the  Better  Protection  of  Women  and  Children  against  Assaults, 
is  a well-meant  though  inadequate  attempt  to  wipe  off  the  former  reproach. 
The  second  is  more  flagrant  than  ever,  another  Reform  Bill  having  been  since 
presented,  largely  extending  the  franchise  among  many  classes  of  men,  but 
leaving  all  women  in  their  existing  state  of  political  as  well  as  social  servitude.” 

The  whole  note  disappeared  in  the  5th  ed.  (1862).] 

' [At  this  point  was  omitted  from  the  3rd  ed.  (1852)  the  following  passage 
of  the  original  (1848)  text ; **  To  work  at  the  bidding  and  for  the  profit  of 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  761 


through  the  class  of  servants  in  their  way  to  that  of  employers  ; but 
not  to  remain  in  it  all  their  lives.  To  begin  as  hired  labourers,  then 
after  a few  years  to  work  on  their  own  account,  and  finally  employ 
others,  is  the  normal  condition  of  labourers  in  a new  country,  rapidly 
increasing  in  wealth  and  population,  like  America  or  Australia. 
1 But  in  an  old  and  fully  peopled  country,  those  who  begin  life  as 
labourers  for  hire,  as  a general  rule,  continue  such  to  the  end,  unless 
they  sink  into  the  still  lower  grade  of  recipients  of  public  charity. 
In  the  present  stage  of  human  progress,  when  ideas  of  equality  are 
daily  spreading  more  widely  among  the  poorer  classes,  and  can  no 
longer  be  checked  by  anything  short  of  the  entire  suppression  of 
printed  discussion  and  even  of  freedom  of  speech,  it  is  not  to  be 
expected  that  the  division  of  the  human  race  into  two  hereditary 
classes,  employers  and  employed,  can  be  permanently  maintained. 
The  relation  is  nearly  as  unsatisfactory  to  the  payer  of  wages  as  to 
the  receiver.  If  the  rich  regard  the  poor,  as  by  a kind  of  natural 
law,  their  servants  and  dependents,  the  rich  in  their  turn  are  regarded 
as  a mere  prey  and  pasture  for  the  poor ; the  subject  of  demands 
and  expectations  wholly  indefinite,  increasing  in  extent  with  every 
concession  made  to  them.  2 The  total  absence  of  regard  for  justice 
or  fairness  in  the  relations  between  the  two,  is  as  marked  on  the 
side  of  the  employed  as  on  that  of  the  employers.  We  look  in  vain 
among  the  working  classes  in  general  for  the  just  pride  which  will 
choose  to  give  good  work  for  good  wages  ; for  the  most  part,  their 
sole  endeavour  is  to  receive  as  much,  and  return  as  little  in  the 
shape  of  service,  as  possible.  It  will  sooner  or  later  become  insup- 
portable to  the  employing  classes,  to  live  in  close  and  hourly  contact 
with  persons  whose  interests  and  feelings  are  in  hostility  to 
them.  Capitalists  are  almost  as  much  interested  as  labourers  in 

another,  without  any  interest  in  the  work — the  price  of  their  labour  being 
adjusted  by  hostile  competition,  one  side  demanding  as  much  and  the  other 
paying  as  Uttle  as  possible — is  not,  even  when  wages  are  high,  a satisfactory 
state  to  human  beings  of  educated  intelligence,  who  have  ceased  to  think 
themselves  naturally  inferior  to  those  whom  they  serve.”] 

1 [The  rest  of  the  paragraph,  with  the  exception  of  the  two  sentences  indicated 
in  the  next  note,  replaced  in  the  3rd  ed.  (1852)  the  following  single  sentence 
of  the  original  text ; “ But  something  else  is  required  when  wealth  increases 
slowly,  or  has  reached  the  stationary  state,  when  positions,  instead  of  being 
more  mobile,  would  tend  to  be  much  more  permanent  than  at  present,  and  the 
condition  of  any  portion  of  mankind  could  only  be  desirable,  if  made  desirable 
from  the  first.”] 

* [This  and  the  following  sentence  are  an  expansion  in  the  4th  ed.  (1857) 
of  the  clause  in  the  3rd  : “ while  the  return  given  in  the  shape  of  service  is 
sought  to  be  reduced  to  the  lowest  minimum.”] 


762 


BOOK  IV.  CHAPTER  VII.  § 4 


placing  tlie  operations  of  industry  on  such  a footing,  that  those  who 
labour  for  them  may  feel  the  same  interest  in  the  work,  which  is 
felt  by  those  who  labour  on  their  own  account. 

The  opinion  expressed  in  a former  part  of  this  treatise  respecting 
small  landed  properties  and  peasant  proprietors,  may  have  made 
the  reader  anticipate  that  a wide  diffusion  of  property  in  land  is  the 
resource  on  which  I rely  for  exempting  at  least  the  agricultural 
labourers  from  exclusive  dependence  on  labour  for  hire.  Such, 
however,  is  not  my  opinion.  I indeed  deem  that  form  of  agricultural 
economy  to  be  most  groundlessly  cried  down,  and  to  be  greatly 
preferable,  in  its  aggregate  effects  on  human  happiness,  to  hired 
labour  in  any  form  in  which  it  exists  at  present ; because  the 
prudential  check  to  population  acts  more  directly,  and  is  shown  by 
experience  to  be  more  efficacious  ; and  because,  in  point  of  security, 
of  independence,  of  exercise  of  any  other  than  the  animal  faculties, 
the  state  of  a peasant  proprietor  is  far  superior  to  that  of  an  agricul- 
tural labourer  in  this  or  in  any  other  old  country.  Where  the 
former  system  already  exists,  and  works  on  the  whole  satisfactorily, 
I should  regret,  in  the  present  state  of  human  intelligence,  to  see  it 
abolished  in  order  to  make  way  for  the  other,  under  a pedantic  notion 
of  agricultural  improvement  as  a thing  necessarily  the  same  in  every 
diversity  of  circumstances.  In  a backward  state  of  industrial 
improvement,  as  in  Ireland,  I should  urge  its  introduction,  in 
preference  to  an  exclusive  system  of  hired  labour;  as  a more 
powerful  instrument  for  raising  a population  from  semi-savage 
listlessness  and  recklessness,  to  persevering  industry  and  prudent 
calculation. 

But  a people  who  have  once  adopted  the  large  system  of  produc- 
tion, either  in  manufactures  or  in  agriculture,  are  not  hkely  to  recede 
from  it;  and  when  population  is  kept  in  due  proportion  to  the 
means  of  support,  it  is  not  desirable  that  they  should.  Labour  is 
unquestionably  more  productive  on  the  system  of  large  industrial 
enterprises ; the  produce,  if  not  greater  absolutely,  is  greater  in 
proportion  to  the  labour  employed  : the  same  number  of  persons  can 
be  supported  equally  well  with  less  toil  and  greater  leisure ; which 
will  be  wholly  an  advantage,  as  soon  as  civilization  and  improvement 
have  so  far  advanced,  that  what  is-  a benefit  to  the  whole  shall  be  a 
benefit  to  each  individual  composing  it.i  And  in  the  moral  aspect  of 

‘ [The  remainder  of  this  paragraph  (subjected  subsequently  to  verbal 
alterations)  replaced  in  the  3rd  ed.  (1852)  the  following  original  (1848)  text ; 
“ The  problem  is,  to  obtain  the  efficiency  and  economy  of  production  on  a large 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  763 


the  question,  which  is  still  more  important  than  the  economical, 
something  better  should  be  aimed  at  as  the  goal  of  industrial  im- 
provement, than  to  disperse  mankind  over  the  earth  in  single 
families,  each  ruled  internally,  as  families  now  are,  by  a patriarchal 
despot,  and  having  scarcely  any  community  of  interest,  or  necessary 
mental  communion,  with  other  human  beings.  The  domination  of 
the  head  of  the  family  over  the  other  members,  in  this  state  of  things, 
is  absolute ; while  the  effect  on  his  own  mind  tends  towards  con- 
centration of  all  interests  in  the  family,  considered  as  an  expansion 
of  self,  and  absorption  of  all  passions  in  that  of  exclusive  possession, 
of  all  cares  in  those  of  preservation  and  acquisition.  As  a step  out 
of  the  merely  animal  state  into  the  human,  out  of  reckless  abandon- 
ment to  brute  instincts  into  prudential  foresight  and  self-government, 
this  moral  condition  may  be  seen  without  displeasure.  But  if 
public  spirit,  generous  sentiments,  or  true  justice  and  equality  are 
desired,  association,  not  isolation,  of  interests,  is  the  school  in  which 
these  excellences  are  nurtured.  The  aim  of  improvement  should  be 
not  solely  to  place  human  beings  in  a condition  in  which  they  will 
be  able  to  do  without  one  another,  but  to  enable  them  to  work 
with  or  for  one  another  in  relations  not  involving  dependence. 
Hitherto  there  has  been  no  alternative  for  those  who  lived  by  their 
labour,  but  that  of  labouring  either  each  for  himself  alone,  or  for  a 
master.  But  the  civilizing  and  improving  influences  of  association, 
and  the  efficiency  and  economy  of  production  on  a large  scale,  may 
be  obtained  without  dividing  the  producers  into  two  parties  with 
hostile  interests  and  feelings,  the  many  who  do  the  work  being  mere 
servants  under  the  command  of  the  one  who  supplies  the  funds,  and 
having  no  interest  of  their  own  in  the  enterprise  except  to  earn  their 
wages  with  as  little  labour  as  possible.  The  speculations  and 
discussions  of  the  last  flfty  years,  and  the  events  of  the  last  thirty,^ 
are  abundantly  conclusive  on  this  point.  If  the  improvement 
which  even  triumphant  military  despotism  has  only  retarded,  not 
stopped,  shall  continue  its  course,^  there  can  be  little  doubt  that  the 
status  of  hired  labourers  will  gradually  tend  to  conflne  itself  to  the 

scale,  without  dividing  the  producers  into  two  parties  with  hostile  interests, 
employers  and  employed,  the  many  who  do  the  work  being  mere  servants  under 
the  command  of  the  one  who  supplies  the  funds,  and  having  no  interest  of 
their  own  in  the  enterprise,  except  to  fulfil  their  contract  and  earn  their  wages.”] 

1 [3rd  ed.  (1852),  “ five  ” ; 4th  (1857),  “ ten  ” ; 6th  (1865),  “ twenty  ” ; 7th 
(1871),  “ thirty.”] 

2 [So  since  5th  ed.  (1862).  In  the  3rd  and  4th,  “ Unless  the  military  despotism 
now  triumphant  on  the  Continent  should  succeed  in  its  nefarious  attempts  to 
throw  back  the  human  mind.”] 


764 


BOOK  IV,  CHAPTER  VII.  § 6 


description  of  workpeople  wkose  low  moral  qualities  render  them 
unfit  for  anything  more  independent : and  that  the  relation  of 
masters  and  workpeople  will  be  gradually  superseded  by  partnership, 
in  one  of  two  forms : in  some  cases,  association  of  the  labourers 
with  the  capitalist ; in  others,  and  perhaps  finally  in  all,^  association 
of  labourers  among  themselves. 

2 § 5.  The  first  of  these  forms  of  association  has  long  been 
practised,  not  indeed  as  a rule,  but  as  an  exception.  In  several 
departments  of  industry  there  are  already  cases  in  which  every  one 
who  contributes  to  the  work,  either  by  labour  or  by  pecuniary 
resources,  has  a partner’s  interest  in  it,  proportional  to  the  value  of 
his  contribution.  It  is  already  a common  practice  to  remunerate 
those  in  whom  peculiar  trust  is  reposed,  by  means  of  a percentage 
on  the  profits : and  cases  exist  in  which  the  principle  is,  with  ex- 
cellent success,  carried  down  to  the  class  of  mere  manual  labourers. 

In  the  American  ships  trading  to  China,  it  has  long  been  the 

^ [In  3rd  ed.  : “ temporarily  and  in  some  cases  ...»  in  other  cases  and 
finally  in  all.”  In  6th  ed.  (1862) : “ perhaps  finally  in  aU.”  In  6th  ed.  (1865), 
“ temporarily  ” omitted.] 

* [The  following  passage,  inserted  at  this  point  in  the  2nd  ed.  (1849)  dis- 
appeared from  the  3rd  (1852). 

“ § 6.  It  is  this  feeling,  of  the  nature  of  the  problem  ” (see  supra,  p.  761, 
n.  1),  “ almost  as  much  as  despair  of  the  improvement  of  the  condition  of  the 
labouring  masses  by  other  means,  which  has  caused  so  great  a multiplication  of 
projects  for  the  ‘ organization  of  industry  ’ by  the  extension  and  development 
of  the  co-operative  or  joint  stock  principle  : some  of  the  more  conspicuous  of 
which  have  been  described  and  characterized  in  an  early  chapter  of  this  work. 
It  is  most  desirable  that  aU  these  schemes  should  have  opportunity  and  en- 
couragement to  test  their  capabilities  by  actual  experiment.  There  are,  in 
almost  aU  of  them,  many  features,  in  themselves  well  worth  submitting  to  that 
test ; while,  on  the  other  hand,  the  exaggerated  expectations  entertained  by 
large  and  growing  multitudes  in  aU  the  principal  nations  of  the  world,  con- 
cerning what  it  is  possible,  in  the  present  state  of  human  improvement,  to  effect 
by  such  means,  have  no  chance  of  being  corrected  except  by  a fair  trial  in 
practice.  The  French  Revolution  of  February  1848,  at  first  seemed  to  have 
opened  a fair  field  for  the  trial  of  such  experiments,  on  a perfectly  safe  scale, 
and  with  every  advantage  that  could  be  derived  from  the  countenance  of  a 
government  which  sincerely  desired  their  success.  It  is  much  to  be  regretted 
that  these  prospects  have  been  frustrated,  and  that  the  reaction  of  the  middle 
class  against  anti-property  doctrines  has  engendered  for  the  present  an  un- 
reasoning and  undiscriminating  antipathy  to  aU  ideas,  however  harmless  or 
however  just,  which  have  the  smallest  savour  of  Socialism.  This  is  a disposition 
of  mind,  of  which  the  influential  classes,  both  in  France  and  elsewhere,  will  find  it 
necessary  to  divest  themselves.  Socialism  has  now  become  irrevocably  one  of 
the  leading  elements  in  European  politics.  The  questions  raised  by  it  will  not 
be  set  at  rest  by  merely  refusing  to  listen  to  it ; but  only  by  a more  and  more 
complete  realization  of  the  ends  which  Socialism  aims  at,  not  neglecting  its  means 
so  far  as  they  can  be  employed  with  advantage.”} 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  766 


custoDi  for  every  sailor  to  have  an  interest  in  the  profits  of  the  voyage; 
and  to  this  has  been  ascribed  the  general  good  conduct  of  those 
seamen,  and  the  extreme  rarity  of  any  collision  between  them  and 
the  government  or  people  of  the  country.  An  instance  in  England, 
not  so  well  known  as  it  deserves  to  be,  is  that  of  the  Cornish  miners. 
“ In  Cornwall  the  mines  are  worked  strictly  on  the  system  of  joint 
adventure ; gangs  of  miners  contracting  with  the  agent,  who 
represents  the  owner  of  the  mine,  to  execute  a certain  portion  of  a 
vein  and  fit  the  ore  for  market,  at  the  price  of  so  much  in  the  pound 
of  the  sum  for  which  the  ore  is  sold.  These  contracts  are  put  up  at 
certain  regular  periods,  generally  every  two  months,  and  taken  by  a 
voluntary  partnership  of  men  accustomed  to  the  mine.  This  system 
has  its  disadvantages,  in  consequence  of  the  uncertainty  and 
irregularity  of  the  earnings,  and  consequent  necessity  of  living  for 
long  periods  on  credit ; but  it  has  advantages  which  more  than 
counterbalance  these  drawbacks.  It  produces  a degree  of  intelligence, 
independence,  and  moral  elevation,  which  raise  the  condition  and 
character  of  the  Cornish  miner  far  above  that  of  the  generality  of  the 
labouring  class.  We  are  told  by  Dr.  Barham,  that  ‘ they  are  not 
only,  as  a class,  intelligent  for  labourers,  but  men  of  considerable 
knowledge.’  Also,  that  ‘ they  have  a character  of  independence, 
something  American,  the  system  by  which  the  contracts  are  let 
giving  the  takers  entire  freedom  to  make  arrangements  among 
themselves ; so  that  each  man  feels,  as  a partner  in  his  little  firm, 
that  he  meets  his  employers  on  nearly  equal  terms.*  . . . With  this 
basis  of  intelligence  and  independence  in  their  character,  we  are  not 
surprised  when  we  hear  that  ‘ a very  great  number  of  miners  are  now 
located  on  possessions  of  their  own,  leased  for  three  lives  or  ninety- 
nine  years,  on  which  they  have  built  houses ; * or  that  ‘ 281,541/. 
are  deposited  in  savings  banks  in  Cornwall,  of  which  two-thirds 
are  estimated  to  belong  to  miners.*  **  * 

Mr.  Babbage,  who  also  gives  an  account  of  this  system,  observes 
that  the  payment  to  the  crews  of  whaling  ships  is  governed  by  a 
similar  principle ; and  that  “ the  profits  arising  from  fisfhing  with 
nets  on  the  south  coasts  of  England  are  thus  divided  : one-half  the 
produce  belongs  to  the  owner  of  the  boat  and  net ; the  other  half 
is  divided  in  equal  portions  between  the  persons  using  it,  who  are 
also  bound  to  assist  in  repairing  the  net  when  required.**  Mr. 

* This  passage  is  from  the  Prize  Essay  on  the  Causes  and  Remedies  of  National 

Distress,  by  Mr.  Samuel  Laing.  The  extracts  which  it  includes  are  from  the 
Appendix  to  the  Report  of  the  Children's  Employment  Commission^ 


•766 


BOOK  IV.  CHAPTER  VII.  § 6 


Babbage  has  the  great  merit  of  having  pointed  out  the  practicability, 
and  the  advantage,  of  extending  the  principle  to  manufacturing 
industry  generally.*  ^ 

* Economy  of  Machinery  and  Manufactures,  3rd  edition,  ch.  26. 

* [The  long  quotation  from  Babbage,  which  appeared  in  the  1st  and  2nd  eds. 
(1848,  1849),  disappeared  from  the  3rd  (1852) : “ I venture  to  quote  the  principal 
part  of  his  observations  on  the  subject. 

‘ The  general  principles  on  which  the  proposed  system  is  founded,  are — 1st. 
That  a considerable  part  of  the  wages  received  by  each  person  employed,  should 
depend  on  the  profits  made  by  the  establishment ; and  2nd.  That  every  person 
connected  with  it  should  derive  more  advantage  from  applying  any  improve- 
ment he  might  discover,  to  the  factory  in  which  he  is  employed,  than  he  could 
by  any  other  course. 

‘ It  would  be  difficult  to  prevail  on  the  large  capitalist  to  enter  upon  any 
system,  which  would  change  the  division  of  the  profits  arising  from  the  employ- 
ment of  his  capital  in  setting  skill  and  labour  in  action ; any  alteration,  there- 
fore, must  be  expected  rather  from  the  small  capitalist,  or  from  the  higher 
class  of  workmen,  who  combine  the  two  characters  ; and  to  these  latter  classes, 
whose  welfare  will  be  first  affected,  the  change  is  most  important.  I shall 
therefore  first  point  out  the  course  to  be  pursued  in  making  the  experiment ; 
and  then,  taking  a particular  branch  of  trade  as  an  illustration,  I shall 
examine  the  merits  and  defects  of  the  proposed  system  as  applied  to  it. 

‘ Let  us  suppose,  in  some  large  manufacturing  town,  ten  or  twelve  of  the 
most  intelligent  and  skilful  workmen  to  unite,  whose  characters  for  sobriety  and 
steadiness  are  good,  and  are  well  known  among  their  class.  Such  persons  will 
each  possess  some  small  portion  of  capital ; and  let  them  join  with  one  or  two 
others  who  have  raised  themselves  into  the  class  of  small  master-manufacturers, 
and  therefore  possess  rather  a larger  portion  of  capital.  Let  these  persons,  after 
well  considering  the  subject,  agree  to  establish  a manufactory  of  fire-irons  and 
fenders  ; and  let  us  suppose  that  each  of  the  ten  workmen  can  command  forty 
pounds,  and  each  of  the  small  capitalists  possesses  two  hundred  pounds  ; thus 
they  have  a capital  of  800Z.  with  which  to  commence  business,  and  for  the  sake 
of  simplifying,  let  us  further  suppose  the  labour  of  each  of  these  twelve  persona 
to  be  worth  two  pounds  a week.  One  portion  of  their  capital  will  be  expended 
in  procuring  the  tools  necessary  for  their  trade,  which  we  shall  take  at  400Z., 
and  this  must  be  considered  as  their  fixed  capital.  The  remaining  400Z.  must 
be  employed  as  circulating  capital,  in  purchasing  the  iron  with  which  their 
articles  are  made,  in  paying  the  rent  of  their  workshops,  and  in  supporting 
themselves  and  their  fanulies  until  some  portion  of  it  is  replaced  by  the  sale 
of  the  goods  produced. 

* Now  the  first  question  to  be  settled  is,  what  proportion  of  the  profit  should 
be  allowed  for  the  use  of  capital,  and  what  for  skill  and  labour  ? It  does  not 
seem  possible  to  decide  this  question  by  any  abstract  reasoning ; if  the  capital 
supplied  by  each  partner  is  equal,  all  ^fficulty  will  be  removed ; if  otherwise, 
the  proportion  must  be  left  to  find  its  level,  and  will  be  discovered  by  experience ; 
and  it  is  probable  that  it  will  not  fluctuate  much.  Suppose  it  to  be  agreed  that 
the  capital  of  800Z.  shall  receive  the  wages  of  one  workman.  At  the  end  of 
each  week,  every  workman  is  to  receive  one  pound  as  wages,  and  one  pound  is 
to  be  divided  amongst  the  owners  of  the  capital.  After  a few  weeks  the  returns 
will  begin  to  come  in  ; and  they  will  soon  become  nearly  uniform.  Accurate 
accounts  should  be  kept  of  every  expense  and  of  all  the  sales  ; and  at  the  end  of 
each  week  the  profit  should  be  divided.  A certain  portion  should  be  laid  aside 
as  a reserved  fund,  another  portion  for  repair  of  the  tools,  and  the  remainder* 
being  divided  into  thirteen  parts,  one  of  these  parts  would  be  divided  amongst 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES 


767 


1 Some  attention  liaa  been  excited  by  an  experiment  of  this 
nature,  commenced  above  thirty  years  ago  by  a Paris  tradesman, 


the  capitalists  and  one  belong  to  each  workman.  Thus  each  man  would,  in 
ordinary  circumstances,  make  up  his  usual  wages  of  two  pounds  weekly.  If 
the  factory  went  on  prosperously,  the  wages  of  the  men  would  increase  ; if  the 
sales  fell  off,  they  would  be  diminished.  It  is  important  that  every  person 
employed  in  the  establishment,  whatever  might  be  the  amount  paid  for  his 
services,  whether  he  act  as  labourer  or  porter,  or  as  the  clerk  who  keeps  the 
accounts,  or  as  book-keeper  employed  for  a few  hours  once  a week  to  superintend 
them,  should  receive  one-half  of  what  his  service  is  worth  in  fixed  salary,  the  other 
part  varying  with  the  success  of  the  undertaking. 

* The  result  of  such  arrangements  in  a factory  would  be, 

* 1.  That  every  person  engaged  in  it  would  have  a direct  interest  in  its 
prosperity ; since  the  effect  of  any  success,  or  falling  off,  would  almost 
immediately  produce  a corresponding  change  in  his  own  weekly  receipts. 

‘ 2.  Every  person  concerned  in  the  factory  would  have  an  immediate  interest 
in  preventing  any  waste  or  mismanagement  in  all  the  departments. 

‘ 3.  The  talents  of  all  connected  with  it  would  be  strongly  directed  to 
improvement  in  every  department. 

* 4.  None  but  workmen  of  high  character  and  qualifications  could  obtain 
admission  into  such  establishments,  because  when  any  additional  hands  were 
required,  it  would  be  the  common  interest  of  all  to  admit  only  the  most  respect- 
able and  skilful,  and  it  would  be  far  less  easy  to  impose  upon  a dozen  workmen 
than  upon  the  single  proprietor  of  a factory. 

* 6.  When  any  circumstance  produced  a glut  in  the  market,  more  skill 
would  be  directed  to  diminishing  the  cost  of  production ; and  a portion  of  the 
time  of  the  men  might  then  be  occupied  in  repairing  and  improving  their  tools, 
for  which  a reserved  fund  would  pay,  thus  checking  present,  and  at  the  same 
time  facilitating  future,  production. 

‘ 6.  Another  advantage,  of  no  small  importance,  would  be  the  total  removal 
of  all  real  or  imaginary  causes  for  combinations.  The  workmen  and  the  capitalist 
would  so  shade  into  each  other — would  so  evidently  have  a common  interest, 
and  their  difficulties  and  distresses  would  be  mutually  so  well  understood,  that 
instead  of  combining  to  oppress  one  another,  the  only  combination  which  could 
exist  would  be  a most  powerful  union  between  both  parties  to  overcome  their 
common  difficulties. 

* One  of  the  difficulties  attending  such  a system  is,  that  capitalists  would  at 
first  fear  to  embark  in  it,  imagining  that  the  workmen  would  receive  too  large 
a share  of  the  profits : and  it  is  quite  true  that  the  workmen  would  have  a 
larger  share  than  at  present ; but  at  the  same  time,  it  is  presumed  the  effect  of 
the  whole  system  would  be,  that  the  total  profits  of  the  establishment  being 
much  increased,  the  smaller  proportion  allowed  to  capital  under  this  system 
would  yet  be  greater  in  actual  amount,  than  that  which  results  to  it  from  the 
larger  share  in  the  system  now  existing. 

‘ A difficulty  would  occur  also  in  discharging  workmen  who  behaved  ill,  or 
who  were  not  competent  to  their  work ; this  would  arise  from  their  having  a 
certain  interest  in  the  reserved  fund,  and  perhaps  from  their  possessing  a certain 
portion  of  the  capital  employed ; but  without  entering  into  detail,  it  may  be 
observed,  that  such  cases  might  be  determined  on  by  meetings  of  the  whole 
establishment ; and  that  if  the  policy  of  the  laws  favoured  such  establishment-^ 
it  would  scarcely  be  more  difficult  to  enforce  just  regulations  than  it  now  is  to 
enforce  some  which  are  unjust,  by  means  of  combinations  either  amongst  the 
masters  or  the  men.’  ”] 

^ [In  the  original  ed.  (1849)  this  paragraph  began  thus  : “ In  this  imaginary 


768 


BOOK  IV.  CHAPTER  VII.  § 5 


a house-painter,  M.  Leclaire,*  and  described  by  him  in  a pamphlet 
published  in  the  year  1842.  M.  Leclaire,  according  to  his  statement, 
employs  on  an  average  two  hundred  workmen,  whom  he  pays  in  the 
usual  manner,  by  fixed  wages  or  salaries.  He  assigns  to  himself, 
besides  interest  for  his  capital,  a fixed  allowance  for  his  labour  and 
responsibility  as  manager.  At  the  end  of  the  year,  the  surplus 
profits  are  divided  among  the  body,  himself  included,  in  the  proportion 
of  their  salaries.f  The  reasons  by  which  M.  Leclaire  was  led  to 
adopt  this  system  are  highly  instructive.  Finding  the  conduct  of 
his  workmen  unsatisfactory,  he  first  tried  the  effect  of  giving  higlier 
wages,  and  by  this  he  managed  to  obtain  a body  of  excellent 
workmen,  who  would  not  quit  his  service  for  any  other.  “ Having 
thus  succeeded  ” (I  quote  from  an  abstract  of  the  pamphlet  in 
Chambers'  Journal, %)  “in  producing  some  sort  of  stability  in  the 
arrangement  of  his  establishment,  M.  Leclaire  expected,  he  says,  to 
enjoy  greater  peace  of  mind.  In  this,  however,  he  was  disappointed. 
So  long  as  he  was  able  to  superintend  everything  himself,  from  the 
general  concerns  of  his  business  down  to  its  minutest  details,  he  did 
enjoy  a certain  satisfaction ; but  from  the  moment  that,  owing  to 
the  increase  of  his  business,  he  found  that  he  could  be  nothing  more 
than  the  centre  from  which  orders  were  issued,  and  to  which  reports 
were  brought  in,  his  former  anxiety  and  discomfort  returned  upon 
him.”  He  speaks  lightly  of  the  other  sources  of  anxiety  to  which 
a tradesman  is  subject,  but  describes  as  an  incessant  cause  of 
vexation  the  losses  arising  from  the  misconduct  of  workmen.  An 
employer  “ will  find  workmen  whose  indifference  to  his  interest  is 
such  that  they  do  not  perform  two-thirds  of  the  amount  of  work 
which  they  are  capable  of ; hence  the  continual  fretting  of  masters, 

case  ” described  by  Babbage,  see  supra,  p.  766,  n.  1,  it  is  supposed  that  each 
labourer  brings  some  small  portion  of  capital  into  the  concern ; but  the  principle 
is  equally  applicable  to  the  ordinary  case  in  which  the  whole  capital  belongs  to 
an  individual  capitalist.  An  application  of  it  to  such  a case  is  actually  in  pro- 
gress by  a Paris  tradesman,”  &c.  The  present  text,  but  with  “ about  ten  yeaw 
ago,”  dates  from  the  3rd  ed.  (1852).  The  4th,  5th,  and  6th  eds.  (1857, 1862, 1865) 
have  “ about  sixteen  years  ago  ” ; the  7th  (1871)  “ above  thirty.”] 

* His  establishment  is  11,  Rue  Saint  Georges. 

f [1849]  It  appears,  however,  that  the  workmen  whom  M.  Leclaire  had 
admitted  to  this  participation  of  profits,  were  only  a portion  (rather  less  than 
half)  of  the  whole  number  whom  he  employed.  This  is  explained  by  another 
part  of  his  system.  M.  Leclaire  pays  the  full  market  rate  of  wages  to  all  his 
workmen.  The  share  of  profit  assigned  to  them  is,  therefore,  a clear  addition 
to  the  ordinary  gains  of  their  class,  which  he  very  laudably  uses  as  an  instru- 
ment of  improvement,  by  making  it  the  reward  of  desert,  or  the  recompense 
for  peculiar  trust. 

J For  Septeml^r  27,  1 845. 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  769 


who,  seeing  their  interests  neglected,  believe  themselves  entitled  to 
suppose  that  workmen  are  constantly  conspiring  to  ruin  those  from 
whom  they  derive  their  livelihood.  If  the  journeyman  were  sure 
of  constant  employment,  his  position  would  in  some  respects  be  more 
enviable  than  that  of  the  master,  because  he  is  assured  of  a certain 
amount  of  day’s  wages,  which  he  will  get  whether  he  works  much  or 
little.  He  runs  no  risk,  and  has  no  other  motive  to  stimulate  him 
to  do  his  best  than  his  own  sense  of  duty.  The  master,  on  the  other 
hand,  depends  greatly  on  chance  for  his  returns  : his  position  is  one 
of  continual  irritation  and  anxiety.  This  would  no  longer  be  the 
case  to  the  same  extent,  if  the  interests  of  the  master  and  those  of  the 
workmen  were  bound  up  with  each  other,  connected  by  some  bond 
of  mutual  security,  such  as  that  which  would  be  obtained  by  the 
plan  of  a yearly  division  of  profits.” 

Even  in  the  first  year  during  which  M.  Leclaire’s  experiment  was 
in  complete  operation,  the  success  was  remarkable.  Not  one  of  his 
journeymen  who  worked  as  many  as  three  hundred  days,  earned  in 
that  year  less  than  1500  francs,  and  some  considerably  more.  His 
highest  rate  of  daily  wages  being  four  francs,  or  1200  francs  for  300 
days,  the  remaining  300  francs,  or  12Z.,  must  have  been  the  smallest 
amount  which  any  journeyman,  who  worked  that  number  of  days, 
obtained  as  his  proportion  of  the  surplus  profit.  M.  Leclaire 
describes  in  strong  terms  the  improvement  which  was  already 
manifest  in  the  habits  and  demeanour  of  his  workmen,  not  merely 
when  at  work,  and  in  their  relations  with  their  employer,  but  at 
other  times  and  in  other  relations,  showing  increased  respect  both  for 
others  and  for  themselves.  ^ M.  Chevalier,  in  a work  published  in 
1848,*  stated  on  M.  Leclaire’s  authority,  that  the  increased  zeal 
of  the  workpeople  continued  to  be  a full  compensation  to  him,  even 
in  a pecuniary  sense,  for  the  share  of  profit  which  he  renounced  in 
their  favour.  ^And  M.  Villiaume,  in  1857,f  observes  “ Though 
he  has  always  kept  himself  free  from  the  frauds  which  are  but  too 
frequent  in  his  profession,  he  has  always  been  able  to  hold  his  ground 
against  competition,  and  has  acquired  a handsome  competency  in 
spite  of  the  relinquishment  of  so  great  a portion  of  his  profits. 
Assuredly  he  has  been  only  thus  successful  because  the  unusual 
activity  of  his  workpeople,  and  the  watch  which  they  kept  over  one 

1 [Added  in  2nd  ed.  (1849).] 

* Lettres  sur  V Organisation  du  Travail,  by  Michel  Chevalier,  lettre  riv. 

* [The  concluding  sentence  of  this  paragraph,  together  with  the  next  para- 
graph and  the  examples  quoted  in  the  note,  were  added  in  the  5th  ed.  (1862).] 

t Nouveau  Traiti  d'Economie  Politique, 


770 


BOOK  IV.  CHAPTER  VH.  § 5 


another,  have  compensated  him  for  the  sacrifice  made  in  contenting 
himself  with  only  a share  of  the  gain.”  * 

The  beneficent  example  set  by  M.  Leclaire  has  been  followed, 
with  brilhant  success,  by  other  employers  of  labour  on  a large  scale 
at  Paris ; and  I annex,  from  the  work  last  referred  to  (one  of  the 
ablest  of  the  many  able  treatises  on  political  economy  produced  by 
the  present  generation  of  the  political  economists  of  France),  some 
signal  examples  of  the  economical  and  moral  benefit  arising  from 
this  admirable  arrangement^ 

* [1865]  At  the  present  time  M.  Leclaire’s  establishment  is  conducted  on  a 
somewhat  altered  system,  though  the  principle  of  dividing  the  profits  is  main- 
tained.  There  are  now  three  partners  in  the  concern  : M.  Leclaire  himself, 
one  other  person  (M.  Defournaux),  and  a Provident  Society  (Societe  de  Secours 
Mutuels),  of  which  all  persons  in  his  employment  are  the  members.  (This 
Society  owns  an  excellent  library,  and  has  scientific,  technical,  and  other  lectures 
regularly  delivered  to  it.)  Each  of  the  three  partners  has  100,000  francs  in- 
vested in  the  concern ; M.  Leclaire  having  advanced  to  the  Provident  Society 
as  much  as  was  necessary  to  supply  the  original  insufficiency  of  their  own  funds. 
The  partnership,  on  the  part  of  the  Society,  is  limited ; on  that  of  M.  Leclaire 
and  M.  Defournaux,  unlimited.  These  two  receive  6000  francs  (240?. ) per  annum 
each  as  wages  of  superintendence.  Of  the  annual  profits  they  receive  half, 
though  owning  two-thirds  of  the  capital.  The  remaining  half  belongs  to  the 
employes  and  workpeople ; two- fifths  of  it  being  paid  to  the  Provident  Society, 
and  the  other  three-fifths  divided  among  the  body.  M.  Leclaire,  however,  now 
reserves  to  himself  the  right  of  deciding  who  shall  share  in  the  distribution,  and 
to  what  amount ; only  binding  himself  never  to  retain  any  part,  but  to  bestow 
whatever  has  not  been  awarded  to  individuals,  on  the  Provident  Society.  It  is 
further  provided  that  in  case  of  the  retirement  of  both  the  private  partners,  the 
goodwill  and  plant  shall  become,  without  payment,  the  property  of  the  Society. 

•f  “ In  March  1847,  M.  Paul  Dupont,  the  head  of  a Paris  printing-office,  had 
the  idea  of  taking  his  workmen  into  partnership  by  assigning  to  them  a tenth 
of  the  profits.  He  habitually  employs  three  hxmdred ; two  hundred  of  them 
on  piece  work,  and  a hundred  by  the  day.  He  also  employs  a hundred  extra 
hands,  who  are  not  included  in  the  association.  The  portion  of  profit  which 
falls  to  the  workmen  does  not  bring  them  in,  on  the  average,  more  than  the 
amount  of  a fortnight’s  wages  ; but  they  receive  their  ordinary  pay  according 
to  the  rates  established  in  all  the  great  Paris  printing  offices  ; and  have,  besides, 
the  advantage  of  medical  attendance  in  illness  at  the  expense  of  the  association, 
and  a franc  and  a half  per  day  while  incapacitated  for  work.  The  workmen 
cannot  draw  out  their  share  of  profit  except  on  quitting  the  association.  It  is 
left  at  interest  (sometimes  invested  in  the  public  funds),  and  forms  an  accumu- 
lating reserve  of  savings  for  its  owners. 

“ M.  Dupont  and  his  partners  find  this  association  a source  of  great  additional 
profit  to  them  : the  workmen,  on  their  side,  congratulate  themselves  daily  on 
the  happy  idea  of  their  employer.  Several  of  them  have  by  their  exertions 
caused  the  establishment  to  gain  a gold  medal  in  1849,  and  an  honorary  medal 
at  the  Universal  Exhibition  of  1855  : some  even  have  personally  received  the 
recompense  of  their  inventions  and  of  their  labours.  Under  an  ordinary  em- 
ployer, these  excellent  people  would  not  have  had  leisure  to  prosecute  their 
inventions,  unless  by  leaving  the  whole  honour  to  one  who  was  not  the  author 
of  them  : but,  associated  as  they  were,  if  the  employer  had  been  unjust,  two 
hundred  men  would  have  obliged  him  to  repair  the  wrong. 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  77 1 


1 Until  the  passing  of  the  Limited  Liability  Act,  it  was  held  that 
an  arrangement  similar  to  M.  Leclaire’s  would  have  been  impossible 
in  England,  as  the  workmen  could  not,  in  the  previous  state  of  the 
law,  have  been  associated  in  the  profits,  without  being  liable  for 
losses.  One  of  the  many  benefits  of  that  great  legislative  improve- 
ment has  been  to  render  partnerships  of  this  description  possible, 
and  we  may  now  expect  to  see  them  carried  into  practice.  Messrs. 
Briggs,  of  the  Whitwood  and  Methley  collieries,  near  Normanton  in 
Yorkshire,  have  taken  the  first  step.  They  now  work  these  mines  by 
a company,  two-thirds  of  the  capital  of  which  they  themselves 
continue  to  hold,  but  undertake,  in  the  allotment  of  the  remaining 
third,  to  give  the  preference  to  the  “ officials  and  operatives  employed 

“ I have  visited  this  establishment,  and  have  been  able  to  see  for  myself  the 
improvement  which  the  partnership  produces  in  the  habits  of  the  workpeople. 

“ M.  Oisquet,  formerly  Prefect  of  Police,  has  long  been  the  proprietor  of  an 
oil  manufactory  at  St.  Denis,  the  most  important  one  in  France  next  to  that 
of  M.  Darblay,  of  CorbeiL  When  in  1848  he  took  the  personal  management  of 
it,  he  found  workmen  who  got  drunk  several  days  in  the  week,  and  during  their 
work  srmg,  smoked,  and  sometimes  quarrelled  with  one  another.  Many 
unsuccessful  attempts  had  been  made  to  alter  this  state  of  things  : he  accom- 
plished it  by  forbidding  his  workmen  to  get  drunk  on  working  days,  on  pain  of 
dismissal,  and  at  the  same  time  promising  to  share  with  them,  by  way  of  annual 
gratuity,  five  per  cent  of  his  net  profits,  in  shares  proportioned  to  wages,  which 
are  fixed  at  the  current  rates.  From  that  time  the  reformation  has  been  com- 
plete, and  he  is  surrounded  by  a hundred  workmen  full  of  zeal  and  devotion. 
Their  comforts  have  been  increased  by  what  they  have  ceased  to  spend  in  drink, 
and  what  they  gain  by  their  punctuality  at  work.  The  annual  gratuity  has 
amounted,  on  the  average,  to  the  equivalent  of  six  weeks’  wages. 

“ M.  Beslay,  a member  of  the  Chamber  of  Deputies  from  1830  to  1839,  and 
afterwards  of  the  Constituent  Assembly,  has  founded  an  important  manufactory 
of  steam  engines  at  Paris,  in  the  Faubourg  of  the  Temple.  He  has  taken  his 
workpeople  into  partnership  ever  since  the  beginning  of  1847,  and  the  contract 
of  association  is  one  of  the  most  complete  which  have  been  made  between 
employers  and  workpeople.” 

The  practical  sagacity  of  Chinese  emigrants  long  ago  suggested  to  them, 
according  to  the  report  of  a recent  visitor  to  Manilla,  a similar  constitution  of 
the  relation  between  an  employer  and  labourers.  “ In  these  Chinese  shops  ” 
(at  Manilla)  “ the  owner  usually  engages  all  the  activity  of  his  countrymen 
employed  by  him  in  them,  by  giving  each  of  them  a share  in  the  profits  of  the 
concern,  or  in  fact  by  making  them  all  small  partners  in  the  business,  of  which 
he  of  course  takes  care  to  retain  the  lion’s  share,  so  that  while  doing  good  for 
him  by  managing  it  well,  they  are  also  benefiting  themselves.  To  such  an 
extent  is  this  principle  carried  that  it  is  usual  to  give  even  their  coolies  a share 
in  the  profits  of  the  business  in  lieu  of  fixed  wages,  and  the  plan  appears  to  suit 
their  temper  well ; for  although  they  are  in  general  most  complete  eye-servants 
when  working  for  a fixed  wage,  they  are  found  to  be  most  industrious  and 
useful  ones  when  interested  even  for  the  smallest  share.” — McMicking’s 
Becollections  of  Manilla  and  the  Philippines  during  1848, 1849,  and  1850,  p.  24. 

* [This  paragraph  was  added  in  the  6th  ed.  (1865) ; and  it  was  said  that 
Messrs.  Briggs  “ have  issued  a proposal  to  work  ” ; changed  to  “ They  now 
work  ’ &c.,  in  the  7th  ed.  (1871).] 


77^ 


BOOK  IV.  CHAPTER  VII.  $ 6 


in  tlie  concern  ; ” and,  what  is  of  still  greater  importance,  whenever 
the  annual  profit  exceeds  10  per  cent,  one-half  the  excess  is  divided 
among  the  workpeople  and  employes,  whether  shareholders  or  not, 
in  proportion  to  their  earnings  during  the  year.  It  is  highly  honour- 
able to  these  important  employers  of  labour  to  have  initiated  a system 
so  full  of  benefit  both  to  the  operatives  employed  and  to  the  general 
interest  of  social  improvement : and  they  express  no  more  than  a 
just  confidence  in  the  principle  when  they  say,  that  “ the  adoption 
of  the  mode  of  appropriation  thus  recommended  would,  it  is  believed, 
add  so  great  an  element  of  success  to  the  undertaking  as  to  increase 
rather  than  diminish  the  dividend  to  the  shareholders.”  ^ 

2 § 6.  The  form  of  association,  however,  which  if  mankind 
continue  to  improve,  must  be  expected  in  the  end  to  predominate, 

1 [For  the  abandonment  of  the  Briggs  experiment  in  1876  see  Schloss, 
Methods  of  Industrial  Remuneration  (2nd  ed.),  p.  282.] 

2 [The  opening  paragraphs  of  this  section  and  the  account  of  French  co- 
operative societies  which  follows  were  added  in  the  3rd  ed.  (1852).  At  the 
same  time  the  following  paragraph  and  section  of  the  original  (1848)  text  were 
removed : 

“Under  this  system,”  of  M.  Leclaire,  “as  well  as  under  that  recommended 
by  Mr.  Babbage,  the  labourers  are,  in  reality,  taken  into  partnership  with  their 
employer.  Bringing  nothing  into  the  common  concern  but  their  labour,  while 
he  brings  not  only  his  labour  of  direction  and  superintendence  but  his  capital 
also,  they  have  justly  a smaller  share  of  the  profits ; this,  however,  is  a matter 
of  private  arrangement  in  all  partnerships  ; one  partner  has  a large,  another  a 
small  share,  according  to  their  agreement,  grounded  on  the  equivalent  which  is 
given  by  each.  The  essence,  however,  of  a partnership  is  obtained,  since  each 
benefits  by  all  things  that  are  beneficial  to  the  concern,  and  loses  by  all  which 
are  injurious.  It  is,  in  the  fullest  sense,  the  common  concern  of  all. 

“ § 6.  To  this  principle,  in  whatever  form  embodied,  it  seems  to  me  that 
futurity  has  to  look  for  obtaining  the  benefits  of  co-operation,  without  con- 
stituting the  numerical  majority  of  the  co-operators  an  inferior  caste.  The 
objections  that  apply  to  a ‘ co-operative  society,’  in  the  Communist  or  Owenite 
sense,  in  which,  by  force  of  giving  to  every  member  of  the  body  a share  in  the 
common  interest,  no  one  has  a greater  share  in  it  than  another,  are  not  applicable 
to  what  is  now  suggested.  It  is  expedient  that  those,  whose  performance  of  the 
part  assigned  to  them  is  the  most  essential  to  the  common  end,  should  have  a 
greater  amount  of  personal  interest  in  the  issue  of  the  enterprise.  If  those  who 
supply  the  funds,  and  incur  the  whole  risk  of  the  undertaking,  obtained  no 
greater  reward  or  more  influential  voice  than  the  r^fst,  few  would  practise  the 
abstinence  through  which  those  funds  are  acquired  and  kept  in  existence.  Up 
to  a certain  point,  however,  the  principle  of  giving  to  every  person  concerned 
an  interest  in  the  profits  is  an  actual  benefit  to  the  capitalist,  not  only  (as  M. 
Leclaire  has  testified)  in  point  of  ease  and  comfort,  but  even  in  pecuniary 
advantage.  And  after  the  point  of  greatest  benefit  to  the  employers  has  been 
attained,  the  participation  of  the  labourers  may  be  carried  somewhat  further 
without  any  material  abatement  from  that  maximum  of  benefit.  At  what 
point,  in  each  employment  of  capital,  this  ultimatum  is  to  be  found,  will  one 
day  be  known  and  understood  from  experience  ; and  up  to  that  point  it  is  not 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  773 


is  not  that  which  can  exist  between  a capitalist  as  chief,  and  work- 
people without  a voice  in  the  management,  but  the  association  of  the 
labourers  themselves  on  terms  of  equality,  collectively  owning  the 
capital  with  which  they  carry  on  their  operations,  and  working  undet 
managers  elected  and  removable  by  themselves.  So  long  as  this 
idea  remained  in  a state  of  theory,  in  the  writings  of  Owen  or  of 
Louis  Blanc,  it  may  have  appeared,  to  the  common  modes  of  judg- 
ment, incapable  of  being  realized,  and  not  likely  to  be  tried  unless 
by  seizing  on  the  existing  capital,  and  confiscating  it  for  the  benefit 
of  the  labourers ; which  is  even  now  imagined  by  many  persons, 
and  pretended  by  more,  both  in  England  and  on  the  Continent,  to 
be  the  meaning  and  purpose  of  Socialism.  But  there  is  a capacity 
of  exertion  and  self-denial  in  the  masses  of  mankind,  which  is  nevef 
known  but  on  the  rare  occasions  on  which  it  is  appealed  to  in  the 
name  of  some  great  idea  or  elevated  sentiment.  Such  an  appeal  was 
made  by  the  French  Revolution  of  1848.  For  the  first  time  it  then 
seemed  to  the  intelligent  and  generous  of  the  working  classes  of  a 
great  nation  that  they  had  obtained  a government  who  sincerely 
desired  the  freedom  and  dignity  of  the  many,  and  who  did  not  look 
upon  it  as  their  natural  and  legitimate  state  to  be  instruments  of 
production,  worked  for  the  benefit  of  the  possessors  of  capital. 
Under  this  encouragement,  the  ideas  sown  by  Socialist  writers,  of 
an  emancipation  of  labour  to  be  efiected  by  means  of  association, 
throve  and  fructified ; and  many  working  people  came  to  the 
resolution,  not  only  that  they  would  work  for  one  another,  instead 
of  working  for  a master  tradesman  or  manufacturer,  but  that  they 
would  also  free  themselves,  at  whatever  cost  of  labour  or  privation, 
from  the  necessity  of  paying,  out  of  the  produce  of  their  industry, 

unreasonable  to  expect  that  the  partnership  principle  will  be,  at  no  very  distant 
time,  extended. 

“The  value  of  this  ‘organization  of  industry,’  for  healing  the  widening  and 
embittering  feud  between  the  class  of  labourers  and  the  class  of  capitalists, 
must,  I think,  impress  itself  by  degrees  on  all  who  habitually  reflect  on  the  con- 
dition and  tendencies  of  modern  society.  I cannot  conceive  how  any  such 
person  can  persuade  himself  that  the  majority  of  the  community  will  for  ever, 
or  even  for  much  longer,  consent  to  hew  wood  and  draw  water  all  their  lives  in 
the  service  and  for  the  benefit  of  others ; or  can  doubt,  that  they  will  be  less  and 
less  willing  to  co-operate  as  subordinate  agents  in  any  work,  when  they  have 
no  interest  in  the  result,  and  that  it  will  be  more  and  more  difficult  to  obtain  the 
best  work-people,  or  the  best  services  of  any  work-people,  except  on  con- 
ditions similar  in  principle  to  those  of  M.  Leclaire.  Although,  therefore,  arrange- 
ments of  this  sort  are  now  in  their  infancy,  their  multiplication  and  growth, 
when  once  they  enter  into  the  general  domain  of  popular  discussion,  are  among 
the  things  which  may  most  confidently  be  expected.”] 


774 


BOOK  IV.  CHAPTER  VII.  § 6 


a heavy  tribute  for  the  use  of  capital ; that  they  would  extinguish 
this  tax,  not  by  robbing  the  capitalists  of  what  they  or  their  prede- 
cessors had  acquired  by  labour  and  preserved  by  economy,  but  by 
honestly  acquiring  capital  for  themselves.  If  only  a few  operatives 
had  attempted  this  arduous  task,  or  if,  while  many  attempted  it, 
a few  only  had  succeeded,  their  success  might  have  been  deemed 
to  furnish  no  argument  for  their  system  as  a permanent  mode  of 
industrial  organization.  But,  excluding  all  the  instances  of  failure, 
there  exist,  or  existed  a short  time  ago,^  upwards  of  a hundred 
successful,  and  many  eminently  prosperous,  associations  of  operatives 
in  Paris  alone,  besides  a considerable  number  in  the  departments. 
An  instructive  sketch  of  their  history  and  principles  has  been 
published,  under  the  title  of  V Association  Ouvrihe  Industrielle 
et  Agricole,  by  H.  Feugueray : and  as  it  is  frequently  affirmed  in 
English  newspapers  that  the  associations  at  Paris  have  failed,  by 
writers  who  appear  to  mistake  the  predictions  of  their  enemies  at  their 
first  formation  for  the  testimonies  of  subsequent  experience,  I think 
it  important  to  show  by  quotations  from  M.  Feugueray ’s  volume, 
strengthened  by  still  later  testimonies,®  that  these  representations 
are  not  only  wide  of  the  truth,  but  the  extreme  contrary  of  it. 

The  capital  of  most  of  the  associations  was  originally  confined 
to  the  few  tools  belonging  to  the  founders,  and  the  small  sums  which 
could  be  collected  from  their  savings,  or  which  were  lent  to  them 
by  other  workpeople  as  poor  as  themselves.  In  some  cases,  how- 
ever, loans  of  capital  were  made  to  them  by  the  republican  govern- 
ment : but  the  associations  which  obtained  these  advances,  or  at 
least  which  obtained  them  before  they  had  already  achieved  success, 
are,  it  appears,  in  general  by  no  means  the  most  prosperous.  The 
most  striking  instances  of  prosperity  are  in  the  case  of  those  who 
have  had  nothing  to  rely  on  but  their  own  slender  means  and  the 
small  loans  of  fellow-workmen,  and  who  lived  on  bread  and  water 
while  they  devoted  the  whole  surplus  of  their  gains  to  the  formation 
of  a capital. 

“Often,”  says  M.  Feugueray,*  “there  was  no  money  at  all  in 
hand,  and  no  wages  could  be  paid.  The  goods  did  not  go  off,  the 
payments  did  not  come  in,  bills  could  not  get  discounted,  the 
warehouse  of  materials  was  empty ; they  had  to  submit  to  priva- 

* [So  since  4th  ed.  (1857).  Originally,  in  3rd  ed.  (1852),  a few  month* 
ago.”] 

2 [“  Strengthened  ” &c.,  added  in  5th  ed.  (1862).] 

* P.  112. 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  775 


tion,  to  reduce  all  expenses  to  the  minimum,  to  live  sometimes  on 
bread  and  water.  ...  It  is  at  the  price  of  these  hardships  and 
anxieties  that  men  who  began  with  hardly  any  resource  but  their 
good  will  and  their  hands,  succeeded  in  creating  customers,  in 
acquiring  credit,  forming  at  last  a joint  capital,  and  thus  found- 
ing associations  whose  futurity  now  seems  to  be  assured.” 

I will  quote  at  length  the  remarkable  history  of  one  of  these 
associations.* 

“ The  necessity  of  a large  capital  for  the  establishment  of  a 
pianoforte  manufactory  was  so  fully  recognised  in  the  trade,  that 
in  1848  the  delegates  of  several  hundred  workmen  who  had  combined 
to  form  a great  association,  sohcited  from  the  government  a subven- 
tion of  300,000  francs  [12,000Z.],  being  a tenth  part  of  the  whole 
sum  voted  by  the  National  Assembly.  I remember  that,  as  one  of 
the  Commission  charged  with  the  distribution  of  the  fund,  I tried 
in  vain  for  two  hours  to  convince  the  two  delegates  with  whom  the 
Commission  conferred,  that  their  request  was  exorbitant.  They 
answered  imperturbably,  that  their  trade  was  a peculiar  one  ; that 
the  association  could  only  have  a chance  of  success  on  a very  large 
scale  and  with  a considerable  capital ; that  300,000  francs  were 
the  smallest  sum  which  could  suffice  them,  and  that  they  could 
not  reduce  the  demand  by  a single  sou.  The  Commission  refused. 

“ Now,  after  this  refusal,  the  project  of  a great  association  being 
abandoned,  what  happened  was  this.  Fourteen  workmen,  and  it  is 
singular  that  among  them  was  one  of  the  two  delegates,  resolved 
to  set  up  by  themselves  a pianoforte-making  association.  The 
project  was  hazardous  on  the  part  of  men  who  had  neither  money  nor 
credit : but  faith  does  not  reason — it  acts. 

“ Our  fourteen  men  therefore  went  to  work,  and  I borrow  from 
an  excellent  article  by  M.  Cochut  in  the  National,  the  accuracy  of 
which  I can  attest,  the  following  account  of  their  first  proceedings. 

“ Some  of  them,  who  had  worked  on  their  own  account,  brought 
with  them  in  tools  and  materials  the  value  of  about  2000  francs 
[SOI.].  There  was  needed  besides  a circulating  capital.  Each 
member,  not  without  difficulty,  managed  to  subscribe  10  francs 
[85.].  A certain  number  of  workmen  not  interested  in  the  society 
gave  their  adhesion  by  bringing  small  contributions.  On  March  10, 
1849,  a sum  of  229J  francs  [01.  3s.  7Jd.]  having  been  realized,  the 
association  was  declared  constituted. 

“ This  sum  was  not  even  sufficient  for  setting  up,  and  for  the 
♦ Pp.  113-6. 


776 


BOOK  IV.  CHAPTER  VIL  § 6 


small  expenses  required  from  day  to  day  for  the  service  of  a workshop. 
There  being  nothing  left  for  wages,  nearly  two  months  elapsed 
without  their  touching  a farthing.  How  did  they  subsist  during 
this  interval  ? As  workmen  live  when  out  of  employment,  by  sharing 
the  portion  of  a comrade  who  is  in  work ; by  selling  or  pawning  bit 
by  bit  the  few  articles  they  possess. 

“ They  had  executed  some  orders.  They  received  the  payment 
on  the  4th  of  May.  That  day  was  for  them  like  a victory  at  the 
opening  of  a campaign,  and  they  determined  to  celebrate  it.  After 
paying  all  debts  that  had  fallen  due,  the  dividend  of  each  member 
amounted  to  6 francs  61  centimes.  They  agreed  to  allow  to  each 
5 francs  [45.]  on  account  of  his  wages,  and  to  devote  the  surplus  to  a 
fraternal  repast.  The  fourteen  shareholders,  most  of  whom  had  not 
tasted  wine  for  a year  past,  met,  along  with  their  wives  and  children. 
They  expended  32  sous  [I5.  4d.]  per  family.  This  day  is  still  spoken 
of  in  their  workshops  with  an  emotion  which  it  is  difficult  not  to 
share. 

“ For  a month  longer  it  was  necessary  to  content  themselves 
with  the  receipt  of  five  francs  per  week.  In  the  course  of  June  a 
baker,  either  from  love  of  music  or  on  speculation,  offered  to  buy  a 
piano,  paying  for  it  in  bread.  The  bargain  was  made  at  the  price 
of  480  francs.  It  was  a piece  of  good  luck  to  the  association.  They 
had  now  at  least  what  was  indispensable.  They  determined  not  to 
reckon  the  bread  in  the  account  of  wages.  Each  ate  according  to  his 
appetite,  or  rather  to  that  of  his  family ; for  the  married  shareholders 
were  allowed  to  take  away  bread  freely  for  their  wives  and  children. 

“ Meanwhile  the  association,  being  composed  of  excellent 
workmen,  gradually  surmounted  the  obstacles  and  privations  which 
had  embarrassed  its  starting.  Its  account-books  offer  the  best 
proof  of  the  progress  which  its  pianos  had  made  in  the  estimation 
of  buyers.  From  August  1849  the  weekly  contingent  rises  to  10, 
15,  and  20  francs  per  week ; and  this  last  sum  does  not  represent 
all  their  profits,  each  partner  having  left  in  the  common  stock  much 
more  than  he  received  from  it.  Indeed  it  is  not  by  the  sum  which 
the  member  receives  weekly  that  his  situation  can  be  judged,  but 
by  the  share  acquired  in  the  ownership  of  a property  already  con- 
siderable. The  following  was  the  position  of  the  association  when 
it  took  stock  on  the  30th  December  1850. 

“ At  this  period  the  number  of  shareholders  was  thirty-two. 
Large  workshops  and  warehouses,  rented  for  2000  francs,  were  no 
longer  sufficient  for  the  business. 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  777 


Independent  of  tools,  valued  at 

Frs. 

5,922 

Cents. 

60 

They  possessed  in  goods  and  especially  in 

materials,  the  value  of 

22,972 

28 

They  had  in  cash . 

1,021 

10 

„ in  bills 

3,540 

There  was  due  to  them  * 

5,861 

90 

They  had  thus  to  their  credit 

39,317 

88 

Against  this  are  only  to  be  debited  4737  francs 

86  centimes  due  to  creditors,  and  1650  francs 

to  eighty  adherents  ; f in  all 

6,387 

86 

Remaining 

32,930 

02 

[£1319 

45.] 

which  formed  their  indivisible  capital  and  the  reserve  of  the  in- 
dividual members.  At  this  period  the  association  had  76  pianos 
under  construction,  and  received  more  orders  than  they  could 
execute.” 

From  a later  report  we  learn  that  this  society  subsequently 
divided  itself  into  two  separate  associations,  one  of  which,  in  1854, 
already  possessed  a circulating  capital  of  56,000  francs  J [2240Z.].  In 
1863  its  total  capital  was  6520L 

* “ The  last  two  items  consisted  of  safe  securities,  nearly  all  of  which  have 
since  been  realised.” 

t “ These  adherents  are  workmen  of  the  trade,  who  subscribed  small  sums 
to  the  association  at  its  commencement : a portion  of  them  were  reimbursed 
in  the  beginning  of  1851.  The  sum  due  to  creditors  has  also  been  much  re- 
duced : on  the  23rd  of  April  it  only  amounted  to  113  francs  59  centimes.” 

J Article  by  M.  Cherbuliez  on  “ Operative  Associations,”  in  the  Journal 
dea  Economistes  for  November  1860. 

I subjoin,  from  M.  Villiaume  and  M.  Cherbuliez,  detailed  particulars  of  other 
eminently  successful  experiments  by  associated  workpeople. 

“ We  will  first  cite,”  says  M.  Cherbuliez,  “ as  having  attained  its  object 
and  arrived  at  a definite  result,  the  Association  Remquet,  of  the  Rue  Garanciere, 
at  Paris,  whose  founder,  in  1848,  was  a foreman  in  M.  Renouard’s  printing 
establishment.  That  firm  being  under  the  necessity  of  winding  up,  he  proposed 
to  his  fellow-workmen  to  join  with  him  in  continuing  the  enterprise  on  their 
own  account,  asking  a subvention  from  the  government  to  cover  the  purchase- 
money  of  the  business  and  the  first  expenses.  Fifteen  of  them  accepted  the 
proposal,  and  formed  an  association,  whose  statutes  fixed  the  wages  for  every 
kind  of  work,  and  provided  for  the  gradual  formation  of  a working  capital  by 
a deduction  of  25  per  cent,  from  all  wages  and  salaries,  on  which  deduction 
no  dividend  or  interest  was  to  be  allowed  during  the  ten  years  that  the  asso- 
ciation was  intended  to  last.  Remquet  asked  and  obtained  for  himself  the 
entire  direction  of  the  enterprise,  at  a very  moderate  fixed  salary.  At  the 


778 


BOOK  IV.  CHAPTER  VII.  § 6 


The  same  admirable  qualities  by  which  the  associations  were 
carried  through  their  early  struggles,  maintained  them  in  their 
increasing  prosperity.  Their  rules  of  discipline,  instead  of  being 
more  lax,  are  stricter  than  those  of  ordinary  workshops ; but 
being  rules  self-imposed,  for  the  manifest  good  of  the  community, 
and  not  for  the  convenience  of  an  employer  regarded  as  having  an 

\^ding  up,  the  entire  profits  were  to  be  divided  among  all  the  members, 
proportionally  to  their  share  in  the  capital,  that  is,  to  the  work  they  had  done. 
A subvention  of  80,000  francs  was  granted  by  the  State,  not  without  great 
difficulty,  and  on  very  onerous  conditions.  In  spite  of  these  conditions,  and 
of  the  unfavourable  circumstances  resulting  from  the  political  situation  of  the 
country,  the  association  prospered  so  well,  that  on  the  winding  up,  after  re- 
paying the  advance  made  by  the  State,  it  was  in  possession  of  a clear  capital  of 

155.000  francs  [6200Z.],  the  division  of  which  gave  on  the  average  between  ten 
and  eleven  thousand  francs  to  each  partner ; 7000  being  the  smallest  and 

18.000  the  largest  share. 

“ The  Fraternal  Association  of  Working  Tinmen  and  Lampmakers  had 
been  founded  in  March  1848  by  500  operatives,  comprising  nearly  the  whole 
body  of  the  trade.  This  first  attempt,  inspired  by  unpractical  ideas,  not  having 
survived  the  fatal  days  of  June,  a new  association  was  formed  of  more  modest 
proportions.  Originally  composed  of  forty  members,  it  commenced  business 
in  1849  with  a capital  composed  of  the  subscriptions  of  its  members,  without 
asking  for  a subvention.  After  various  vicissitudes,  which  reduced  the  number 
of  partners  to  three,  then  brought  it  back  to  fourteen,  then  again  sunk  it  to 
three,  it  ended  by  keeping  together  forty-six  members,  who  quietly  remodelled 
their  statutes  in  the  points  which  experience  had  shown  to  be  faulty,  and  their 
number  having  been  raised  by  successive  steps  to  100,  they  possessed,  in  1858, 
a I'oint  property  of  50,000  francs,  and  were  in  a condition  to  divide  annually 

20.000  francs. 

“ The  Association  of  Operative  Jewellers,  the  oldest  of  all,  had  been  founded 
in  1831  by  eight  workmen,  with  a capital  of  200  francs  [8Z.]  derived  from  their 
united  savings.  A subvention  of  24,000  francs  enabled  them  in  1849  greatly 
to  extend  their  operations,  which  in  1858  had  already  attained  the  value  of 

140.000  francs,  and  gave  to  each  partner  an  annual  dividend  equal  to  double 
his  wages.” 

The  following  are  from  M.  Villiaum6  : — 

“ After  the  insurrection  of  June  1848,  work  was  suspended  in  the  Faubourg 
St.  Antoine,  which,  as  we  know,  is  principally  occupied  by  furniture- makers. 
Some  operative  arm-chair  makers  made  an  appeal  to  those  who  might  be  willing 
to  combine  with  them.  Out  of  six  or  seven  hundred  composing  the  trade, 
four  hundred  gave  in  their  names.  But  capital  being  wanting,  nine  of  the  most 
zealous  began  the  association  with  all  that  they  possessed ; being  a value  of 
369  francs  in  tools,  and  135  francs  20  centimes  in  money. 

“ Their  good  taste,  honesty,  and  punctuality  having  increased  their  business, 
they  soon  numbered  108  members.  They  received  from  the  State  an  advance 
of  25,000  francs,  reimbursable  in  14  years  by  way  of  annuity,  with  interest  at 
3J  per  cent. 

“ In  1857  the  number  of  partners  is  65,  the  auxiliaries  average  100.  All 
the  partners  vote  at  the  election  of  a council  of  eight  members,  and  a manager 
whose  name  represents  the  firm.  The  distribution  and  superintendence  of  all 
the  works  is  entrusted  to  foremen  chosen  by  the  manager  and  council  There 
is  a foreman  to  every  20  or  25  workmen. 

“ The  payment  is  by  the  piece,  at  rates  determined  in  general  assembly. 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  779 


opposite  interest,  they  are  far  more  scrupulously  obeyed,  and  the 
voluntary  obedience  carries  with  it  a sense  of  personal  worth  and 
dignity.  With  wonderful  rapidity  the  associated  workpeople  have 
learnt  to  correct  those  of  the  ideas  they  set  out  with  which  are  in 
opposition  to  the  teaching  of  reason  and  experience.  Almost  all 
the  associations,  at  first,  excluded  piece-work,  and  gave  equal  wages 

The  earnings  vary  from  3 to  7 francs  a day,  according  to  zeal  and  ability.  The 
average  is  60  francs  [2Z.]  a fortnight,  and  no  one  gains  much  less  than  40  francs 
per  fortnight,  while  many  earn  80.  Some  of  the  carvers  and  moulders  make 
as  much  as  100  francs,  being  200  francs  [8Z.]  a month.  Each  binds  himself  to 
work  120  hours  per  fortnight,  equal  to  ten  per  day.  By  the  regulations,  every 
hour  short  of  the  number  subjects  the  delinquent  to  a penalty  of  10  centimes 
[one  penny]  per  hour  up  to  thirty  hours,  and  15  centimes  [l^c?.]  beyond.  The 
object  of  this  rule  was  to  abolish  Saint  Monday,  and  it  succeeded  in  its  effort. 
For  the  last  two  years  the  conduct  of  the  members  has  been  so  good,  that 
fines  have  fallen  into  disuse. 

“ Though  the  partners  started  with  only  359  francs,  the  value  of  the  plant 
(Rue  de  Chavonne,  Cour  St.  Joseph,  Faubourg  St.  Antoine)  already  in  1851 
amounted  to  5713  francs,  and  the  assets  of  the  association,  debts  due  to  them 
included,  to  24,000  francs.  Since  then  the  association  has  become  still  more 
flourishing,  having  resisted  all  the  attempts  made  to  impede  its  progress.  It 
does  the  largest  business,  and  is  the  most  considered,  of  all  the  houses  in  Paris 
in  the  trade.  Its  business  amounts  to  400,000  francs  a year.”  Its  inventory 
in  December  1855  showed,  according  to  M.  Villiaum6,  a balance  of  100,398 
francs  90  centimes  in  favour  of  the  association,  but  it  possessed,  he  says,  in 
reality,  123,000  francs. 

But  the  most  important  association  of  all  is  that  of  the  Masons.  “ The 
Association  of  Masons  was  founded  August  10th,  1848.  Its  address  is  Rue  St. 
Victor,  155.  Its  number  of  members  is  85,  and  its  auxiliaries  from  three  to 
four  hundred.  There  are  two  managers,  one  for  the  building  department,  the 
other  for  the  pecuniary  administration  : these  are  regarded  as  the  ablest  master- 
masons  in  Paris,  and  are  content  with  a moderate  salary.  This  association  has 
lately  constructed  three  or  four  of  the  most  remarkable  mansions  in  the  metro- 
polis. Though  it  does  its  work  more  economically  than  ordinary  contractors, 
yet  as  it  has  to  give  long  credits,  it  is  called  upon  for  considerable  advances  : 
it  prospers,  however,  as  is  proved  by  the  dividend  of  56  per  cent  which  has  been 
paid  this  year  on  its  capital,  including  in  the  payment  those  who  have  associated 
themselves  in  its  operations.  It  consists  of  workmen  who  bring  only  their  labour, 
of  others  who  bring  their  labour  and  a capital  of  some  sort,  and  of  a third  class 
who  do  not  work,  but  contribute  capital  only. 

“ The  masons,  in  the  evening,  carry  on  mutual  instruction.  They,  as  well 
as  the  arm-chair  makers,  give  medical  attendance  at  the  expense  of  the  association, 
and  an  allowance  to  its  sick  members.  They  extend  their  protection  over  every 
member  in  every  action  of  his  life.  The  arm-chair  makers  will  soon  each  possess 
a capital  of  two  or  three  thousand  francs,  with  which  to  portion  their  daughters 
or  commence  a reserve  for  future  years.  Of  the  masons,  some  have  already 
4000  francs,  which  are  left  in  the  common  stock. 

” Before  they  were  associated,  these  workmen  were  poorly  clad  in  jackets 
and  blouses ; because,  for  want  of  forethought,  and  still  more  from  want  of 
work,  they  had  never  60  francs  beforehand  to  buy  an  overcoat.  Most  of  them 
are  now  as  well  dressed  as  shopkeepers,  and  sometimes  more  tastefully.  For 
the  workman,  having  always  a credit  with  the  association,  can  get  whatever 
he  wants  by  signing  an  order ; and  the  association  reimburses  itself  by 


780 


BOOK  IV.  CHAPTER  VII.  § 6 


whether  the  work  done  was  more  or  less.  Almost  all  have  abandoned 
this  system,  and  after  allowing  to  every  one  a fixed  TniniTmini, 
sufficient  for  subsistence,  they  apportion  all  further  remuneration 
according  to  the  work  done  : most  of  them  even  dividing  the 
profits  at  the  end  of  the  year,  in  the  same  proportion  as  the  earnings.* 


fortnightly  stoppages,  making  him  save  as  it  were  in  spite  of  himself.  Some 
workmen  who  are  not  in  debt  to  the  concern,  sign  orders  payable  to  themselves 
at  five  months  date,  to  resist  the  temptation  of  needless  expense.  They  are 
put  under  stoppages  of  10  francs  per  fortnight,  and  thus  at  the  end  of  five  months 
they  have  saved  the  amount.” 

The  following  table,  taken  by  M.  Cherbuliez  from  a work  {Die  gewerhlichen 
und  wirthschaftlichen  Genossenschaften  der  arbeitenden  Classen  in  England, 
Frankreich  und  Deutschland)^  published  at  Tubingen  in  1860,  by  Professor 
Huber  (one  of  the  most  ardent  and  high-principled  apostles  of  this  kind  of  co- 
operation) shows  the  rapidly  progressive  growth  in  prosperity  of  the  Masons* 
Association  up  to  1858  : — 


Amount  of 

Profits 

Year 

business  done. 

realized. 

francs. 

francs. 

1852  . 

45,530  . . 

1,000 

1853  . 

......  297,208 

7,000 

1854  . 

. . e « . 344,240  .. 

20,000 

1855  . 

, . . . . . 614,694 

46,000 

1856  . 

998,240  . . 

80,000 

1857  . 

1,330,000  .. 

100,000 

1858  . 

1,231,461  . . 

130,000 

“ Of  this  last  dividend,”  says  M.  Cherbuliez,  “ 30,000  francs  were  taken  foi 
the  reserve  fund,  and  the  remaining  100,000,  divided  among  the  shareholders, 
gave  to  each  from  500  to  1500  francs,  besides  their  wages  or  salaries,  and  their 
share  in  the  fixed  capital  of  the  concern.” 

Of  the  management  of  the  associations  generally,  M.  Villiaume  says,  “ I have 
been  able  to  satisfy  myself  personally  of  the  ability  of  the  managers  and  councils 
of  the  operative  associations.  The  managers  are  far  superior  in  intelligence,  in 
zeal,  and  even  in  politeness,  to  most  of  the  private  masters  in  their  respective 
trades.  And  among  the  associated  workmen,  the  fatal  habit  of  intemperance 
is  gradually  disappearing,  along  with  the  coarseness  and  rudeness  which  are  the 
consequence  of  the  too  imperfect  education  of  the  class.” 

♦ Even  the  association  founded  by  M.  Louis  Blanc,  that  of  the  tailors  of 
Clichy,  after  eighteen  months*  trial  of  this  system,  adopted  piece-work.  One  of 
the  reasons  given  by  them  for  abandoning  the  original  system  is  well  worth 
extracting.  “ Besides  the  vices  I have  mentioned,  the  tailors  complained  that 
it  caused  incessant  disputes  and  quarrels,  through  the  interest  which  each  had 
in  making  his  neighbours  work.  Their  mutual  watchfulness  degenerated  into 
a real  slavery  ; nobody  had  the  free  control  of  his  time  and  his  actions.  These 
dissensions  have  disappeared  since  piece-work  was  introduced.” — Feugueray, 
p.  88.  One  of  the  most  discreditable  indications  of  a low  moral  condition  given 
of  late  by  part  of  the  English  working  classes,  is  the  opposition  to  piece-work. 
When  the  payment  per  piece  is  not  sufficiently  high,  that  is  a just  ground  of 
objection.  But  dislike  to  piece-work  in  itself,  except  under  mistaken  notions, 
must  be  dislike  to  justice  and  fairness  ; a desire  to  cheat,  by  not  giving  work  in 
proportion  to  pay.  Piece-work  is  the  perfection  of  contract ; and  contract,  in 
all  work,  *^’Hd  in  the  most  minute  detail — the  principle  of  so  much  pay  for  sq 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  781 


It  is  the  declared  principle  of  most  of  these  associations  that  they 
do  not  exist  for  the  mere  private  benefit  of  the  individual  members, 
but  for  the  promotion  of  the  co-operative  cause.  With  every 
extension,  therefore,  of  their  business,  they  take  in  additional 
members,  not  (when  they  remain  faithful  to  their  original  plan)  to 
receive  wages  from  them  as  hired  labourers,  but  to  enter  at  once 
into  the  full  benefits  of  the  association,  without  being  required  to 
bring  anything  in,  except  their  labour  ; the  only  condition  imposed 
is  that  of  receiving  during  a few  years  a smaller  share  in  the  annual 
division  of  profits,  as  some  equivalent  for  the  sacrifices  of  the  founders. 
When  members  quit  the  association,  which  they  are  always  at 
liberty  to  do,  they  carry  none  of  the  capital  with  them  : it  remains 
an  indivisible  property,  of  which  the  members  for  the  time  being 
have  the  use,  but  not  the  arbitrary  disposal : by  the  stipulations  of 
most  of  the  contracts,  even  if  the  association  breaks  up,  the  capital 
cannot  be  divided,  but  must  be  devoted  entire  to  some  work  of 
beneficence  or  of  public  utility.  A fixed,  and  generally  a consider- 
able, proportion  of  the  annual  profits,  is  not  shared  among  the 
members,  but  added  to  the  capital  of  the  association,  or  devoted  to 
the  repayment  of  advances  previously  made  to  it : another  portion 
is  set  aside  to  provide  for  the  sick  and  disabled,  and  another  to  form 
a fund  for  extending  the  practice  of  association,  or  aiding  other 
associations  in  their  need.  The  managers  are  paid,  like  other 
members,  for  the  time  which  is  occupied  in  management,  usually  at 
the  rate  of  the  highest  paid  labour  : but  the  rule  is  adhered  to,  that 
the  exercise  of  power  shall  never  be  an  occasion  for  profit. 

Of  the  ability  of  the  associations  to  compete  successfully  with 
individual  capitalists,  even  at  an  early  period  of  their  existence, 
M.  Feugueray  said,  “ The  associations  which  have  been  founded 
in  the  last  two  years  ” (M.  Feugueray  wrote  in  1851)  “ had  many 
obstacles  to  overcome ; the  majority  of  them  were  almost  entirely 
without  capital : all  were  treading  in  a path  previously  unexplored  ; 
they  ran  the  risks  which  always  threaten  innovators  and  beginners. 
Nevertheless,  in  many  of  the  trades  in  which  they  have  been  estab- 
lished, they  are  already  formidable  competitors  of  the  old  houses,  and 
are  even  complained  of  on  that  account  by  a part  of  the  bourgeoisie. 
This  is  not  only  true  of  the  cooks,  the  lemonade  sellers,  and  hair 

much  service,  carried  out  to  the  utmost  extremity — is  the  system,  of  all  others, 
in  the  present  state  of  society  and  degree  of  civilization,  most  favourable  to  the 
worker  ; though  most  unfavourable  to  the  non- worker  who  wishes  to  be  paid  for 
being  idle. 


782 


BOOK  IV.  CHAPTER  VII.  § 6 


dressers,  trades  the  nature  of  which  enables  the  associations  to  rely 
on  democratic  custom,  but  also  in  other  trades  where  they  have  not 
the  same  advantages.  One  has  only  to  consult  the  makers  of  chairs, 
of  arm-chairs,  of  files,  and  one  will  learn  from  them  if  the  most 
important  establishments  in  their  respective  trades  are  not  those 
of  the  associated  workmen.” 

1 The  vitality  of  these  associations  must  indeed  be  great,  to  have 
enabled  about  twenty  of  them  to  survive  not  only  the  anti-socialist 
reaction,  which  for  the  time  discredited  all  attempts  to  enable 
workpeople  to  be  their  own  employers — not  only  the  tracasseries  of 
the  police,  and  the  hostile  policy  of  the  government  since  the  usur- 
pation—but  in  addition  to  these  obstacles,  all  the  difficulties  arising 
from  the  trying  condition  of  financial  and  commercial  affairs  from 
1854  to  1858.  Of  the  prosperity  attained  by  some  of  them  even 
while  passing  through  this  difficult  period,  I have  given  examples 
which  must  be  conclusive  to  all  minds  as  to  the  brilliant  future 
reserved  for  the  principle  of  co-operation.*^ 

' [This  paragraph  dates  from  the  5th  ed.  (1862),  and  ^jeplaced  the  following 
passages  of  the  3rd  (1852) : “ It  is  painful  to  think  that  these  bodies,  formed  by 
the  heroism  and  maintained  by  the  public  spirit  and  good  sense  of  the  working 
people  of  Paris,  are  in  danger  of  being  involved  in  the  same  ruin  with  every- 
thing free,  popular,  or  tending  to  improvement  in  French  institutions.  The 
unprincipled  adventurer  who  has  for  the  present  succeeded  in  reducing  France 
to  the  political  condition  of  Russia,  knows  that  two  or  three  persons  cannot 
meet  together  to  discuss,  though  it  be  only  the  affairs  of  a workshop,  without 
danger  to  his  power.  He  has  therefore  already  suppressed  most  of  the  pro- 
vincial associations,  and  many  of  those  of  Paris,  and  the  remainder,  instead  of 
waiting  to  be  dissolved  by  despotism,  are,  it  is  said,  preparing  to  emigrate. 
Before  this  calamity  overtook  !^ance,  the  associations  could  be  spoken  of  not 
with  the  hope  merely,  but  with  positive  evidence,  of  their  being  able  to  compete 
successfully  with  individual  capitalists.  ‘ The  associations,’  says  M.  Feugue- 
ray,”  &c.,  as  in  the  present  text,  supra,  p.  781. 

“ Though  the  existing  associations  may  be  dissolved,  or  driven  to  expatriate, 
their  experience  will  not  be  lost.  They  have  existed  long  enough  to  furnish  the 
type  of  future  improvement : they  have  exemplified  the  process  for  bringing 
about  a change  in  society,  which  would  combine  the  freedom  and  independence 
of  the  individual,”  &c.,  as  in  the  present  text,  infra,  p.  791. 

To  the  4th  ed.  (1857)  was  added  this  note : “ It  appears  however  from  subse- 
quent accounts  that  in  1854  twenty- five  associations  still  existed  in  Paris  and 
several  in  the  provinces,  and  that  many  of  these  were  in  a most  flourishing  con- 
dition. This  number  is  exclusive  of  Co-operative  Stores,  which  have  greatly 
multiplied,  especially  in  the  South  of  France,  and  are  not  understood  to  be 
discouraged  by  the  Government.”] 

* [1865]  In  the  last  few  years  the  co-operative  movement  among  the  French 
working  classes  has  taken  a fresh  start.  An  interesting  account  of  the  Provi- 
sion Association  (Association  Alimentaire)  of  Grenoble  has  been  given  in  a 
pamphlet  by  M.  Casimir  P6rier  {Les  SocUtis  de  Go-opiration) ; and  in  the 
Times  of  November  24,  1864,  we  read  the  following  passage  : — “ While  a 
certain  number  of  operatives  stand  opt  for  more  wages,  or  fewer  houra  of 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  783 


1 It  is  not  in  France  alone  that  these  associations  have  commenced 
a career  of  prosperity.  To  say  nothing  at  present  of  Germany, 
Piedmont,  and  Switzerland  (where  the  Konsum-Verein  of  Zurich 
is  one  of  the  most  prosperous  co-operative  associations  in  Europe), 
England  can  produce  cases  of  success  rivalling  even  those  which  I 
have  cited  from  France.  Under  the  impulse  commenced  by  Mr. 
Owen,  and  more  recently  propagated  by  the  writings  and  personal 
efforts  of  a band  of  friends,  chiefly  clergymen  and  barristers,  to  .whose 
noble  exertions  too  much  praise  can  scarcely  be  given,  the  good 
seed  was  widely  sown ; the  necessary  alterations  in  the  English 
law  of  partnership  were  obtained  from  Parliament,  on  the  benevolent 
and  public-spirited  initiative  of  Mr.  Slaney ; many  industrial 
associations,  and  a still  greater  number  of  co-operative  stores  for 
retail  purchases,  were  founded.  Among  these  are  already  many 
instances  of  remarkable  prosperity,  the  most  signal  of  which  are  the 


labour,  others,  who  have  also  seceded,  have  associated  for  the  purpose  of 
carrying  on  their  respective  trades  on  their  own  account,  and  have  collected 
funds  for  the  purchase  of  instruments  of  labour.  They  have  founded  a society, 
‘ Societe  Generale  d’Approvisionnement  et  de  Consommation.’  It  numbers 
between  300  and  400  members,  who  have  already  opened  a ‘ co-operative 
store  ’ at  Passy,  which  is  now  within  the  limits  of  Paris.  They  calculate  that 
by  May  next,  fifteen  new  self-supporting  associations  of  the  same  kind  will  be 
ready  to  commence  operations ; so  that  the  number  will  be  for  Paris  alone 
from  50  to  60.” 

^ [This  paragraph  and  the  subsequent  account  of  the  Rochdale  Pioneers 
date  from  the  5th  ed.  (1862),  though  the  reference  to  the  Zurich  society  and  to 
Mr.  Plummer  in  the  footnote  were  added  in  the  6th  ed.  (1865).  From  the  4th 
(1857)  disappeared  the  following  footnote  : 

Though  this  beneficent  movement  has  been  so  seriously  checked  in  the 
country  in  which  it  originated,  it  is  rapidly  spreading  in  those  other  countries 
which  have  acquired,  and  still  retain,  any  political  freedom.  It  forms  already 
an  important  feature  in  the  social  improvement  which  is  proceeding  at  a most 
rapid  pace  in  Piedmont.  In  England  also,  under  the  impulse  given  by  the 
writings  and  personal  exertions  of  a band  of  friends,  chiefly  clergymen  and 
barristers,  the  movement  has  made  some  progress.  On  the  15th  of  February, 
1856,  there  had  been  registered  under  the  Industrial  and  Provident  Societies’ 
Act,  thirty-three  associations,  seventeen  of  which  were  industrial  societies,  the 
remainder  being  associations  for  co-operative  consumption  only ; without 
reckoning  Scotland,  where,  also,  these  associations  were  rapidly  spreading.  It 
is  believed  that  all  such  societies  are  now  registered  under  the  Limited 
Liabilities  Act.  From  later  information  it  appears  that  the  productive  associa- 
tions (excluding  the  flour  mills,  which  partake  more  of  the  nature  of  stores) 
have  fallen  off  in  number  since  their  first  start ; and  their  progress,  in  the 
present  moral  condition  of  the  bulk  of  the  population,  cannot  possibly  be  rapid. 
But  those  which  subsist,  continue  to  do  as  much  business  as  they  ever  did  : 
and  there  are  in  the  North  of  England  instances  of  brilliant  and  steadily 
progressive  success.  Co-operative  stores  are  increasing  both  in  number  and 
prosperity,  especially  in  the  North ; and  they  are  the  best  preparation  for  a 
wider  application  of  the  principle.”] 


784 


BOOR  IV.  CHAPTER  VII.  § 6 


Leeds  Flour  Mill,  and  the  Rochdale  Society  of  Equitable  Pioneers. 
Of  this  last  association,  the  most  successful  of  all,  the  history  has 
been  written  in  a very  interesting  manner  by  Mr.  Holyoake  ;*  and 
the  notoriety  which  by  this  and  other  means  has  been  given  to 
facts  so  encouraging,  is  causing  a rapid  extension  of  associations  with 
similar  objects  in  Lancashire,  Yorkshire,  London,  and  elsewhere. 

The  original  capital  of  the  Rochdale  Society  consisted  of  28?., 
brought  together  by  the  unassisted  economy  of  about  forty  labourers, 
through  the  slow  process  of  a subscription  of  twopence  (afterwards 
raised  to  threepence)  per  week.  With  this  sum  they  established  in 
1844  a small  shop,  or  store,  for  the  supply  of  a few  common  articles 
for  the  consumption  of  their  own  families.  As  their  carefulness 
and  honesty  brought  them  an  increase  of  customers  and  of  subscribers, 
they  extended  their  operations  to  a greater  number  of  articles  of 
consumption,  and  in  a few  years  were  able  to  make  a large  investment 
in  shares  of  a Co-operative  Corn  Mill.  Mr.  Holyoake  thus  relates  the 
stages  of  their  progress  up  to  1857  : — 

“ The  Equitable  Pioneers’  Society  is  divided  into  seven  depart- 
ments : Grocery,  Drapery,  Butchering,  Shoemaking,  Clogging, 

Tailoring,  Wholesale. 

“ A separate  account  is  kept  of  each  business,  and  a general 
account  is  given  each  quarter,  showing  the  position  of  the  whole. 

“ The  grocery  business  was  commenced,  as  we  have  related,  in 
December  1844,  with  only  four  articles  to  sell.  It  now  includes  what- 
ever a grocer’s  shop  should  include. 

“ The  drapery  business  was  started  in  1847,  with  an  humble 
array  of  attractions.  In  1854  it  was  erected  into  a separate  depart- 
ment. 

“ A year  earlier,  1846,  the  Store  began  to  sell  butcher’s  meat, 
buying  eighty  or  one  hundred  pounds  of  a tradesman  in  the  town. 
After  a while  the  sales  were  discontinued  until  1850,  when  the 
Society  had  a warehouse  of  its  own.  Mr.  John  Moorhouse,  who 
has  now  two  assistants,  buys  and  kills  for  the  Society  three  oxen, 
eight  sheep,  sundry  porkers  and  calves,  which  are  on  the  average 
converted  into  130?.  of  cash  per  week. 

“ Shoemaking  commenced  in  1852.  Three  men  and  an  apprentice 
make,  and  a stock  is  kept  on  sale. 

* Self-help  by  the  People — H isUyry  of  Co-operation  in  Rochdale.  An  instructive 
account  of  this  and  other  co-operative  associations  has  also  been  written  in  the 
Companion  to  the  Almanack  for  1862,  by  Mr.  John  Plummer,  of  Kettering ; 
himself  one  of  the  most  inspiring  examples  of  mental  cultivation  and  high 
principle  in  a self-instructed  working  man. 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  786 


“ Clogging  and  tailoring  commenced  also  in  this  year. 

“ The  wholesale  department  commenced  in  1852,  and  marks  an 
important  development  of  the  Pioneers’  proceedings.  This  depart- 
ment has  been  created  for  supplying  any  members  requiring  large 
quantities,  and  with  a view  to  supply  the  co-operative  stores  of 
Lancashire  and  Yorkshire,  whose  small  capitals  do  not  enable  them 
to  buy  in  the  best  markets,  nor  command  the  services  of  what  is 
otherwise  indispensable  to  every  store — a good  buyer,  who  knows  the 
markets  and  his  business,  who  knows  what,  how,  and  where  to  buy. 
The  wholesale  department  guarantees  purity,  quality,  fair  prices, 
standard  weight  and  measure,  but  all  on  the  never-failing  principle, 
cash  payment.” 

In  consequence  of  the  number  of  members  who  now  reside  at  a 
distance,  and  the  difficulty  of  serving  the  great  increase  of  customers, 
“ Branch  Stores  have  been  opened.  In  1856  the  first  Branch  was 
opened  in  the  Oldham  Koad,  about  a mile  from  the  centre  of  Roch- 
dale. In  1857  the  Castleton  Branch,  and  another  in  the  Whitworth 
Road,  were  established,  and  a fourth  Branch  in  Pinfold.” 

The  warehouse,  of  which  their  original  Store  was  a single  apart- 
ment, was  taken  on  lease  by  The  Society,  very  much  out  of  repair, 
in  1849.  “ Every  part  has  undergone  neat  refitting  and  modest 

decoration,  and  now  wears  the  air  of  a thoroughly  respectable  place 
of  business.  One  room  is  now  handsomely  fitted  up  as  a news 

room.  Another  is  neatly  fitted  up  as  a library Their  news 

room  is  as  well  supplied  as  that  of  a London  club.”  It  is  now 
“ free  to  members,  and  supported  from  the  Education  Fund,”  a 
fund  consisting  of  2J  per  cent  of  all  the  profits  divided,  which  is  set 
apart  for  educational  purposes.  “ The  Library  contains  2200 
volumes  of  the  best,  and  among  them,  many  of  the  most  expensive 
books  published.  The  Library  is  free.  From  1850  to  1855,  a school 
for  young  persons  was  conducted  at  a charge  of  twopence  per 
month.  Since  1855,  a room  has  been  granted  by  the  Board  for  the 
use  of  from  twenty  to  thirty  persons,  from  the  ages  of  fourteen  to 
forty,  for  mutual  instruction  on  Sundays  and  Tuesdays.  . . . 

“ The  corn-mill  was  of  course  rented,  and  stood  at  Small  Bridge, 
some  distance  from  the  town — one  mile  and  a half.  The  Society 
have  since  built  in  the  town  an  entirely  new  mill  for  themselves. 
The  engine  and  the  machinery  are  of  the  most  substantial  and 
improved  kind.  The  capital  invested  in  the  corn-mill  is  8450/.,  of 
which  3731/.  155.  2d.  is  subscribed  by  the  Equitable  Pioneers’ 
Society.  The  corn-mill  employs  eleven  men.’* 


786 


BOOK  IV.  CHAPTER  VII.  § 6 


At  a later  period  they  extended  their  operations  to  the  staple 
manufacture  itself.  From  the  success  of  the  Pioneers’  Society 
grew  not  only  the  co-operative  com-millj  but  a co-operative  associa- 
tion for  cotton  and  woollen  manufacturing.  “ The  capital  in  this 
department  is  4000Z.,  of  which  sum  2042?.  has  been  subscribed  by 
the  Equitable  Pioneers*  Society.  This  Manufacturing  Society  has 
ninety-six  power-looms  at  work,  and  employs  twenty-six  men,  seven 
women,  four  boys,  and  five  girls — in  all  forty-two  persons.  . . .” 

“ In  1853  the  Store  purchased  for  745?.,  a warehouse  (freehold) 
on  the  opposite  side  of  the  street,  where  they  keep  and  retail  their 
stores  of  flour,  butcher’s  meat,  potatoes,  and  kindred  articles.  Their 
committee-rooms  and  offices  are  fitted  up  in  the  same  building. 
They  rent  other  houses  adjoining  for  calico  and  hosiery  and  shoe 
stores.  In  their  wilderness  of  rooms,  the  visitor  stumbles  upon 
shoemakers  and  tailors  at  work  under  healthy  conditions,  and  in 
perfect  peace  of  mind  as  to  the  result  on  Saturday  night.  Their 
warehouses  are  everywhere  as  bountifully  stocked  as  Noah’s  Ark, 
and  cheerful  customers  literally  crowd  Toad  Lane  at  night,  swarming 
like  bees  to  every  counter.  The  industrial  districts  of  England 
have  not  such  another  sight  as  the  Eochdale  Co-operative  Store  on 
Saturday  night.”  * Since  the  disgraceful  failure  of  the  Eochdale 

* “ But  it  is  not,”  adds  Mr.  Holyoake,  “ the  brilliancy  of  commercial  activity 
in  which  either  writer  or  reader  will  take  the  deepest  interest ; it  is  in  the  new 
and  improved  spirit  animating  this  intercourse  of  trade.  Buyer  and  seller 
meet  as  friends  ; there  is  no  overreaching  on  one  side,  and  no  suspicion  on  the 
other.  ....  These  crowds  of  humble  working  men,  who  never  knew  before 
when  they  put  good  food  in  their  mouths,  whose  every  dinner  was  adulterated, 
whose  shoes  let  in  the  water  a month  too  soon,  whose  waistcoats  shone  with 
devil’s  dust,  and  whose  wives  wore  calico  that  would  not  wash,  now  buy  in  the 
markets  like  millionaires,  and  as  far  as  pureness  of  food  goes,  live  like  lords.” 
Far  better,  probably,  in  that  particular ; for  assuredly  lords  are  not  the  cus 
tomers  least  cheated  in  the  present  race  of  dishonest  competition.  “ They 
are  weaving  their  own  stuffs,  making  their  own  shoes,  sewing  their  own  garments, 
and  grinding  their  own  corn.  They  buy  the  purest  sugar  and  the  best  tea, 
and  grind  their  own  coffee.  They  slaughter  their  own  cattle,  and  the  finest 
beasts  of  the  land  waddle  down  the  streets  of  Rochdale  for  the  consumption 
of  flannel  weavers  and  cobblers.  (Last  year  the  Society  advertised  for  a Pro- 
vision Agent  to  make  purchases  in  Ireland,  and  to  devote  his  whole  time  to 
that  duty.)  When  did  competition  give  poor  men  these  advantages  ? And 
will  any  man  say  that  the  moral  character  of  these  people  is  not  improved 
under  these  influences  ? The  teetotallers  of  Rochdale  acknowledge  that  the 
Store  has  made  more  sober  men  since  it  commenced  than  all  their  efforts  have 
oeen  able  to  make  in  the  same  time.  Husbands  who  never  knew  what  it  was 
to  be  out  of  debt,  and  poor  wives  who  during  forty  years  never  had  sixpence 
uncondemned  in  their  pockets,  now  possess  little  stores  of  money  sufficient  to 
build  them  cottages,  and  go  every  week  into  their  own  market  with  money 
jingling  in  their  pockets ; and  in  that  market  there  is  no  distrust  and  no 
deception ; there  is  no  adulteration,  and  no  second  prices.  The  who^ 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  78'/ 


Savings  Bank  in  1849,  the  Society’s  Store  has  become  the  virtual 
Savings  Bank  of  the  place. 

The  following  Table,  completed  to  1860  from  the  Almanack 
published  by  the  Society,  shows  the  pecuniary  result  of  its  operations 
from  the  commencement. 


Tear. 

No.  of 
members. 

Amonnt  of  Capital. 

Amount  of 
in  store 

cash  sales 
(annual). 

Amount  of  profit 
(annual). 

£ 

s. 

d. 

£ 

S. 

d. 

£ 

s. 

d. 

1844 

28 

28 

0 

0 

1845 

74 

181 

12 

5 

710 

6 

5 

32 

17 

6 

1846 

86 

252 

7 

1,146 

17 

7 

80 

16 

H 

1847 

110 

286 

5 

H 

1,924 

13 

10 

72 

2 

10 

1848 

140 

397 

0 

0 

2,276 

6 

117 

16 

lOi 

1849 

390 

1,193 

19 

1 

6,611 

18 

0 

561 

3 

9 

1850 

600 

2,299 

10 

5 

13,179 

17 

0 

889 

12 

5 

1851 

630 

2,785 

0 

n 

17,638 

4 

0 

990 

19 

1852 

680 

3,471 

0 

6 

16,352 

5 

0 

1,206 

15 

1853 

720 

5,848 

3 

11 

22,760 

0 

0 

1,674 

18 

IH 

1854 

900 

7,172 

15 

7 

33,364 

0 

0 

1,763 

11 

1855 

1400 

11,032 

12 

lOJ 

44,902 

12 

0 

3,106 

8 

1856 

1600 

12,920 

13 

n 

63,197 

10 

0 

3,921 

13 

H 

1857 

1850 

15,142 

1 

2 

79,788 

0 

0 

5,470 

6 

1858 

1950 

18,160 

5 

4 

71,689 

0 

0 

6,284 

17 

H 

1859 

2703 

27,060 

14 

2 

104,012 

0 

0 

10,739 

18 

1860* 

3450 

37,710 

9 

0 

152,063 

0 

0 

15,906 

9 

11 

atmosphere  is  honest.  Those  who  serve  neither  hurry,  finesse,  nor  flatter.  They 
have  no  interest  in  chicanery.  They  have  but  one  duty  to  perform — that  of 
giving  fair  measure,  full  weight,  and  a pure  article.  In  other  parts  of  the 
town,  where  competition  is  the  principle  of  trade,  all  the  preaching  in  Rochdale 
cannot  produce  moral  effects  like  these. 

“ As  the  Store  has  made  no  debts,  it  has  incurred  no  losses  ; and  during 
thirteen  years’  transactions,  and  receipts  amounting  to  303,852/.,  it  has  had 
no  law-suits.  The  Arbitrators  of  the  Societies,  during  all  their  years  of  office, 
have  never  had  a case  to  decide,  and  are  discontented  that  nobody  quarrels.” 

* [1865]  The  latest  report  to  which  I have  access  is  that  for  the  quarter 
ending  September  20,  1864,  of  which  I take  the  following  abstract  from  the 
November  number  of  that  valuable  periodical  the  Co-operator,  conducted  by 
Mr.  Henry  Pitman,  one  of  the  most  active  and  judicious  apostles  of  the  Co- 
operative cause  : — “ The  number  of  members  is  4580,  being  an  increase  of  132 
for  the  three  months.  The  capital  or  assets  of  the  society  is  59,536/.  IO5.  Ic/., 
or  more  than  last  quarter  by  3687/.  13s.  7d.  The  cash  received  for  sale  of 
goods  is  45,806/.  O5.  lOJd.,  being  an  increase  of  2283/.  12s.  5\d.  as  compared 
with  the  previous  three  months.  The  profit  realized  is  5713/.  2s.  7J</.,  which, 
after  depreciating  fixed  stock  account  182/.  2s.  4^d.,  paying  interest  on  share 
capital  598/.  17s.  6d.,  applying  2|  per  cent  to  an  educational  fund,  viz. 
122/.  17s.  9c/.,  leaves  a dividend  to  members  on  their  purchases  of  2s.  4d.  in  the 
pound.  Non-members  have  received  261/.  18s.  4d.,  at  Is.  8c/.  in  the  pound  oa 
their  purchases,  leaving  Sd.  in  the  pound  profit  to  the  society,  which  increases 


788 


BOOK  IV.  CHAPTER  VIL  § 6 


I need  not  enter  into  similar  particulars  respecting  the  Corn-Mill 
Society,  and  will  merely  state  that  in  1860  its  capital  is  set  down, 
on  the  same  authority,  at  26,6 18Z.  14s.  6d.,  and  the  profit  for  that 
single  year  at  10,164Z.  12s.  5d.  For  the  manufacturing  establish- 
ment I have  no  certified  information  later  than  that  of  Mr.  Holyoake, 
who  states  the  capital  of  the  concern,  in  1857,  to  be  5500/.  But 
a letter  in  the  Rochdale  Observer  of  May  26,  1860,  editorially 
announced  as  by  a person  of  good  information,  says  that  the  capital 
had  at  that  time  reached  50,000/.  : and  the  same  letter  gives  highly 
satisfactory  statements  respecting  other  similar  associations ; the 
Rosendale  Industrial  Company,  capital  40,000/. ; the  Walsden 
Co-operative  Company,  capital  8000/. ; the  Bacup  and  Wardle 
Commercial  Company,  with  a capital  of  40,000/.,  “ of  which  more 
than  one-third  is  borrowed  at  5 per  cent,  and  this  circumstance, 
during  the  last  two  years  of  unexampled  commercial  prosperity, 
has  caused  the  rate  of  dividend  to  shareholders  to  rise  to  an  almost 
fabulous  height.” 

1 It  is  not  necessary  to  enter  into  any  details  respecting  the 
subsequent  history  of  English  Co-operation ; the  less  so,  as  it  is 
now  one  of  the  recognised  elements  in  the  progressive  movement 
of  the  age,  and,  as  such,  has  latterly  been  the  subject  of  elaborate 
articles  in  most  of  our  leading  periodicals,  one  of  the  most  recent 
and  best  of  which  was  in  the  Edinburgh  Review  for  October  1864 : 
and  the  progress  of  Co-operation  from  month  to  month  is  regularly 
chronicled  in  the  Co-oferator,  I must  not,  however,  omit  to 
mention  the  last  great  step  in  advance  in  reference  to  the  Co- 
operative Stores,  the  formation  in  the  North  of  England  (and  another 
is  in  course  of  formation  in  London)  of  a Wholesale  Society,  to 
dispense  with  the  services  of  the  wholesale  merchant  as  well  as  of  the 
retail  dealer,  and  e:^tend  to  the  Societies  the  advantage  which  each 
society  gives  to  its  own  members,  by  an  agency  for  co-operative 
purchases,  of  foreign  as  well  as  domestic  commodities,  direct  from 
the  producers. 

2 It  is  hardly  possible  to  take  any  but  a hopeful  view  of  the 

the  reserve  fund  104/.  155.  4d.  This  lund  now  stands  at  1352/.  Is.  the 

accumulation  of  profits  from  the  trade  of  the  public  with  the  store  since  Sep- 
tember 1862,  over  and  above  the  Is.  8d.  in  the  pound  allowed  to  such  purchasers.” 

1 [This  paragraph  added  in  6th  ed.  (1865).] 

2 [This  paragraph  is  from  the  5th  ed.  (1862),  and  so  is  the  explanation,  in  the 
next  paragraph  but  one,  of  the  increase  in  the  productiveness  of  industry. 
The  argument  as  to  the  limitation  of  the  number  of  distributors  was  inserted 
in  the  6^  ed.  (1865).] 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  789 


prospects  of  mankind,  when,  in  two  leading  countries  of  the  world, 
the  obscure  depths  of  society  contain  simple  working  men  whose 
integrity,  good  sense,  self-command,  and  honourable  confidence  in 
one  another,  have  enabled  them  to  carry  these  noble  experiments 
to  the  triumphant  issue  which  the  facts  recorded  in  the  preceding 
pages  attest. 

From  the  progressive  advance  of  the  co-operative  movement, 
a great  increase  may  be  looked  for  even  in  the  aggregate  productive- 
ness of  industry.  The  sources  of  the  increase  are  twofold.  In  the 
first  place,  the  class  of  mere  distributors,  who  are  not  producers 
but  auxiliaries  of  production,  and  whose  inordinate  numbers,  far 
more  than  the  gains  of  capitalists,  are  the  cause  why  so  great  a 
portion  of  the  wealth  produced  does  not  reach  the  producers — will 
be  reduced  to  more  modest  dimensions.  Distributors  differ  from 
producers  in  this,  that  when  producers  increase,  even  though  in 
any  given  department  of  industry  they  may  be  too  numerous,  they 
actually  produce  more  : but  the  multiplication  of  distributors  does 
not  make  more  distribution  to  be  done,  more  wealth  to  be  dis- 
tributed ; it  does  but  divide  the  same  work  among  a greater  number 
of  persons,  seldom  even  cheapening  the  process.  By  limiting  the 
distributors  to  the  number  really  required  for  making  the  com- 
modities accessible  to  the  consumers — which  is  the  direct  effect  of 
the  co-operative  system — a vast  number  of  hands  will  be  set  free 
for  production,  and  the  capital  which  feeds  and  the  gains  which 
remunerate  them  will  be  applied  to  feed  and  remunerate  producers. 
This  great  economy  of  the  world’s  resources  would  be  realized  even 
if  co-operation  stopped  at  associations  for  purchase  and  consumption, 
without  extending  to  production. 

The  other  mode  in  which  co-operation  tends,  still  more  efficaci- 
ously, to  increase  the  productiveness  of  labour,  consists  in  the  vast 
stimulus  given  to  productive  energies,  by  placing  the  labourers,  as 
a mass,  in  a relation  to  their  work  which  would  make  it  their  principle 
and  their  interest — at  present  it  is  neither — to  do  the  utmost,  instead 
of  the  least  possible,  in  exchange  for  their  remuneration.  ^It  is 
scarcely  possible  to  rate  too  highly  this  material  benefit,  which  yet 
is  as  nothing  compared  with  the  moral  revolution  in  society  that 
would  accompany  it : the  healing  of  the  standing  feud  between 
capital  and  labour ; the  transformation  of  human  life,  from  a* 
confiict  of  classes  struggling  for  opposite  interests,  to  a friendly 

* [The  present  text  from  this  point  to  the  point  indicated  in  the  next 
paragraph  but  two  dates  from  the  6th  ed.  (1865).] 


790 


BOOK  IV.  CHAPTER  VII.  § 6 


rivalry  in  the  pursuit  of  a good  common  to  all ; the  elevation  of 
the  dignity  of  labour ; a new  sense  of  security  and  independence 
in  the  labouring  class ; and  the  conversion  of  each  human  being’s 
daily  occupation  into  a school  of  the  social  sympathies  and  the 
practical  intelligence. 

Such  is  the  noble  idea  which  the  promoters  of  Co-operation 
should  have  before  them.  But  to  attain,  in  any  degree,  these  objects, 
it  is  indispensable  that  all,  and  not  some  only,  of  those  who  do  the 
work  should  be  identified  in  interest  with  the  prosperity  of  the 
undertaking.  Associations  which,  when  they  have  been  successful, 
renounce  the  essential  principle  of  the  system,  and  become  joint- 
stock  companies  of  a limited  number  of  shareholders,  who  differ 
from  those  of  other  companies  only  in  being  working  men ; associ- 
ations which  employ  hired  labourers  without  any  interests  in  the 
profits  (and  I grieve  to  say  that  the  manufacturing  Society  even  of 
Rochdale  has  thus  degenerated)  are,  no  doubt,  exercising  a lawful 
right  in  honestly  employing  the  existing  system  of  society  to  improve 
their  position  as  individuals,  but  it  is  not  from  them  that  anything 
need  be  expected  towards  replacing  that  system  by  a better.  Neither 
will  such  societies,  in  the  long  run,  succeed  in  keeping  their  ground 
against  individual  competition.  Individual  management,  by  the 
one  person  principally  interested,  has  great  advantages  over  every 
description  of  collective  management.  Co-operation  has  but  one 
thing  to  oppose  to  those  advantages — the  common  interest  of  all 
the  workers  in  the  work.  When  individual  capitalists,  as  they 
will  certainly  do,  add  this  to  their  other  points  of  advantage ; 
when,  even  if  only  to  increase  their  gains,  they  take  up  the  practice 
which  these  co-operative  societies  have  dropped,  and  connect  the 
pecuniary  interest  of  every  person  in  their  employment  with  the 
most  efficient  and  most  economical  management  of  the  concern ; 
they  are  likely  to  gain  an  easy  victory  over  societies  which  retain 
the  defects,  while  they  cannot  possess  the  full  advantages,  of  the 
old  system. 

Under  the  most  favourable  supposition,  it  will  be  desirable,  and 
perhaps  for  a considerable  length  of  time,  that  individual  capitalists, 
associating  their  work-people  in  the  profits,  should  coexist  with 
even  those  co-operative  societies  which  are  faithful  to  the  co- 
operative principle.  Unity  of  authority  makes  many  things  possible, 
which  could  not  or  would  not  be  undertaken  subject  to  the  chance 
of  divided  councils  or  changes  in  the  management.  A private 
capitalist,  exempt  from  the  control  of  a body,  if  he  is  a person  of 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  79] 


capacity,  is  considerably  more  likely  than  almost  any  association 
to  run  judicious  risks,  and  originate  costly  improvements.  Co- 
operative societies  may  be  depended  on  for  adopting  improvements 
after  they  have  been  tested  by  success,  but  individuals  are  more 
hkely  to  commence  things  previously  untried.  Even  in  ordinary 
business,  the  competition  of  capable  persons  who  in  the  event  of 
failure  are  to  have  all  the  loss,  and  in  case  of  success  the  greater 
part  of  the  gain,  will  be  very  useful  in  keeping  the  managers  of 
co-operative  societies  up  to  the  due  pitch  of  activity  and  vigilance. 

When,  however,  co-operative  societies  shall  have  sufficiently 
multiplied,  it  is  not  probable  that  any  but  the  least  valuable  work- 
people will  any  longer  consent  to  work  all  their  lives  for  wages 
merely ; both  private  capitalists  and  associations  will  gradually 
find  it  necessary  to  make  the  entire  body  of  labourers  participants 
in  profits.  Eventually,  and  in  perhaps  a less  remote  future  than 
may  be  supposed,  we  may,  through  the  co-operative  principle,  see 
our  way  to  ^ a change  in  society,  which  would  combine  the  freedom 
and  independence  of  the  individual,  with  the  moral,  intellectual,  and 
economical  advantages  of  aggregate  production  ; and  which,  without 
violence  or  spoliation,  or  even  any  sudden  disturbance  of  existing 
habits  and  expectations,  would  realize,  at  least  in  the  industrial 
department,  the  best  aspirations  of  the  democratic  spirit,  by  putting 
an  end  to  the  division  of  society  into  the  industrious  and  the  idle, 
and  effacing  all  social  distinctions  but  those  fairly  earned  by  personal 
services  and  exertions.  Associations  like  those  which  we  have  des- 
cribed, by  the  very  process  of  their  success,  are  a course  of  education 
in  those  moral  and  active  qualities  by  which  alone  success  can  be 
either  deserved  or  attained.  As  associations  multiplied,  they  would 
tend  more  and  more  to  absorb  all  work-people,  except  those  who 
have  too  little  understanding,  or  too  little  virtue,  to  be  capable  of 
learning  to  act  on  any  other  system  than  that  of  narrow  selfishness. 
As  this  change  proceeded,  owners  of  capital  would  gradually  find 
it  to  their  advantage,  instead  of  maintaining  the  struggle  of  the 
old  system  with  work-people  of  only  the  worst  description,  to  lend 
their  capital  to  the  associations ; to  do  this  at  a diminishing  rate 
of  interest,  and  at  last,  perhaps,  even  to  exchange  their  capital 
for  terminable  annuities.  In  this  or  some  such  mode,  the  existing 
accumulations  of  capital  might  honestly,  and  by  a kind  of  spon- 
taneous process,  become  in  the  end  the  joint  property  of  all  who 
participate  in  their  productive  employment : a transformation 
1 [The  rest  of  this  paragraph  dates  from  the  3rd  ed.  (1852).] 


792 


BOOK  IV.  CHAPTER  VIL  § 7 


which,  thus  effected,  (and  assuming  of  course  that  both  sexes 
participate  equally  in  the  rights  and  in  the  government  of  the 
association,)*  would  be  the  nearest  approach  to  social  justice,  and  the 
most  beneficial  ordering  of  industrial  affairs  for  the  universal  good, 
which  it  is  possible  at  present  to  foresee. 

^ § 7.  I agree,  then,  with  the  Socialist  writers  in  their  conception 
of  the  form  which  industrial  operations  tend  to  assume  in  the 
advance  of  improvement ; and  I entirely  share  their  opinion  that 
the  time  is  ripe  for  commencing  this  transformation,  and  that  it 
should  by  all  just  and  effectual  means  be  aided  and  encouraged. 
But  while  I agree  and  sympathize  with  Sociahsts  in  this  practical 
portion  of  their  aims,  I utterly  dissent  from  the  most  conspicuous 
and  vehement  part  of  their  teaching,  their  declamations  against 
competition.  With  moral  conceptions  in  many  respects  far  ahead 
of  the  existing  arrangements  of  society,  they  have  in  general  very 
confused  and  erroneous  notions  of  its  actual  working ; and  one  of 
their  greatest  errors,  as  I conceive,  is  to  charge  upon  competition 
all  the  economical  evils  which  at  present  exist.  They  forget  that 
wherever  competition  is  not,  monopoly  is ; and  that  monopoly, 
in  all  its  forms,  is  the  taxation  of  the  industrious  for  the  support 
of  indolence,  if  not  of  plunder.  They  forget,  too,  that  with  the 
exception  of  competition  among  labourers,  all  other  competition 
is  for  the  benefit  of  the  labourers,  by  cheapening  the  articles  they 
consume ; that  competition  even  in  the  labour  market  is  a source 
not  of  low  but  of  high  wages,  wherever  the  competition /or  labour 
exceeds  the  competition  of  labour,  as  in  America,  in  the  colonies, 
and  in  the  skilled  trades  ; and  never  could  be  a cause  of  low  wages, 
save  by  the  overstocking  of  the  labour  market  through  the  too 
great  numbers  of  the  labourers’  families ; while,  if  the  supply  of 
labourers  is  excessive,  not  even  Sociahsm  can  prevent  their  remunera- 
tion from  being  low.  Besides,  if  association  were  universal,  there 

* [1865]  In  this  respect  also  the  Rochdale  Society  has  given  an  example  of 
reason  and  justice,  worthy  of  the  good  sense  and  good  feeling  manifested  in 
their  general  proceedings.  “ The  Rochdale  Store,”  says  Mr.  Holyoake,  “render? 
incidental  but  valuable  aid  towards  realizing  the  civil  independence  of  women. 
Women  may  be  members  of  this  Store,  and  vote  in  its  proceedings.  Single 
and  married  women  join.  Many  married  women  become  members  because 
their  husbands  will  not  take  the  trouble,  and  others  join  it  in  self-defence  to 
prevent  the  husband  from  spending  their  money  in  drink.  The  husband 
cannot  withdraw  the  savings  at  the  Store  standing  in  the  wife’s  name  unless 
she  signs  the  order.” 

* [This  section  added  in  3rd  ed.  (1852).] 


PROBABLE  FUTURE  OF  THE  LABOURING  CLASSES  793 


would  be  no  competition  between  labourer  and  labourer  ; and  that 
between  association  and  association  would  be  for  the  benefit  of  the 
consumers,  that  is,  of  the  associations ; of  the  industrious  classes 
generally. 

I do  not  pretend  that  there  are  no  inconveniences  in  competition, 
or  that  the  moral  objections  urged  against  it  by  Socialist  writers,  as 
a source  of  jealousy  and  hostility  among  those  engaged  in  the  same 
occupation,  are  altogether  groundless.  But  if  competition  has  its 
evils,  it  prevents  greater  evils.  As  M.  Feugueray  well  says,*  “ The 
deepest  root  of  the  evils  and  iniquities  which  fill  the  industrial 
world,  is  not  competition,  but  the  subjection  of  labour  to  capital, 
and  the  enormous  share  which  the  possessors  of  the  instruments 
of  industry  are  able  to  take  from  the  produce.  ...  If  competition 
has  great  power  for  evil,  it  is  no  less  fertile  of  good,  especially  in 
what  regards  the  development  of  the  individual  faculties,  and  the 
success  of  innovations.”  It  is  the  common  error  of  Socialists  to 
overlook  the  natural  indolence  of  mankind ; their  tendency  to  be 
passive,  to  be  the  slaves  of  habit,  to  persist  indefinitely  in  a course 
once  chosen.  Let  them  once  attain  any  state  of  existence  which 
they  consider  tolerable,  and  the  danger  to  be  apprehended  is  that 
they  will  thenceforth  stagnate  ; will  not  exert  themselves  to  improve, 
and  by  letting  their  faculties  rust,  will  lose  even  the  energy  required 
to  preserve  them  from  deterioration.  Competition  may  not  be  the 
best  conceivable  stimulus,  but  it  is  at  present  a necessary  one,  and 
no  one  can  foresee  the  time  when  it  will  not  be  indispensable  to 
progress.  Even  confining  ourselves  to  the  industrial  department, 
in  which,  more  than  in  any  other,  the  majority  may  be  supposed  to 
be  competent  judges  of  improvements ; it  would  be  difficult  to 
induce  the  general  assembly  of  an  association  to  submit  to  the 
trouble  and  inconvenience  of  altering  their  habits  by  adopting  some 
new  and  promising  invention,  unless  their  knowledge  of  the  existence 
of  rival  associations  made  them  apprehend  that  what  they  would 
not  consent  to  do,  others  would,  and  that  they  would  be  left  behind 
in  the  race. 

Instead  of  looking  upon  competition  as  the  baneful  and  anti- 
social principle  which  it  is  held  to  be  by  the  generality  of  Socialists, 
I conceive  that,  even  in  the  present  state  of  society  and  industry, 
every  restriction  of  it  is  an  evil,  and  every  extension  of  it,  even  if 
for  the  time  injuriously  affecting  some  class  of  labourers,  is  always 
an  ultimate  good.  To  be  protected  against  competition  is  to  be 
♦ P.  90. 


794 


BOOK  IV.  CHAPTER  VIL  § 7 


protected  in  idleness,  in  mental  dulness  ; to  be  saved  the  necessity 
of  being  as  active  and  as  intelligent  as  other  people ; and  if  it  is 
also  to  be  protected  against  being  underbid  for  employment  by  a 
less  highly  paid  class  of  labourers,  this  is  only  where  old  custom,  or 
local  and  partial  monopoly,  has  placed  some  particular  class  of 
artizans  in  a privileged  position  as  compared  with  the  rest ; and  the 
time  has  come  when  the  interest  of  universal  improvement  is  no 
longer  promoted  by  prolonging  the  privileges  of  a few.  If  the  slop- 
sellers  and  others  ^ of  their  class  have  lowered  the  wages  of  tailors, 
and  some  other  artizans,  by  making  them  an  affair  of  competition 
instead  of  custom,  so  much  the  better  in  the  end.  What  is  now 
required  is  not  to  bolster  up  old  customs,  whereby  limited  classes  of 
labouring  people  obtain  partial  gains  which  interest  them  in  keeping 
up  the  present  organization  of  society,  but  to  introduce  new  general 
practices  beneficial  to  all ; and  there  is  reason  to  rejoice  at  whatever 
makes  the  privileged  classes  of  skilled  artizans  feel  that  they  have 
the  same  interests,  and  depend  for  their  remuneration  on  the  same 
general  causes,  and  must  resort  for  the  improvement  of  their  condition 
to  the  same  remedies,  as  the  less  fortunately  circumstanced  and 
comparatively  helpless  multitude.^ 

* [“  Of  their  class  ” was  inserted  in  4th  ed.  (1857) ; and  the  words  of  the 
3rd  ed.  (1852),  “ so  unjustly  and  illiberally  railed  at — as  if  they  were  one 
iota  worse  in  their  motives  or  practices  than  other  people,  in  the  existing  state 
of  society, — ” were  omitted.] 

2 [See  Appendix  DD.  The  Subsequent  History  of  Co-operation.] 


BOOK  V 


ON  THE  INFLUENCE  OF  GOVERNMENT 


CHAPTER  I 

OF  THE  FUNCTIONS  OF  GOVERNMENT  IN  GENERAL 

§ 1.  One  of  the  most  disputed  questions  both  in  political 
science  and  in  practical  statesmanship  at  this  particular  period 
relates  to  the  proper  limits  of  the  functions  and  agency  of  govern- 
ments. At  other  times  it  has  been  a subject  of  controversy  how 
governments  should  be  constituted,  and  according  to  what  principles 
and  rules  they  should  exercise  their  authority  ; but  it  is  now  almost 
equally  a question  to  what  departments  of  human  affairs  that 
authority  should  extend.  And  when  the  tide  sets  so  strongly  towards 
changes  in  government  and  legislation,  as  a means  of  improving  the 
condition  of  mankind,  this  discussion  is  more  likely  to  increase 
than  to  diminish  in  interest.  On  the  one  hand,  impatient  reformers, 
thinking  it  easier  and  shorter  to  get  possession  of  the  government 
than  of  the  intellects  and  dispositions  of  the  public,  are  under  a 
constant  temptation  to  stretch  the  province  of  government  beyond 
due  bounds  : while,  on  the  other,  mankind  have  been  so  much 
accustomed  by  their  rulers  to  interference  for  purposes  other  than 
the  public  good,  or  under  an  erroneous  conception  of  what  that  good 
requires,  and  so  many  rash  proposals  are  made  by  sincere  lovers 
of  improvement,  for  attempting,  by  compulsory  regulation,  the 
attainment  of  objects  which  can  only  be  effectually  or  only  usefully 
compassed  by  opinion  and  discussion,  that  there  has  grown  up  a 
spirit  of  resistance  in  limine  to  the  interference  of  government, 
merely  as  such,  and  a disposition  to  restrict  its  sphere  of  action 
within  the  narrowest  bounds.  From  differences  in  the  historical 


796 


BOOK  V.  CHAPTER  L § 2 


development  of  different  nations,  not  necessary  to  be  here  dwelt 
upon,  the  former  excess,  that  of  exaggeraang  the  province  of  govern- 
ment, prevails  most,  both  in  theory  and  in  practice,  among  the 
Continental  nations,  while  in  England  the  contrary  spirit  has  hitherto 
been  predominant. 

The  general  principles  of  the  question,  in  so  far  as  it  is  a question 
of  principle,  I shall  make  an  attempt  to  determine  in  a later  chapter 
of  this  Book  : after  first  considering  the  effects  produced  by  the 
conduct  of  government  in  the  exercise  of  the  functions  universally 
acknowledged  to  belong  to  it.  For  this  purpose,  there  must  be  a 
specification  of  the  functions  which  are  either  inseparable  from  the 
idea  of  a government,  or  are  exercised  habitually  and  without 
objection  by  all  governments  ; as  distinguished  from  those  respecting 
which  it  has  beeji  considered  questionable  whether  governments 
should  exercise  them  or  not.  The  former  may  be  termed  the 
necessary j the  latter  the  optional^  functions  of  government.  ^ By  the 
term  optional  it  is  not  meant  to  imply  that  it  can  ever  be  a matter 
of  indifference,  or  of  arbitrary  choice,  whether  the  government 
should  or  should  not  take  upon  itself  the  functions  in  question  ; 
but  only  that  the  expediency  of  its  exercising  them  does  not  amount 
to  necessity,  and  is  a subject  on  which  diversity  of  opinion  does  or 
may  exist. 

§ 2.  In  attempting  to  enumerate  the  necessary  functions  of 
government,  we  find  them  to  be  considerably  more  multifarious 
than  most  people  are  at  first  aware  of,  and  not  capable  of  being 
circumscribed  by  those  very  definite  lines  of  demarcation,  which, 
in  the  inconsiderateness  of  popular  discussion,  it  is  often  attempted 
to  draw  round  them.  We  sometimes,  for  example,  hear  it  said  that 
governments  ought  to  confine  themselves  to  affording  protection 
against  force  and  fraud  : that,  these  two  things  apart,  people  should 
be  free  agents,  able  to  take  care  of  themselves,  and  that  so  long  as 
a person  practises  no  violence  or  deception,  to  the  injury  of  others 
in  person  or  property,  ^ legislatures  and  governments  are  in  no  way 
called  on  to  concern  themselves  about  him.  But  why  should 
people  be  protected  by  their  government,  that  is,  by  their  own 
collective  strength,  against  violence  and  fraud,  and  not  against 
other  evils,  except  that  the  expediency  is  more  obvious  ? If  nothing 

^ [This  explanation  added  in  2nd  ed.  (1849).] 

2 [So  since  the  4th  ed.  (1857).  The  original  text  ran  : “ he  has  a claim 
to  do  as  he  likes,  without  being  molested  or  restricted  by  judges  and  legislators.” 


FUNCTIONS  OF  GOVERNMENT  IN  GENERAL 


797 


but  what  people  cannot  possibly  do  for  themselves,  can  be  fit  to  be 
done  for  them  by  government,  people  might  be  required  to  protect 
themselves  by  their  skill  and  courage  even  against  force,  or  to  beg 
or  buy  protection  against  it,  as  they  actually  do  where  the  govern- 
ment is  not  capable  of  protecting  them  : and  against  fraud  every 
one  has  the  protection  of  his  own  wits.  But  without  further  antici- 
pating the  discussion  of  principles,  it  is  sufficient  on  the  present 
occasion  to  consider  facts. 

Under  which  of  these  heads,  the  repression  of  force  or  of  fraud, 
are  we  to  place  the  operation,  for  example,  of  the  laws  of  inheritance  ? 
Some  such  laws  must  exist  in  all  societies.  It  may  be  said,  perhaps, 
that  in  this  matter  government  has  merely  to  give  effect  to  the 
disposition  which  an  individual  makes  of  his  own  property  by  will. 
This,  however,  is  at  least  extremely  disputable  ; there  is  probably 
no  country  by  whose  laws  the  power  of  testamentary  disposition  is 
perfectly  absolute.  And  suppose  the  very  common  case  of  there 
being  no  will : does  not  the  law,  that  is,  the  government,  decide  on 
principles  of  general  expediency,  who  shall  take  the  succession  ? 
and  in  case  the  successor  is  in  any  manner  incompetent,  does  it  not 
appoint  persons,  frequently  officers  of  its  own,  to  collect  the  property 
and  apply  it  to  his  benefit  ? There  are  many  other  cases  in  which 
the  government  undertakes  the  administration  of  property,  because 
the  public  interest,  or  perhaps  only  that  of  the  particular  persons 
concerned,  is  thought  to  require  it.  This  is  often  done  in  cases  of 
litigated  property ; and  in  cases  of  judicially  declared  insolvency. 
It  has  never  been  contended  that,  in  doing  these  things,  a government 
exceeds  its  province. 

Nor  is  the  function  of  the  law  in  defining  property  itself  so 
simple  a thing  as  may  be  supposed.  It  may  be  imagined,  perhaps, 
that  the  law  has  only  to  declare  and  protect  the  right  of  every  one 
to  what  he  has  himself  produced,  or  acquired  by  the  voluntary 
consent,  fairly  obtained,  of  those  who  produced  it.  But  is  there 
nothing  recognized  as  property  except  what  has  been  produced  ? 
Is  there  not  the  earth  itself,  its  forests  and  waters,  and  all  other 
natural  riches,  above  and  below  the  surface  ? These  are  the  inherit- 
ance of  the  human  race,  and  there  must  be  regulations  for  the 
common  enjoyment  of  it.  What  rights,  and  under  what  conditions, 
a person  shall  be  allowed  to  exercise  over  any  portion  of  this  common 
inheritance  cannot  be  left  undecided.  No  function  of  government 
is  less  optional  than  the  regulation  of  these  things,  or  more  com- 
pletely involved  in  the  idea  of  civilized  society. 


793 


BOOK  V.  CHAPTER  I.  § 2 


Again,  the  legitimacy  is  conceded  of  repressing  violence  or 
treachery ; but  under  which  of  these  heads  are  we  to  place  the 
obligation  imposed  on  people  to  perform  their  contracts  ? Non- 
performance does  not  necessarily  imply  fraud ; the  person  who 
entered  into  the  contract  may  have  sincerely  intended  to  fulfil  it ; 
and  the  term  fraud,  which  can  scarcely  admit  of  being  extended 
even  to  the  case  of  voluntary  breach  of  contr^-ct  when  no  deception 
was  practised,  is  certainly  not  applicable  when  the  omission  to 
perform  is  a case  of  negligence.  Is  it  no  part  of  the  duty  of  govern- 
ments to  enforce  contracts  ? Here  the  doctrine  of  non-interference 
would  no  doubt  be  stretched  a little,  and  it  would  be  said  that 
enforcing  contracts  is  not  regulating  the  affairs  of  individuals  at  the 
pleasure  of  government,  but  giving  effect  to  their  own  expressed 
desire.  Let  us  acquiesce  in  this  enlargement ‘ of  the  restrictive 
theory,  and  take  it  for  what  it  is  worth.  But  governments  do  not 
limit  their  concern  with  contracts  to  a simple  enforcement.  They 
take  upon  themselves  to  determine  what  contracts  are  fit  to  be 
enforced.  It  is  not  enough  that  one  person,  not  being  either  cheated 
or  compelled,  makes  a promise  to  another.  There  are  promises  by 
which  it  is  not  for  the  public  good  that  persons  should  have  the  power 
of  binding  themselves.  To  say  nothing  of  engagements  to  do 
something  contrary  to  law,  there  are  engagements  which  the  law 
refuses  to  enforce,  for  reasons  connected  with  the  interest  of  the 
promiser,  or  with  the  general  policy  of  the  state.  A contract  by 
which  a person  sells  himself  to  another  as  a slave  would  be  declared 
void  by  the  tribunals  of  this  and  of  most  other  European  countries. 
There  are  few  nations  whose  laws  enforce  a contract  for  what  is 
looked  upon  as  prostitution,  or  any  matrimonial  engagement  of 
which  the  conditions  vary  in  any  respect  from  those  which  the 
law  has  thought  fit  to  prescribe.  But  when  once  it  is  admitted  that 
there  are  any  engagements  which  for  reasons  of  expediency  the  law 
ought  not  to  enforce,  the  same  question  is  necessarily  opened  with 
respect  to  all  engagements.  Whether,  for  example,  the  law  should 
enforce  a contract  to  labour  when  the  wages  are  too  low  or  the  hours 
of  work  too  severe  : whether  it  should  enforce  a contract  by  which 
a person  binds  himself  to  remain,  for  more  than  a very  limited  period, 
in  the  service  of  a given  individual : whether  a contract  of  marriage, 
entered  into  for  life,  should  continue  to  be  enforced  against  the 
deliberate  will  of  the  persons,  or  of  either  of  the  persons,  who  entered 
into  it.  Every  question  which  can  possibly  arise  as  to  the  policy 
of  contracts,  and  of  the  relations  which  they  establish  among  human 


FUNCTIONS  OF  GOVERN]\IENT  IN  GENERAL 


799 


beings,  is  a question  for  the  legislator ; and  one  which  he  cannot 
escape  from  considering,  and  in  some  way  or  other  deciding. 

Again,  the  prevention  and  suppression  of  force  and  fraud  afford 
appropriate  employment  for  soldiers,  policemen,  and  criminal 
judges ; but  there  are  also  civil  tribunals.  The  punishment  of 
wrong  is  one  business  of  an  administration  of  justice,  but  the  decision 
of  disputes  is  another.  Innumerable  disputes  arise  between  persons, 
without  mala  fides  on  either  side,  through  misconception  of  their 
legal  rights,  or  from  not  being  agreed  about  the  facts,  on  the  proof 
of  which  those  rights  are  legally  dependent.  Is  it  not  for  the  general 
interest  that  the  State  should  appoint  persons  to  clear  up  these 
uncertainties  and  terminate  these  disputes  ? It  cannot  be  said  to 
be  a case  of  absolute  necessity.  People  might  appoint  an  arbitrator, 
and  engage  to  submit  to  his  decision ; and  they  do  so  where  there 
are  no  courts  of  justice,  or  where  the  courts  are  not  trusted,  or 
where  their  delays  and  expenses,  or  the  irrationality  of  their  rules 
of  evidence,  deter  people  from  resorting  to  them.  Still,  it  is  univer- 
sally thought  right  that  the  State  should  establish  civil  tribunals  ; 
and  if  their  defects  often  drive  people  to  have  recourse  to  substitutes, 
even  then  the  power  held  in -reserve  of  carrying  the  case  before  a 
legally  constituted  court  gives  to  the  substitutes  their  principal 
efficacy. 

Not  only  does  the  State  undertake  to  decide  disputes,  it  takes 
precautions  beforehand  that  disputes  may  not  arise.  The  laws 
of  most  countries  lay  down  rules  for  determining  many  things, 
not  because  it  is  of  much  consequence  in  what  way  they  are  deter- 
mined, but  in  order  that  they  may  be  determined  somehow,  and  there 
may  be  no  question  on  the  subject.  The  law  prescribes  forms  of 
words  for  many  kinds  of  contract,  in  order  that  no  dispute  or 
misunderstanding  may  arise  about  their  meaning  : it  makes  provision 
that,  if  a dispute  does  arise,  evidence  shall  be  procurable  for  deciding 
it,  by  requiring  that  the  document  be  attested  by  witnesses  and 
executed  with  certain  formalities.  The  law  preserves  authentic 
evidence  of  facts  to  which  legal  consequences  are  attached,  by 
keeping  a registry  of  such  facts  ; as  of  births,  deaths,  and  marriages, 
of  wills  and  contracts,  and  of  judicial  proceedings.  In  doing  these 
things,  it  has  never  been  alleged  that  government  oversteps  the 
proper  limits  of  its  functions. 

Again,  however  wide  a scope  we  may  allow  to  the  doctrine  that 
individuals  are  the  proper  guardians  of  their  own  interests,  and 
that  government  owes  nothing  to  them  but  to  save  them  from  being 


800 


BOOK  V.  CHAPTER  L § 3 


interfered  with  by  other  people,  the  doctrine  can  never  be  applicable 
to  any  persons  but  those  who  are  capable  of  acting  in  their  own 
behalf.  The  individual  may  be  an  infant,  or  a lunatic,  or  fallen 
into  imbecility.  The  law  surely  must  look  after  the  interest  of  such 
persons.  It  does  not  necessarily  do  this  through  officers  of  its  own. 
It  often  devolves  the  trust  upon  some  relative  or  connexion.  But, 
in  doing  so,  is  its  duty  ended  ? Can  it  make  over  the  interests  of  one 
person  to  the  control  of  another,  and  be  excused  from  supervision, 
or  from  holding  the  person  thus  trusted  responsible  for  the  discharge 
of  the  trust  ? 

There  is  a multitude  of  cases  in  which  governments,  vdth  general 
approbation,  assume  powers  and  execute  functions  for  which  no 
reason  can  be  assigned  except  the  simple  one,  that  they  conduce 
to  general  convenience.  We  may  take  as  an  example,  the  function 
(which  is  a monopoly  too)  of  coining  money.  This  is  assumed  for 
no  more  recondite  purpose  than  that  of  saving  to  individuals  the 
trouble,  delay,  and  expense  of  weighing  and  assaying.  No  one, 
however,  even  of  those  most  jealous  of  state  interference,  has 
objected  to  this  as  an  improper  exercise  of  the  powers  of  government. 
Prescribing  a set  of  standard  weights  and  measures  is  another 
instance.  Paving,  lighting,  and  cleansing  the  streets  and  thorough- 
fares is  another ; whether  done  by  the  general  government,  or,  as 
is  more  usual,  and  generally  more  advisable,  by  a municipal  authority. 
Making  or  improving  harbours,  building  lighthouses,  making  surveys 
in  order  to  have  accurate  maps  and  charts,  raising  dykes  to  keep 
the  sea  out,  and  embankments  to  keep  rivers  in,  are  cases  in  point. 

Examples  might  be  indefinitely  multiplied  without  intruding  on 
any  disputed  ground.  But  enough  has  been  said  to  show  that  the 
admitted  functions  of  government  embrace  a much  wider  field  than 
can  easily  be  included  within  the  ring-fence  of  any  restrictive  defini- 
tion, and  that  it  is  hardly  possible  to  find  any  ground  of  justification 
common  to  them  all,  except  the  comprehensive  one  of  general  expedi- 
ency; nor  to  limit  the  interference  of  government  by  any  universal 
rule,  save  the  simple  and  vague  one,  that  it  should  never  be  admitted 
but  when  the  case  of  expediency  is  strong. 

§ 8.  Some  observations,  however,  may  be  usefuUy  bestowed 
on  the  nature  of  the  considerations  on  which  the  question  of  govern- 
ment interference  is  most  hkely  to  turn,  and  on  the  mode  of  estimating 
the  comparative  magnitude  of  the  expediencies  involved.  This  will 
form  the  last  of  the  three  parts,  into  which  our  discussion  of  the 


FUNCmONS  OF  GOVERNMENT  IN  GENERAL 


801 


principles  and  effects  of  government  interference  may  conveniently 
be  divided.  The  following  will  be  our  division  of  the  subject. 

We  shall  first  consider  the  economical  effects  arising  from  the 
manner  in  which  governments  perform  their  necessary  and  acknow- 
ledged functions. 

We  shall  then  pass  to  certain  governmental  interferences  of 
what  I have  termed  the  optional  kind  (i.e.  overstepping  the 
boundaries  of  the  universally  acknowledged  functions)  which  have 
heretofore  taken  place,  and  in  some  cases  still  take  place,  under  the 
influence  of  false  general  theories. 

It  will  lastly  remain  to  inquire  whether,  independently  of  any 
false  theory,  and  consistently  with  a correct  view  of  the  laws  which 
regulate  human  affairs,  there  be  any  cases  of  the  optional  class  in 
which  governmental  interference  is  really  advisable,  and  what  are 
those  cases. 

The  first  of  these  divisions  is  of  an  extremely  miscellaneous 
character  : since  the  necessary  functions  of  government,  and  those 
which  are  so  manifestly  expedient  that  they  have  never  or  very 
rarely  been  objected  to,  are,  as  already  pointed  out,  too  various  to  be 
brought  under  any  very  simple  classification.  Those,  however, 
which  are  of  principal  importance,  which  alone  it  is  necessary  here 
to  consider,  may  be  reduced  to  the  following  general  heads. 

First,  the  means  adopted  by  governments  to  raise  the  revenue 
which  is  the  condition  of  their  existence. 

Secondly,  the  nature  of  the  laws  which  they  prescribe  on  the  two 
great  subjects  of  Property  and  Contracts. 

Thirdly,  the  excellences  or  defects  of  the  system  of  means  by 
which  they  enforce  generally  the  execution  of  their  laws,  namely, 
their  judicature  and  police. 

We  commence  with  the  first  head,  that  is,  with  the  theory  of 
Taxation, 


CHAPTER  II 


ON  THE  GENEEAL  PRINCIPLES  OP  TAXATION 

§ ) . The  qualities  desirable,  economically  speaking,  in  a system 
of  taxation,  have  been  embodied  by  Adam  Smith  in  four  maxims  or 
principles,  which,  having  been  generally  concurred  in  by  subse- 
quent writers,  may  be  said  to  have  become  classical,  and  this  chapter 
cannot  be  better  commenced  than  by  quoting  them.* 

“ 1.  The  subjects  of  every  state  ought  to  contribute  to  the 
support  of  the  government  as  nearly  as  possible  in  proportion  to 
their  respective  abihties  : that  is,  in  proportion  to  the  revenue 
which  they  respectively  enjoy  under  the  protection  of  the  state. 
In  the  observation  or  neglect  of  this  maxim  consists  what  is  called 
the  equahty  or  inequahty  of  taxation. 

“ 2.  The  tax  which  each  individual  is  bound  to  pay  ought  to  be 
certain,  and  not  arbitrary.  The  time  of  payment,  the  manner  of 
payment,  the  quantity  to  be  paid,  ought  all  to  be  clear  and  plain 
to  the  contributor,  and  to  every  other  person.  Where  it  is  otherwise, 
every  person  subject  to  the  tax  is  put  more  or  less  in  the  power  of 
the  tax-gatherer,  who  can  either  aggravate  the  tax  upon  any  ob- 
noxious contributor,  or  extort,  by  the  terror  of  such  aggravation, 
some  present  or  perquisite  to  himself.  The  uncertainty  of  taxation 
encourages  the  insolence  and  favours  the  corruption  of  an  order  of 
men  who  are  naturally  unpopular,  even  when  they  are  neither 
insolent  nor  corrupt.  The  certainty  of  what  each  individual  ought 
to  pay  is,  in  taxation,  a matter  of  so  great  importance,  that  a very 
considerable  degree  of  inequality,  it  appears,  I beheve,  from  the 
experience  of  all  nations,  is  not  near  so  great  an  evil  as  a very  small 
degree  of  uncertainty. 

“ 3.  Every  tax  ought  to  be  levied  at  the  time,  or  in  the  manner, 
in  which  it  is  most  hkely  to  be  convenient  for  the  contributor  to 
pay  it.  A tax  upon  the  rent  of  land  or  of  houses,  payable  at  the 
* Wealth  of  Nations,  book  v.  ch.  ii 


GENERAL  PRINCIPLES  OE  TAXATION 


803 


same  term  at  which  such  rents  are  usually  paid,  is  levied  at  a time 
when  it  is  most  likely  to  be  convenient  for  the  contributor  to  pay  ; 
or  when  he  is  most  hkely  to  have  wherewithal  to  pay.  Taxes  upon 
such  consumable  goods  as  are  articles  of  luxury  are  all  finally  paid 
by  the  consumer,  and  generally  in  a manner  that  is  very  convenient 
to  him.  He  pays  them  by  httle  and  little,  as  he  has  occasion  to 
buy  the  goods.  As  he  is  at  liberty,  too,  either  to  buy  or  not  to 
buy,  as  he  pleases,  it  must  be  his  own  fault  if  he  ever  suffers  any 
considerable  inconvenience  from  such  taxes. 

“ 4.  Every  tax  ought  to  be  so  contrived  as  both  to  take  out  and 
to  keep  out  of  the  pockets  of  the  people  as  little  as  possible  over  and 
above  what  it  brings  into  the  public  treasury  of  the  state.  A tax 
may  either  take  out  or  keep  out  of  the  pockets  of  the  people  a great 
deal  more  than  it  brings  into  the  pubhc  treasury,  in  the  four  following 
ways.  First,  the  levying  of  it  may  require  a great  number  of 
officers,  whose  salaries  may  eat  up  the  greater  part  of  the  produce 
of  the  tax,  and  whose  perquisites  may  impose  another  additional 
tax  upon  the  people.”  Secondly,  it  may  divert  a portion  of  the 
labour  and  capital  of  the  community  from  a more  to  a less  pro- 
ductive employment.  “ Thirdly,  by  the  forfeitures  and  other 
penalties  which  those  unfortunate  individuals  incur  who  attempt 
unsuccessfully  to  evade  the  tax,  it  may  frequently  ruin  them,  and 
thereby  put  an  end  to  the  benefit  which  the  community  might  have 
derived  from  the  employment  of  their  capitals.  An  injudicious 
tax  offers  a great  temptation  to  smuggling.  Fourthly,  by  subject- 
ing the  people  to  the  frequent  visits  and  the  odious  examination  of 
the  tax-gatherers,  it  may  expose  them  to  much  unnecessary  trouble, 
vexation,  and  oppression  : ” to  which  may  be  added,  that  the 
restrictive  regulations  to  which  trades  and  manufactures  are  often 
subjected  to  prevent  evasion  of  a tax,  are  not  only  in  themselves 
troublesome  and  expensive,  but  often  oppose  insuperable  obstacles 
to  making  improvements  in  the  processes. 

The  last  three  of  these  four  maxims  require  little  or  other 
explanation  or  illustration  than  is  contained  in  the  passage  itself. 
How  far  any  given  tax  conforms  to,  or  conflicts  with  them,  is  a 
matter  to  be  considered  in  the  discussion  of  particular  taxes.  But 
the  first  of  the  four  points,  equality  of  taxation,  requires  to  be  more 
fully  examined,  being  a thing  often  imperfectly  understood,  and  on 
which  many  false  notions  have  become  to  a certain  degree  accredited, 
through  the  absence  of  any  definite  principles  of  judgment  in  the 
popular  mind. 


S04 


BOOK  V.  CHAPTER  II.  § 2 


§ 2.  For  what  reason  ought  equality  to  be  the  rule  in  matters 
of  taxation  ? For  the  reason  that  it  ought  to  be  so  in  all  affairs  of 
government.  As  a government  ought  to  make  no  distinction  of 
persons  or  classes  in  the  strength  of  their  claims  on  it,  whatever 
sacrifices  it  requires  from  them  should  be  made  to  bear  as  nearly 
as  possible  with  the  same  pressure  upon  all,  which,  it  must  be 
observed,  is  the  mode  by  which  least  sacrifice  is  occasioned  on  the 
whole.  If  any  one  bears  less  than  his  fair  share  of  the  burthen, 
some  other  person  must  suffer  more  than  his  share,  and  the  allevia- 
tion to  the  one  is  not,  ccBteris  paribus,  so  great  a good  to  him,  as  the 
increased  pressure  upon  the  other  is  an  evil.  Equality  of  taxation, 
therefore,  as  a maxim  of  pohtics,  means  equality  of  sacrifice.  It 
means  apportioning  the  contribution  of  each  person  towards  the 
expenses  of  government  so  that  he  shall  feel  neither  more  nor  less 
inconvenience  from  his  share  of  the  payment  than  every  other 
person  experiences  from  his.  This  standard,  like  other  standards 
of  perfection,  cannot  be  completely  realized ; but  the  first  object 
in  every  practical  discussion  should  be  to  know  what  perfection  is. 

There  are  persons,  however,  who  are  not  content  with  the 
general  principles  of  justice  as  a basis  to  ground  a rule  of  finance 
upon,  but  must  have  something,  as  they  think,  more  specifically 
appropriate  to  the  subject.  What  best  pleases  them  is,  to  regard 
the  taxes  paid  by  each  member  of  the  community  as  an  equivalent 
for  value  received,  in  the  shape  of  service  to  himself ; and  they  prefer 
to  rest  the  justice  of  making  each  contribute  in  proportion  to  his 
means,  upon  the  ground,  that  he  who  has  twice  as  much  property 
to  be  protected  receives,  on  an  accurate  calculation,  twice  as  much 
protection,  and  ought,  on  the  principles  of  bargain  and  sale,  to  pay 
twice  as  much  for  it.  Since,  however,  the  assumption  that  govern- 
ment exists  solely  for  the  protection  of  property,  is  not  one  to  be 
dehberately  adhered  to ; some  consistent  adherents  of  the  quid 
pro  quo  principle  go  on  to  observe,  that  protection  being  required 
for  person  as  well  as  property,  and  everybody’s  person  receiving 
the  same  amount  of  protection,  a poll-tax  of  a fixed  sum  per  head 
is  a proper  equivalent  for  this  part  of  the  benefits  of  government, 
while  the  remaining  part,  protection  to  property,  should  be  paid  for 
in  proportion  to  property.  There  is  in  this  adjustment  a false  air 
of  nice  adaptation,  very  acceptable  to  some  minds.  But  in  the 
first  place,  it  is  not  admissible  that  the  protection  of  persons  and 
that  of  property  are  the  sole  purposes  of  government.  The  ends  of 
government  are  as  comprehensive  as  those  of  the  social  union.  They 


GENERAL  PRINCIPLES  OF  TAXATION 


805 


consist  of  all  the  good,  and  all  the  immunity  from  evil,  which  the 
existence  of  government  can  be  made  either  directly  or  indirectly  to 
bestow.  In  the  second  place,  the  practice  of  setting  definite  values 
on  things  essentially  indefinite,  and  making  them  a ground  of  practical 
conclusions,  is  peculiarly  fertile  in  false  views  of  social  questions.  It 
cannot  be  admitted  that  to  be  protected  in  the  ownership  of  ten 
times  as  much  property  is  to  be  ten  times  as  much  protected. 
Neither  can  it  be  truly  said  that  the  protection  of  lOOOL  a year  costs 
the  state  ten  times  as  much  as  that  of  100/.  a year,  rather  than  twice 
as  much,  or  exactly  as  much.  The  same  judges,  soldiers,  and 
sailors  who  protect  the  one  protect  the  other,  and  the  larger  income 
does  not  necessarily,  though  it  may  sometimes,  require  even  more 
policemen.  Whether  the  labour  and  expense  of  the  protection,  or 
the  feelings  of  the  protected  person,  or  any  other  definite  thing  be 
made  the  standard,  there  is  no  such  proportion  as  the  one  supposed, 
nor  any  other  definable  proportion.  If  we  wanted  to  estimate  the 
degrees  of  benefit  which  different  persons  derive  from  the  protection 
of  government  we  should  have  to  consider  who  would  suffer  most 
if  that  protection  were  withdrawn  : to  which  question  if  any  answer 
could  be  made,  it  must  be  that  those  would  suffer  most  who  were 
weakest  in  mind  or  body,  either  by  nature  or  by  position.  Indeed, 
such  persons  would  almost  infallibly  be  slaves.  If  there  were  any 
justice,  therefore,  in  the  theory  of  justice  now  under  consideration, 
those  who  are  least  capable  of  helping  or  defending  themselves, 
being  those  to  whom  the  protection  of  government  is  the  most 
indispensable,  ought  to  pay  the  greatest  share  of  its  price  : the  re- 
verse of  the  true  idea  of  distributive  justice,  which  consists  not  in 
imitating  but  in  redressing  the  inequalities  and  wrongs  of  nature. 

Government  must  be  regarded  as  so  pre-eminently  a concern 
of  all,  that  to  determine  who  are  most  interested  in  it  is  of  no  real 
importance.  If  a person  or  class  of  persons  receive  so  small  a share 
of  the  benefit  as  makes  it  necessary  to  raise  the  question,  there  is 
something  else  than  taxation  which  is  amiss,  and  the  thing  to  be 
done  is  to  remedy  the  defect,  instead  of  recognising  it  and  making 
it  a ground  for  demanding  less  taxes.  As,  in  a case  of  voluntary 
subscription  for  a purpose  in  which  all  are  interested,  all  are  thought 
to  have  done  their  part  fairly  when  each  has  contributed  according 
to  his  means,  that  is,  has  made  an  equal  sacrifice  for  the  common 
object ; in  like  manner  should  this  be  the  principle  of  compulsory 
contributions : and  it  is  superfluous  to  look  for  a more  ingenious 
or  recondite  ground  to  rest  the  principle  upon. 


S06 


BOOK  V.  CHAPTER  II.  § 3 


§ 3.  Setting  out,  then,  from  the  maxim  that  equal  sacrifices 
ought  to  be  demanded  from  all,  we  have  next  to  inquire  whether 
this  is  in  fact  done  by  making  each  contribute  the  same  percentage 
on  his  pecuniary  means.  Many  persons  maintain  the  negative, 
saying  that  a tenth  part  taken  from  a small  income  is  a heavier 
burthen  than  the  same  fraction  deducted  from  one  much  larger : 
and  on  this  is  grounded  the  very  popular  scheme  of  what  is  called  a 
graduated  property  tax,  viz.  an  income  tax  in  which  the  percentage 
rises  with  the  amount  of  the  income. 

On  the  best  consideration  I am  able  to  give  to  this  question,  it 
appears  to  me  that  the  portion  of  truth  which  the  doctrine  con- 
tains arises  principally  from  the  difference  between  a tax  which  can 
be  saved  from  luxuries  and  one  which  trenches,  in  ever  so  small  a 
degree,  upon  the  necessaries  of  life.  To  take  a thousand  a year 
from  the  possessor  of  ten  thousand  would  not  deprive  him  of  any- 
thing really  conducive  either  to  the  support  or  to  the  comfort  of 
existence  ; and  if  such  would  be  the  effect  of  taking  five  pound  from 
one  whose  income  is  fifty,  the  sacrifice  required  from  the  last  is  not 
only  greater  than,  but  entirely  incommensurable  with,  that  imposed 
upon  the  first.  The  mode  of  adjusting  these  inequahties  of  pressure, 
which  seems  to  be  the  most  equitable,  is  that  recommended  by  Ben- 
tham,  of  leaving  a certain  minimum  of  income,  sufficient  to  provide 
the  necessaries  of  hfe,  untaxed.  Suppose  50i.  a year  to  be  sufficient 
to  provide  the  number  of  persons  ordinarily  supported  from  a single 
income  with  the  requisites  of  life  and  health,  and  with  protection 
against  habitual  bodily  suffering,  but  not  with  any  indulgence. 
This  then  should  be  made  the  minimum,  and  incomes  exceeding  it 
should  pay  taxes  not  upon  their  whole  amount,  but  upon  the  surplus. 
If  the  tax  be  ten  per  cent.,  an  income  of  60i.  should  be  considered 
as  a net  income  of  101.,  and  charged  with  11.  a year,  while  an  income 
of  lOOOZ.  should  be  charged  as  one  of  0601.  Each  would  then  pay 
a fixed  proportion,  not  of  his  whole  means,  but  of  his  superfluities.* 
An  income  not  exceeding  bOl.  should  not  be  taxed  at  all,  either 
directly  or  by  taxes  on  necessaries ; for  as  by  supposition  this  is 
the  smallest  income  which  labour  ought  to  be  able  to  command,  the 
government  ought  not  to  be  a party  to  making  it  smaller.  This 
arrangement,  however,  would  constitute  a reason,  in  addition  to 

* [1865]  This  principle  of  assessment  has  been  partially  adopted  by  Mr. 
Gladstone  in  renewing  the  income-tax.  From  lOOl.,  at  which  the  tax  beams, 
up  to  200^.,  the  income  only  pays  tax  on  the  excess  above  QOl. 

[For  the  subsequent  history  of  the  Income  Tax  see  Appendix  EE.] 


GENERAL  PRINCIPLES  OF  TAXATION 


807 


others  which  might  be  stated,  for  maintaining  taxes  on  articles  of 
luxury  consumed  by  the  poor.  The  immunity  extended  to  the 
income  required  for  necessaries,  should  depend  on  its  being  actually 
expended  for  that  purpose ; and  the  poor  who,  not  having  more 
than  enough  for  necessaries,  divert  any  part  of  it  to  indulgences, 
should  like  other  people  contribute  their  quota  out  of  those 
indulgences  to  the  expenses  of  the  state. 

The  exemption  in  favour  of  the  smaller  incomes  should  not,  I 
think,  be  stretched  further  than  to  the  amount  of  income  needful 
for  life,  health,  and  immunity  from  bodily  pain.  If  601.  a year 
is  sufficient  (which  may  be  doubted)  for  these  purposes,!  an  income 
of  lOOL  a year  would,  as  it  seems  to  me,  obtain  all  the  relief  it  is 
entitled  to,  compared  with  one  of  lOOOZ.,  by  being  taxed  only  on 
601.  of  its  amount.  It  may  be  said,  indeed,  that  to  take  1001.  from 
lOOOi.  (even  giving  back  five  pounds)  is  a heavier  impost  than  lOOOZ. 
taken  from  10,000i.  (giving  back  the  same  five  pounds).  But  this 
doctrine  seems  to  me  too  disputable  altogether,  and  even  if  true  at  all, 
not  true  to  a sufficient  extent  to  be  made  the  foundation  of  any 
rule  of  taxation.  Whether  the  person  with  10,000Z.  a year  cares 
less  for  lOOOZ.  than  the  person  with  only  a lOOOZ.  a year  cares  for 
100?.,  and  if  so,  how  much  less,  does  not  appear  to  me  capable  of 
being  decided  with  the  degree  of  certainty  on  which  a legislator 
or  a financier  ought  to  act.^ 

Some  indeed  contend  that  the  rule  of  proportional  taxation  bears 
harder  upon  the  moderate  than  upon  the  large  incomes,  because 
the  same  proportional  payment  has  more  tendency,  in  the  former 
case  than  in  the  latter,  to  reduce  the  payer  to  a lower  grade  of 
social  rank.  The  fact  appears  to  me  more  than  questionable. 
But  even  admitting  it,  I object  to  its  being  considered  incumbent 
on  government  to  shape  its  course  by  such  considerations,  or  to 
recognise  the  notion  that  social  importance  is  or  can  be  determined 
by  amount  of  expenditure.  Government  ought  to  set  an  example 
of  rating  all  things  at  their  true  value,  and  riches,  therefore  at 
the  worth,  for  comfort  or  pleasure,  of  the  things  which  they  will 

1 [Added  in  6th  ed.  (1862).  The  original  (1848)  text  ran  : “ An  income  of 
100?.  a year  would,  as  it  seems  to  me,  obtain  all  the  relief  it  is  entitled  to,”  &c.] 

* [This  last  sentence  replaced  in  the  3rd  ed.  (1862)  the  following  sentence 
of  the  original  text : “To  tax  all  incomes  in  an  equal  ratio,  would  be  unjust  to 
those  the  greater  part  of  whoso  income  is  required  for  necessaries ; but  I can 
see  no  fairer  standard  of  real  equality  than  to  take  from  aU  persons,  whatever 
may  bo  their  amount  of  fortune,  the  same  arithmetical  proportion  of  their 
superfluities.”] 


BOOK  V.  CHAPTER  II.  § 3 


buy : and  ought  not  to  sanction  the  vulgarity  of  prizing  them  for 
the  pitiful  vanity  of  being  known  to  possess  them,  or  the  paltry 
shame  of  being  suspected  to  be  without  them,  the  presiding  motives 
of  three-fourths  of  the  expenditure  of  the  middle  classes.  The 
sacrifices  of  real  comfort  or  indulgence  which  government  requires 
it  is  bound  to  apportion  among  all  persons  with  as  much  equality 
as  possible  ; but  their  sacrifices  of  the  imaginary  dignity  dependent 
on  expense  it  may  spare  itself  the  trouble  of  estimating. 

Both  in  England  and  on  the  Continent  a graduated  property 
tax  (Vimpot  progressif)  has  been  advocated,  on  the  avowed  ground 
that  the  state  should  use  the  instrument  of  taxation  as  a means 
of  mitigating  the  inequalities  of  wealth.  I am  as  desirous  as  any  one 
that  means  should  be  taken  to  diminish  those  inequalities,  but  not 
so  as  to  relieve  the  prodigal  at  the  expense  of  the  prudent.^  To 
tax  the  larger  incomes  at  a higher  percentage  than  the  smaller  is 
to  lay  a tax  on  industry  and  economy ; to  impose  a penalty  on 
people  for  having  worked  harder  and  saved  more  than  their  neigh- 
bours. It  is  not  the  fortunes  which  are  earned,  but  those  which 
are  unearned,  that  it  is  for  the  public  good  to  place  under  limitatiom^ 
A just  and  wise  legislation  would  abstain  from  holding  out  motives 
for  dissipating  rather  than  saving  the  earnings  of  honest  exertion.^ 
Its  impartiality  between  competitors  would  consist  in  endeavouring 
that  they  should  all  start  fair,  and  not  in  hanging  a weight  upon 
the  swift  to  diminish  the  distance  between  them  and  the  slow.^ 
Many,  indeed,  fail  with  greater  efforts  than  those  with  which  others 
succee’d,  not  from  difference  of  merits,  but  difference  of  opportuni- 
ties ; but  if  all  were  done  which  it  would  be  in  the  power  of  a good 
government  to  do,  by  instruction  and  by  legislation,  to  diminish 
this  inequality  of  opportunities,  the  differences  of  fortune  arising 
from  people’s  own  earnings  could  not  justly  give  umbrage.®  With 

^ [So  since  the  3rd  ed.  (1852).  The  original  text  ran  : “ but  not  so  as  to 
impair  the  motives  on  which  society  depends  for  keeping  up  (not  to  say  in- 
creasing) the  produce  of  its  labour  and  capital.] 

- [This  sentence  replaced  in  the  3rd  ed.  a sentence  of  the  original : “ It  is 
partial  taxation,  which  is  a mild  form  of  robbery.”] 

2 [This  sentence  replaced  in  the  3rd  ed.  the  original  sentence  ; “ A just 
and  wuse  legislation  would  scrupulously  abstain  from  opposing  obstacles  to  the 
acquisition  of  even  the  largest  fortune  by  honest  exertion.”] 

“*  [So  since  3rd  ed.  Originally  : “ and  not  that,  whether  they  were  svift 
or  slow,  all  should  reach  the  goal  at  once.”] 

* [So  since  3rd  ed.  Instead  of  the  second  half  of  this  sentence  the  original 
ran  ; “ and  it  is  the  part  of  a good  government  to  provide,  that,  as  far  as  more 
paramount  considerations  permit,  the  inequality  of  opportunities  shall  be 
remedied.  When  all  kinds  of  useful  instruction  shall  be  as  accessible  as  they 


GENERAL  PRINCIPLES  OF  TAXATION 


809 


respect  to  the  large  fortunes  acquired  by  gift  or  inheritance,  the 
power  of  bequeathing  is  ^ one  of  those  privileges  of  property  which 
are  fit  subjects  for  regulation  on  grounds  of  general  expediency  ; 
and  I have  already  suggested  * as  a possible  mode  2 of  restraining 
the  accumulation  of  large  fortunes  in  the  hands  of  those  who  have 
not  earned  them  by  exertion,  a limitation  of  the  amount  which 
any  one  person  should  be  permitted  to  acquire  by  gift,  bequest,  or 
inheritance.  Apart  from  this,  and  from  the  proposal  of  Bentham 
(also  discussed  in  a former  chapter)  that  collateral  inheritance  ah 
intestato  should  cease,  and  the  property  escheat  to  the  state,  I 
conceive  that  inheritances  and  legacies,  exceeding  a certain  amount, 
are  highly  proper  subjects  for  taxation  : and  that  the  revenue  from 
them  should  be  as  great  as  it  can  be  made  without  giving  rise  to 
evasions,  by  donation  inter  vivos  or  concealment  of  property,  such 
as  it  would  be  impossible  adequately  to  check.  The  principle  of 
graduation  (as  it  is  called),  that  is,  of  levying  a larger  percentage 
on  a larger  sum,  though  its  application  to  general  taxation  would 
be  in  my  opinion  objectionable, ^ seems  to  me  both  just  and  expedient^ 
as  applied  to  legacy  and  inheritance  duties.^ 

The  objection  to  a graduated  property  tax  applies  in  an  aggra- 
vated degree  to  the  proposition  of  an  exclusive  tax  on  what  is  called 
“realized  property,”  that  is,  property  not  forming  a part  of  any 
capital  engaged  in  business,  or  rather  in  business  under  the  super- 
intendence of  the  owner  : as  land,  the  public  funds,  money  lent  on 
mortgage,  and  shares  (I  presume)  in  joint  stock  companies.  Except 
the  proposal  of  applying  a sponge  to  the  national  debt,  no  such 
palpable  violation  of  common  honesty  has  found  sufficient  support 
in  this  country,  during  the  present  generation,  to  be  regarded  as 
within  the  domain  of  discussion.  It  has  not  the  palliation  of  a 

might  be  made,  and  when  the  cultivated  intelligence  of  the  poorer  classes,  aided 
BO  far  as  necessary  by  the  guidance  and  co-operation  of  the  state,  shall  obviate, 
as  it  might  so  well  do,  the  major  part  of  the  disabilities  attendant  on  poverty, 
the  inequalities  of  fortune  arising,”  &c.] 

^ [At  this  point  were  omitted  in  the  3rd  ed.  (1852)  the  following  words  of  the 
original  text ; “ is  as  much  a part  of  the  right  of  property  as  the  power  of  using  : 
that  is  not  in  the  fullest  sense  a person’s  own,  which  he  is  not  free  to  bestow 
on  others.  But  this  is,”  &o.] 

* Supra,  book  ii.  ch.  2. 

2 [So  since  3rd  ed.  Originally  : “ the  most  eligible  mode.”] 

* [So  since  3rd  ed.  Originally  : “ would  be  a violation  of  first  principles.”] 

^ [So  since  3rd  ed.  Originally  : “ is  quite  unobjectionable.”] 

^ [The  principle  of  graduation  has  been  applied  to  inheritance  and  legacy 

duties  since  1894.  See  Bastable,  Public  Finance,  3rd  ed.  p.  599 ; Book  iv.  oh. 
9,  § 6.  For  its  application  to  the  Income  Tax  see  Appendix  EE.] 


810 


BOOK  V.  CHAPTER  II.  § 4 


graduated  property  tax,  that  of  laying  the  burthen  on  those  best 
able  to  bear  it ; for §  **  realized  property  ” includes  the  far  larger 
portion  of  the  provision  made  for  those  who  are  unable  to  work, 
and  consists,  in  great  part,  of  extremely  small  fractions.  I can 
hardly  conceive  a more  shameless  pretension,  than  that  the  major 
part  of  the  property  of  the  country,  that  of  merchants,  manufacturers, 
farmers,  and  shopkeepers,  should  be  exempted  from  its  share  of 
taxation  : that  these  classes  should  only  begin  to  pay  their  pro- 
portion after  retiring  from  business,  and  if  they  never  retire  should 
be  excused  from  it  altogether.  But  even  this  does  not  give  an 
adequate  idea  of  the  injustice  of  the  proposition.  The  burthen 
thus  exclusively  thrown  on  the  owners  of  the  smaller  portion  of  the 
wealth  of  the  community,  would  not  even  be  a burthen  on  that 
class  of  persons  in  perpetual  succession,  but  would  fall  exclusively 
on  those  who  happened  to  compose  it  when  the  tax  was  laid  on. 
As  land  and  those  particular  securities  would  thenceforth  yield  a 
smaller  net  income,  relatively  to  the  general  interest  of  capital  and 
to  the  profits  of  trade ; the  balance  would  rectify  itself  by  a 
permanent  depreciation  of  those  kinds  of  property.  Future  buyers 
would  acquire  land  and  securities  at  a reduction  of  price,  equivalent 
to  the  peculiar  tax,  which  tax  they  would,  therefore,  escape  from 
paying ; while  the  original  possessors  would  remain  burthened 
with  it  even  after  parting  with  the  property,  since  they  would 
have  sold  their  land  or  securities  at  a loss  of  value  equivalent  to 
the  fee-simple  of  the  tax.  Its  imposition  would  thus  be  tanta- 
mount to  the  confiscation  for  public  uses  of  a percentage  of  their 
property,  equal  to  the  percentage  laid  on  their  income  by  the  tax. 
That  such  a proposition  should  find  any  favour,  is  a striking  instance 
of  the  want  of  conscience  in  matters  of  taxation,  resulting  from  the 
absence  of  any  fixed  principles  in  the  public  mind,  and  of  any 
indication  of  a sense  of  justice  on  the  subject  in  the  general  conduct 
of  governments.  Should  the  scheme  ever  enlist  a large  party  in 
its  support,  the  fact  would  indicate  a laxity  of  pecuniary 
integrity  in  national  affairs,  scarcely  inferior  to  American 
repudiation. 

§ 4.  Whether  the  profits  of  trade  may  not  rightfully  be  taxed 

at  a lower  rate  than  incomes  derived  from  interest  or  rent,  is  part  of 
the  more  comprehensive  question,  so  often  mooted  on  the  occasion 
of  the  present  income  tax,  whether  life  incomes  should  be  subjected 
to  the  same  rate  of  taxation  as  perpetual  incomes  : whether  salaries. 


GENERAL  PRINCIPLES  OF  TAXATION 


811 


for  example,  or  annuities,  or  the  gains  of  professions,  should  pay  the 
same  percentage  as  the  income  from  inheritable  property. 

The  existing  tax  treats  all  kinds  of  incomes  exactly  alike, 
taking  its  sevenpence  (now  [1871]  fourpence)  in  the  pound,  as  well 
from  the  person  whose  income  dies  with  him,  as  from  the  landholder, 
stockholder,  or  mortgagee,  who  can  transmit  his  fortune  undiminished 
to  his  descendants.  This  is  a visible  injustice  : yet  it  does  not 
arithmetically  violate  the  rule  that  taxation  ought  to  be  in  proportion 
to  means.  When  it  is  said  that  a temporary  income  ought  to  be 
taxed  less  than  a permanent  one,  the  reply  is  irresistible,  that  it  is 
taxed  less  ; for  the  income  which  lasts  only  ten  years  pays  the  tax 
only  ten  years,  while  that  which  lasts  for  ever  pays  for  ever.  ^ On 
this  point  some  financial  reformers  are  guilty  of  a great  fallacy. 
They  contend  that  incomes  ought  to  be  assessed  to  the  income  tax 
not  in  proportion  to  their  annual  amount,  but  to  their  capitalized 
value  : that,  for  example,  if  the  value  of  a perpetual  annuity  of 
1001.  is  3000Z.,  and  a life  annuity  of  the  same  amount,  being  worth 
only  half  the  number  of  years’  purchase  could  only  be  sold  for  1500Z., 
the  perpetual  income  should  pay  twice  as  much  per  cent  income 
tax  as  the  terminable  income.;  if  the  one  pays  101.  a year  the  other 
should  pay  only  51.  But  in  this  argument  there  is  the  obvious 
oversight,  that  it  values  the  incomes  by  one  standard  and  the 
payments  by  another ; it  capitalizes  the  incomes,  but  forgets  to 
capitalize  the  payments.  An  annuity  worth  3000Z.  ought,  it  J3 
alleged,  to  be  taxed  twice  as  highly  as  one  which  is  only  worth  1500Z.< 
and  no  assertion  can  be  more  unquestionable ; but  it  is  forgotten 
that  the  income  worth  3000Z.  pays  to  the  supposed  income  tax  lOZ. 
a year  in  perpetuity,  which  is  equivalent,  by  supposition,  to  300Z., 
while  the  terminable  income  pays  the  same  lOZ.  only  during  the  life 
of  its  owner,  which  on  the  same  calculation  is  a value  of  150Z.,  and 
could  actually  be  bought  for  that  sum.  Already,  therefore,  the 
income  which  is  only  half  as  valuable  pays  only  half  as  much  to  the 
tax  ; and  if  in  addition  to  this  its  annual  quota  were  reduced  from 
lOZ.  to  5Z.,  it  would  pay,  not  half,  but  a fourth  part  only  of  the  pay- 
ment demanded  from  the  perpetual  income.  To  make  it  just  that 
the  one  income  should  pay  only  half  as  much  per  annum  as  the  other, 
it  would  be  necessary  that  it  should  pay  that  half  for  the  same 
period,  that  is,  in  perpetuity. 


* [The  rest  of  this  paragraph, — with  the  exception  of  the  Jast  sentence, 
added  in  the  4th  ed.  (1857), — was  inserted  in  the  2nd  ed.  (1849).] 


812 


BOOK  V.  CHAPTER  IL  § 4 


1 Tlie  rule  of  payment  which  this  school  of  financial  reformers 
contend  for  would  be  very  proper  if  the  tax  were  only  to  be  levied 
once,  to  meet  some  national  emergency.  On  the  principle  of 
requiring  from  all  payers  an  equal  sacrifice,  every  person  who  had 
anything  belonging  to  him,  reversioners  included,  would  be  called  on 
for  a payment  proportioned  to  the  present  value  of  his  property. 
I wonder  it  does  not  occur  to  the  reformers  in  question,  that  precisely 
because  this  principle  of  assessment  would  be  just  in  the  case  of  a 
payment  made  once  for  all,  it  cannot  possibly  be  just  for  a permanent 
tax.  When  each  pays  only  once,  one  person  pays  no  oftener  than 
another ; and  the  proportion  which  would  be  just  in  that  case  can- 
not also  be  just  if  one  person  has  to  make  the  payment  only  once, 
and  the  other  several  times.  This,  however,  is  the  type  of  the  case 
which  actually  occurs.  The  permanent  incomes  pay  the  tax  as  much 
oftener  than  the  temporary  ones,  as  a perpetuity  exceeds  the  certain 
or  uncertain  length  of  time  which  forms  the  duration  of  the  income  for 
life  or  years. 

2 All  attempts  to  establish  a claim  in  favour  of  terminable  incomes 
on  numerical  grounds — to  make  out,  in  short,  that  a proportional 
tax  is  not  a proportional  tax — are  manifestly  absurd.  The  claim 
does  not  rest  on  grounds  of  arithmetic,  but  of  human  wants  and 
feelings.  ^ Jt  is  not  because  the  temporary  annuitant  has  smaller 
means,  but  because  he  has  greater  necessities,  that  he  ought  to  be 
assessed  at  a lower  rate. 

In  spite  of  the  nominal  equality  of  income.  A,  an  annuitant  of 
lOOOl.  a year,  cannot  so  well  afford  to  pay  1001.  out  of  it,  as  B who 
derives  the  same  aimual  sum  from  heritable  property ; A having 
usually  a demand  on  his  income  which  B has  not,  namely,  to  provide 
by  saving  for  children  or  others  ; to  which,  in  the  case  of  salaries  or 
professional  gains,  must  generally  be  added  a provision  for  his  own 
later  years  ; while  B may  expend  his  whole  income  without  injury 
to  his  old  age,  and  still  have  it  all  to  bestow  on  others  after  his  death. 
If  A,  in  order  to  meet  these  exigencies,  must  lay  by  3001.  of  his  income, 
to  take  lOOZ.  from  him  as  income  tax  is  to  take  1002.  from  7002., 
since  it  must  be  retrenched  from  that  part  only  of  his  means  which 
he  can  afford  to  spend  on  his  own  consumption.  Were  he  to  throw 
it  rateably  on  what  he  spends  and  on  what  he  saves,  abating  702. 

» [This  paragraph  inserted  in  5th  ed.  (1862).] 

« [Added  in  2nd  ed.  (1849).] 

3 [Added  in  3rd  ed.  (1852)  with  “ greater  wants  ” : changed  to  “ greater 
necessities  ” in  5th  ed.] 


GENERAL  PRINCIPLES  OF  TAXATION 


813 


from  his  consumption  and  30/.  from  his  annual  saving,  then  indeed 
his  immediate  sacrifice  would  be  proportionately  the  same  as  B’s  : 
but  then  his  children  or  his  old  age  would  be  worse  provided  for  in 
consequence  of  the  tax.  The  capital  sum  which  would  be  accu- 
mulated for  them  would  be  one-tenth  less,  and  on  the  reduced  income 
afforded  by  this  reduced  capital,  they  would  be  a second  time 
charged  with  income  tax ; while  B’s  heirs  would  only  be  charged  once. 

The  principle,  therefore,  of  equality  of  taxation,  interpreted  in 
its  only  just  sense,  equality  of  sacrifice,  requires  that  a person  who 
has  no  means  of  providing  for  old  age,  or  for  those  in  whom  he  is 
interested,  except  by  saving  from  income,  should  have  the  tax 
remitted  on  all  that  part  of  his  income  which  is  really  and  bond  fide 
applied  to  that  purpose. 

1 If,  indeed,  reliance  could  be  placed  on  the  conscience  of  the 
contributors,  or  sufficient  security  taken  for  the  correctness  of  their 
statements  by  collateral  precautions,  the  proper  mode  of  assessing 
an  income  tax  would  be  to  tax  only  the  part  of  income  devoted  to 
expenditure,  exempting  that  which  is  saved.  For  when  saved  and 
invested  (and  all  savings,  speaking  generally,  are  invested)  it 
thenceforth  pays  income  tax  on  the  interest  or  profit  which  it  brings, 
notwithstanding  that  it  has  already  been  taxed  on  the  principal. 
Unless,  therefore,  savings  are  exempted  from  income  tax,  the  con- 
tributors are  twice  taxed  on  what  they  save,  and  only  once  on  what 
they  spend.  A person  who  spends  all  he  receives,  pays  7d.  in  the 
pound,  or  say  three  per  cent,  to  the  tax,  and  no  more ; but  if  he 

[This  paragraph  was  inserted  in  the  3rd  ed.  (1852),  in  the  place  of  the 
following  passage  which  was  made  a footnote,  but  disappeared  from  the  5th 
ed.  (1862) : 

“ I say  really  applied,  because  (as  before  remarked  in  the  case  of  an  income 
not  more  than  sufficient  for  subsistence)  an  exemption  grounded  on  an  assumed 
necessity  ought  not  to  be  claimable  by  any  one  who  practically  emancipates 
himself  from  the  necessity.  One  expedient  might  be,  that  the  Income-Tax 
Commissioners  should  allow,  as  a deduction  from  income,  all  bond  fide  payments 
for  insurance  on  life.  This,  however,  would  not  provide  for  the  case  which 
most  of  all  deserves  consideration,  that  of  persons  whose  lives  are  not  insurable  ; 
nor  would  it  include  the  case  of  savings  made  as  a provision  for  age.  The 
latter  case  might,  perhaps,  be  met  by  allowing  as  a deduction  from  income  all 
payments  made  in  the  purchase  of  deferred  annuities  ; and  the  former  by 
remitting  income-tax  on  sums  actually  settled,  and  on  sums  paid  into  the  hands 
of  a public  officer,  to  be  invested  in  securities,  and  repaid  only  to  the  executor 
or  administrator ; the  tax  so  remitted,  with  interest  from  the  date  of  deposit, 
being  retained  (for  the  prevention  of  fraud)  as  a first  debt  chargeable  on  the 
deposit  itself,  before  other  debts  could  be  paid  out  of  it ; but  not  demanded  if 
satisfactory  proof  were  given  that  all  debts  had  been  paid  from  other  resources. 
I throw  out  these  suggestions  for  the  consideration  of  those  whose  experience 
renders  them  adequate  judges  of  practical  difficulties.”] 


814 


BOOK  V.  CHAPTER  IL  § 4 


saves  part  of  the  year’s  income  and  buys  stock,  then  in  addition  to 
the  three  per  cent  which  he  has  paid  on  the  principal,  and  which 
diminishes  the  interest  in  the  same  ratio,  he  pays  three  per  cent 
annually  on  the  interest  itself,  which  is  equivalent  to  an  immediate 
payment  of  a second  three  per  cent  on  the  principal.  So  that  while 
unproductive  expenditure  pays  only  three  per  cent,  savings  pay  six 
per  cent : or  more  correctly,  three  per  cent  on  the  whole,  and 
another  three  per  cent  on  the  remaining  ninety-seven.  The  differ- 
ence thus  created  to  the  disadvantage  of  prudence  and  economy  is 
not  only  impolitic  but  unjust.  To  tax  the  sum  invested,  and 
afterwards  to  tax  also  the  proceeds  of  the  investment,  is  to  tax  the 
same  portion  of  the  contributor’s  means  twice  over.  The  principal 
and  the  interest  cannot  both  together  form  part  of  his  resources ; 
they  are  the  same  portion  twice  counted  : if  he  has  the  interest,  it 
is  because  he  abstains  from  using  the  principal ; if  he  spends  the 
principal,  he  does  not  receive  the  interest.  Yet  because  he  can  do 
either  of  the  two,  he  is  taxed  as  if  he  could  do  both,  and  could  have 
the  benefit  of  the  saving  and  that  of  the  spending,  concurrently  with 
one  another. 

1 It  has  been  urged  as  an  objection  to  exempting  savings  from 
taxation,  that  the  law  ought  not  to  disturb,  by  artificial  interference, 
the  natural  competition  between  the  motives  for  saving  and  those 
for  spending.  But  we  have  seen  that  the  law  disturbs  this  natural 
competition  when  it  taxes  savings,  not  when  it  spares  them ; for, 
as  the  savings  pay  at  any  rate  the  fuU  tax  as  soon  as  they  are 
invested,  their  exemption  from  payment  in  the  earlier  stage  is 
necessary  to  prevent  them  from  paying  twice,  while  money  spent 
in  unproductive  consumption  pays  only  once.  It  has  been  further 
objected,  that  since  the  rich  have  the  greatest  means  of  saving, 
any  privilege  given  to  savings  is  an  advantage  bestowed  on  the  rich 
at  the  expense  of  the  poor.  I answer,  that  it  is  bestowed  on  them 
only  in  proportion  as  they  abdicate  the  personal  use  of  their  riches ; 
in  proportion  as  they  divert  their  income  from  the  supply  of  their 
own  wants  to  a productive  investment,  through  which,  instead  of 
being  consumed  by  themselves,  it  is  distributed  in  wages  among 
the  poor.  If  this  be  favouring  the  rich,  I should  like  to  have  it 
pointed  out  what  mode  of  assessing  taxation  can  deserve  the  name 
of  favouring  the  poor. 

2 No  income  tax  is  really  just  from  which  savings  are  not  exempted; 

1 [This  paragraph  inserted  in  6th  ed.  (1862).] 

2 [Here  the  text  again  dates  from  the  3rd  ed.  (1852)  down  to  the  proposal 


GENERAL  PRINCIPLES  OF  TAXATION 


815 


aod  no  income  tax  ought  to  be  voted  without  that  provision,  if  the 
form  of  the  returns,  and  the  nature  of  the  evidence  required,  could 
be  so  arranged  as  to  prevent  the  exemption  from  being  taken  frau- 
dulent advantage  of,  by  saving  with  one  hand  and  getting  into  debt 
with  the  other,  or  by  spending  in  the  followring  year  what  had  been 
passed  tax-free  as  saving  in  the  year  preceding.  If  this  difficulty 
could  be  surmounted,  the  difficulties  and  complexities  arising  from 
the  comparative  claims  of  temporary  and  permanent  incomes 
would  disappear ; for,  since  temporary  incomes  have  no  just  claim 
to  lighter  taxation  than  permanent  incomes,  except  in  so  far  as 
their  possessors  are  more  called  upon  to  save,  the  exemption  of  what 
they  do  save  would  fully  satisfy  the  claim.  But  if  no  plan  can  be 
devised  for  the  exemption  of  actual  savings,  sufficiently  free  from 
liability  to  fraud,  it  is  necessary,  as  the  next  thing  in  point  of  justice, 
to  take  into  account,  in  assessing  the  tax,  what  the  different  classes 
of  contributors  ought  to  save.  And  there  would  probably  be  no 
other  mode  of  doing  this  than  the  rough  expedient  of  two  different 
rates  of  assessment.  There  would  be  great  difficulty  in  taking  into 
account  differences  of  duration  between  one  terminable  income  and 
another  ; and  in  the  most  frequent  case,  that  of  incomes  dependent 
on  life,  differences  of  age  and  health  would  constitute  such  extreme 
diversity  as  it  would  be  impossible  to  take  proper  cognizance  of. 
It  would  probably  be  necessary  to  be  content  with  one  uniform  rate 
for  all  incomes  of  inheritance,  and  another  uniform  rate  for  all  those 
which  necessarily  terminate  with  the  life  of  the  individual.  In  fixing 
the  proportion  between  the  two  rates,  there  must  inevitably  be  some- 
thing arbitrary ; perhaps  a deduction  of  one-fourth  in  favour  of 
life-incoLies  would  be  as  little  objectionable  as  any  which  could  be 
made,  it  being  thus  assumed  that  one-fourth  of  a life-income  is,  on 
the  average  of  all  ages  and  states  of  health,  a suitable  proportion  to 
be  laid  by  as  a provision  for  successors  and  for  old  age.* 

of  “ two  different  rates  of  assessment,”  from  which  point  the  text  becomes 
that  of  the  original  edition  (1848).] 

* [1862]  Mr.  Hubbard,  the  first  person  who,  as  a practical  legislator,  has 
attempted  the  rectification  of  the  income  tax  on  principles  of  unimpeachable 
justice,  and  whose  well-conceived  plan  wants  little  of  being  as  near  an  approxi- 
mation to  a just  assessment  as  it  is  likely  that  means  could  be  found  of  carry- 
ing into  practical  effect,  proposes  a reduction  not  of  a fourth  but  of  a third,  in 
favour  of  industrial  and  professional  incomes.  He  fixes  on  this  ratio,  on  the 
ground  that,  independently  of  all  consideration  as  to  what  the  industrial  and 
professional  classes  ought  to  save,  the  attainable  evidence  goes  to  prove  that  a 
third  of  their  incomes  is  what  on  an  average  they  do  save,  over  and  above  the 
proportion  saved  by  other  classes.  “ The  savings  ” (Mr.  Hubbard  observes) 
**  effected  out  of  incomes  derived  from  invested  property  are  estimated  at  one- 


816 


BOOK  V.  CHAPTER  II.  § 4 


Of  the  net  profits  of  persons  in  business,  a part,  as  before  observed, 
may  be  considered  as  interest  on  capital,  and  of  a perpetual  character, 
and  the  remaining  part  as  remuneration  for  the  skill  and  labour  of 
superintendence.  The  surplus  beyond  interest  depends  on  the  life 
of  the  individual,  and  even  on  his  continuance  in  business,  and  is 
entitled  to  the  full  amount  of  exemption  allowed  to  terminable 
incomes.  i It  has  also,  I conceive,  a just  claim  to  a further  amount 
of  exemption  in  consideration  of  its  precariousness.  An  income 
which  some  not  unusual  vicissitude  may  reduce  to  nothing,  or  even 
convert  into  a loss,  is  not  the  same  thing  to  the  feelings  of  the  possessor 
as  a permanent  income  of  lOOOl,  a year,  even  though  on  an  average 

tenth.  The  savings  effected  ont  of  industrial  incomes  are  estimated  at  four- 
tenths.  The  amounts  which  would  be  assessed  under  these  two  classes  being 
nearly  equal,  the  adjustment  is  simplified  by  striking  off  one-tenth  on  either 
side,  and  then  reducing  by  three-tenths,  or  one-third,  the  assessable  amount 
of  industrial  incomes.”  Proposed  Report  (p.  xiv.  of  the  Eeport  and  Evidence 
of  the  Committee  of  1861).  In  such  an  estimate  there  must  be  a large  element 
of  conjecture  ; but  in  so  far  as  it  can  be  substantiated,  it  affords  a valid  ground 
for  the  practical  conclusion  which  Mr.  Hubbard  founds  on  it. 

[1848]  Several  writers  on  the  subject,  including  Mr.  Mill  in  his  Elements  of 
Political  Economy,  and  Mr.  M'CuUoch  in  his  work  on  Taxation,  have  contended 
that  as  much  should  be  deducted  as  would  be  sufficient  to  insure  the  possessor’s 
life  for  a sum  which  would  give  to  his  successors  for  ever  an  income  equal  to 
what  he  reserves  for  himself ; since  this  is  what  the  possessor  of  heritable  pro- 
perty can  do  without  saving  at  all ; in  other  words,  that  temporary  incomes 
should  be  converted  into  perpetual  incomes  of  equal  present  value,  and  taxed 
as  such.  If  the  owners  of  life-incomes  actually  ffid  save  this  large  proportion 
of  theii  income,  or  even  a still  larger,  I would  gladly  grant  them  an  exemption 
from  taxation  on  the  whole  amount,  since,  if  practical  means  could  be  found 
of  doing  it,  I would  exempt  savings  altogether.  But  I cannot  admit  that  they 
have  a claim  to  exemption  on  the  general  assumption  of  their  being  obliged  to 
save  this  amount.  Owners  of  life-incomes  are  not  bound  to  forego  ♦he  enjoy- 
ment of  them  for  the  sake  of  leaving  to  a perpetual  line  of  successors  an 
independent  provision  equal  to  their  own  temporary  one ; and  no  one  ever 
dreams  of  doing  so.  Least  of  all  is  it  to  be  required  or  expected  from  those 
whose  incomes  are  the  fruits  of  personal  exertion,  that  they  should  leave  to 
their  posterity  for  ever,  without  any  necessity  for  exertion,  the  same  incomes 
which  they  allow  to  themselves.  All  they  are  bound  to  do,  even  for  their 
children,  is  to  place  them  in  circumstances  in  which  they  will  have  favourable 
chances  of  earning  their  own  living.  To  give,  however,  either  to  children  or  to 
others,  by  I'equest,  being  a legitimate  inclination,  which  these  persons  cannot 
indulge  witliout  laying  by  a part  of  their  income,  while  the  oi;mers  of  heritable 
property  ca  ti ; this  real  inequality  in  cases  where  the  incomes  themselves 
are  equal,  should  be  considered,  to  a reasonable  degree,  in  the  adjustment  of 
taxation,  so  as  to  require  from  both,  as  nearly  as  practicable,  an  equal  sacrifice. 

* [The  remainder  of  this  paragraph  dates  from  the  3rd  ed.  (1852).  In  the 
original  it  was  said,  “ Of  the  net  profits  of  persons  in  business  one  half  may 
perhaps  be  considered  as  interest  on  capital  . . . and  the  other  half  as  re- 
muneration ” &c.  ; and  the  paragraph  ended  thus : “ For  profits,  therefore, 
an  intermediate  rate  might  be  adopted,  one  half  of  the  net  income  being 
taxed  on  the  higher  scale  and  the  other  half  on  the  lower.”] 


GENERAL  PRINCIPLES  OF  TAXATION 


817 


of  years  it  may  5rield  10002.  a year.  If  life-incomes  were  assessed  at 
three-fourths  of  their  amount,  the  profits  of  business,  after  deducting 
interest  on  capital,  should  not  only  be  assessed  at  three-fourths, 
but  should  pay,  on  that  assessment,  a lower  rate.  Or  perhaps  the 
claims  of  justice  in  this  respect  might  be  sufficiently  met  by  allowing 
the  deduction  of  a fourth  on  the  entire  income,  interest  included. 

These  are  the  chief  cases,  of  ordinary  occurrence,  in  which  any 
difficulty  arises  in  interpreting  the  maxim  «f  equality  of  taxation. 
The  proper  sense  to  be  put  upon  it,  as  we  have  seen  in  the  preceding 
example,  is,  that  people  should  be  taxed,  not  in  proportion  to  what 
they  have,  but  to  what  they  can  afford  to  spend.  It  is  no  objection 
to  this  principle  that  we  cannot  apply  it  consistently  to  all  cases. 
A person  with  a life-income  and  precarious  health,  or  who  has  many 
persons  depending  on  his  exertions,  must,  if  he  wishes  to  provide 
for  them  after  his  death,  be  more  rigidly  economical  than  one  who 
has  a life-income  of  equal  amount,  with  a strong  constitution,  and 
few  claims  upon  him ; and  if  it  be  conceded  that  taxation  cannot 
accommodate  itself  to  these  distinctions,  it  is  argued  that  there  is  no 
use  in  attending  to  any  distinctions,  where  the  absolute  amount  of 
income  is  the  same.  But  the  difficulty  of  doing  perfect  justice  is  no 
reason  against  doing  as  much  as  we  can.  Though  it  may  be  a hard- 
ship to  an  annuitant  whose  life  is  only  worth  five  years’  purchase,  to 
be  allowed  no  greater  abatement  than  is  granted  to  one  whose  life 
is  worth  twenty,  it  is  better  for  him  even  so,  than  if  neither  of  them 
were  allowed  any  abatement  at  alV 

§ 5.  Before  leaving  the  subject  of  Equality  of  Taxation,  I must 
remark  that  there  are  cases  in  which  exceptions  may  be  made  to  it, 
consistently  with  that  equal  justice  which  is  the  groundwork  of  the 
rule.  Suppose  that  there  is  a kind  of  income  which  constantly 
tends  to  increase,  without  any  exertion  or  sacrifice  on  the  part  of  the 
owners  : those  owners  constituting  a class  in  the  community,  whom 
the  natural  course  of  things  progressively  enriches,  consistently 
with  complete  passiveness  on  their  own  part.  In  such  a case  it 

* [Between  the  last  revision  of  this  chapter  and  the  present  edition 
(1909),  important  changes  have  been  made  in  the  Income  Tax: — 

(1)  The  extension  of  the  system  of  abatements  has  made  the  tax  in  effect 

progressive  up  to  incomes  of  £700. 

(2)  It  has  been  made  allowable  to  deduct  life  insurance  premiums  actually 

paid,  up  to  one  sixth  of  the  income. 

(3)  Adistinction  has  been  introduced  between  “earned”  and  “unearned’* 

incomes,  and  a lower  rate  charged  on  the  former.  See  Appendix  EE]. 


818 


BOOK  V.  CHAPTER  II.  § 6 


would  be  no  violation  of  the  principles  on  which  private  property  is 
grounded,  if  the  state  should  appropriate  this  increase  of  wealth,  or 
part  of  it,  as  it  arises.  This  would  not  properly  be  taking  anything 
from  anybody  ; it  would  merely  be  applying  an  accession  of  wealth, 
created  by  circumstances,  to  the  benefit  of  society,  instead  of  allowing 
it  to  become  an  unearned  appendage  to  the  riches  of  a particular  class. 

Now  this  is  actually  the  case  with  rent.  The  ordinary  progress 
of  a society  which  inereases  in  wealth  is  at  all  times  tending  to 
augment  the  incomes  of  landlords ; to  give  them  both  a greater 
amount  and  a greater  proportion  of  the  wealth  of  the  community,  in- 
dependently of  any  trouble  or  outlay  incurred  by  themselves.  They 
grow  richer,  as  it  were  in  their  sleep,  without  working,  risking,  or 
economizing.  What  claim  have  they,  on  the  general  principle  of 
social  justice,  to  this  accession  of  riches  ? In  what  would  they 
have  been  wronged  if  society  had,  from  the  beginning,  reserved 
the  right  of  taxing  the  spontaneous  increase  of  rent,  to  the  highest 
amount  required  by  financial  exigencies  ? I admit  that  it  would  be 
unjust  to  come  upon  each  individual  estate,  and  lay  hold  of  the 
increase  which  might  be  foimd  to  have  taken  place  in  its  rental ; 
because  there  would  be  no  means  of  distinguishing  in  individual 
cases  between  an  increase  owing  solely  to  the  general  circumstances 
of  society,  and  one  which  was  the  effect  of  skill  and  expenditure 
on  the  part  of  the  proprietor.  The  only  admissible  mode  of  pro- 
ceeding would  be  by  a general  measure  The  first  step  should  be  a 
valuation  of  all  the  land  in  the  country.  The  present  value  of  all 
land  should  be  exempt  from  the  tax ; but  after  an  interval  had 
elapsed,  during  which  society  had  increased  in  population  and 
capital,  a rough  estimate  might  be  made  of  the  spontaneous  increase 
which  had  accrued  to  rent  since  the  valuation  was  made.  Of  this 
the  average  price  of  produce  would  be  some  criterion  : if  that  had 
risen,  it  would  be  certain  that  rent  had  mcreased,  and  (as  already 
shown)  even  in  a greater  ratio  than  the  rise  of  price.  On  this  and 
other  data,  an  approximate  estimate  might  be  made,  how  much 
value  had  been  added  to  the  land  of  the  country  by  natural  causes ; 
and  in  laying  on  a general  land-tax,  which  for  fear  of  miscalculation 
should  be  considerably  within  the  amount  thus  indicated,  there 
would  be  an  assurance  of  not  touching  any  increase  of  income  which 
might  be  the  result  of  capital  expended  or  industry  exerted  by  the 
proprietor. 

But  though  there  could  be  no  question  as  to  the  justice  of  taxing 
the  increase  of  rent,  if  society  had  avowedly  reserved  the  right,  has 


GENERAL  PRINCTPLES  OF  TAXATION 


819 


not  society  waived  that  right  by  not  exercising  it  ? In  England, 
for  example,  have  not  all  who  bought  land  for  the  last  century  or 
more,  given  value  not  only  for  the  existing  income,  but  for  the 
prospects  of  increase,  under  an  implied  assurance  of  being  only 
taxed  in  the  same  proportion  with  other  incomes  ? This  objection,  in 
so  far  as  valid,  has  a different  degree  of  validity  in  different  countries  ; 
depending  on  the  degree  of  desuetude  into  which  society  has  allowed 
a right  to  fall,  which,  as  no  one  can  doubt,  it  once  fully  possessed. 
In  most  countries  of  Europe,  the  right  to  take  by  taxation,  as  exigency 
might  require,  an  indefinite  portion  of  the  rent  of  land,  has  never 
been  allowed  to  slumber.  In  several  parts  of  the  Continent,  the 
land-tax  forms  a large  proportion  of  the  public  revenues,  and  has 
always  been  confessedly  liable  to  be  raised  or  lowered  without 
reference  to  other  taxes.  In  these  countries  no  one  can  pretend  to 
have  become  the  owner  of  land  on  the  faith  of  never  being  called 
upon  to  pay  an  increased  land-tax.  In  England  the  land-tax  has 
not  varied  since  the  early  part  of  the  last  century.  The  last  act  of 
the  legislature  in  rela  tion  to  its  amount,  was  to  diminish  it ; and 
though  the  subsequent  increase  in  the  rental  of  the  country  has  been 
immense  not  only  from  agriculture,  but  from  the  growth  of  towns 
and  the  increase  of  buildings,  the  ascendency  of  landholders  in  the 
legislature  has  prevented  any  tax  from  being  imposed,  as  it  so  justly 
might,  upon  the  very  large  portion  of  this  increase  which  was  un- 
earned, and,  as  it  were,  accidental.  For  the  expectations  thus 
raised,  it  appears  to  me  that  an  amply  sufficient  allowance  is  made, 
if  the  whole  increase  of  income  which  has  accrued  during  this  long 
period  from  a mere  natural  law,  without  exertion  or  sacrifice,  is 
held  sacred  from  any  peculiar  taxation.  From  the  present  date,  or 
any  subsequent  time  at  which  the  legislature  may  think  fit  to  assert 
the  principle,  I see  no  objection  to  declaring  that  the  future  incre- 
ment of  rent  should  be  liable  to  special  taxation ; in  doing  which 
all  injustice  to  the  landlords  would  be  obviated  if  the  present 
market-price  of  their  land  were  secured  to  them  ; since  that  includes 
the  present  value  of  all  future  expectations.  With  reference  to  such 
a tax,  perhaps  a safer  criterion  than  either  a rise  of  rents  or  a rise 
of  the  price  of  corn,  would  be  a general  rise  in  the  price  of  land.  It 
would  be  easy  to  keep  the  tax  within  the  amount  which  would  reduce 
the  market  value  of  land  below  the  original  valuation  : and  up  to 
that  point,  whatever  the  amount  of  the  tax  might  be,  no  injustice 
would  be  done  to  the  proprietors.^ 

* [See  Appendix  FF.  The  Taxation  of  Land.] 


820 


BOOK  V.  CHAPTER  II.  § 6 


§ 6.  But  whatever  may  be  thought  of  the  legitimacy  of  making 
the  State  a sharer  in  all  future  increase  of  rent  from  natural  causes, 
the  existing  land-tax  (which  in  this  country  unfortunately  is  very 
small)  ought  not  to  be  regarded  as  a tax,  but  as  a rent-charge  in 
favour  of  the  public ; a portion  of  the  rent,  reserved  from  the  be- 
ginning by  the  State,  which  has  never  belonged  to  or  formed  part 
of  the  income  of  the  landlords,  and  should  not  therefore  be  counted 
to  them  as  part  of  their  taxation,  so  as  to  exempt  them  from  their 
fair  share  of  every  other  tax.  As  well  might  the  tithe  be  regarded 
as  a tax  on  the  landlords : as  well,  in  Bengal,  where  the  State, 
though  entitled  to  the  whole  rent  of  the  land,  gave  away  one-tenth 
of  it  to  individuals,  retaining  the  other  nine-tenths,  might  those 
nine-tenths  be  considered  as  an  unequal  and  unjust  tax  on  the 
grantees  of  the  tenth.  That  a person  owns  part  of  the  rent,  does 
not  make  the  rest  of  it  his  just  right,  injuriously  withheld  from 
him.  The  landlords  originally  held  their  estates  subject  to  feudal 
burthens,  for  which  the  present  land-tax  is  an  exceedingly  small 
equivalent,  and  for  their  relief  from  which  they  should  have  been 
required  to  pay  a much  higher  price.  All  who  have  bought  land 
since  the  tax  existed  have  bought  it  subject  to  the  tax.  There  is 
not  the  smallest  pretence  for  looking  upon  it  as  a payment  exacted 
from  the  existing  race  of  landlords. 

These  observations  are  applicable  to  a land-tax,  only  in  so  far 
as  it  is  a peculiar  tax,  and  not  when  it  is  merely  a mode  of  levying 
from  the  landlords  the  equivalent  of  what  is  taken  from  other 
classes.  In  France,  for  example,  there  are  [1848]  peculiar  taxes  on 
other  kinds  of  property  and  income  (the  mohilier  and  the  'patente) ; 
and  supposing  the  land-tax  to  be  not  more  than  equivalent  to  these, 
there  would  be  no  ground  for  contending  that  the  state  had  reserved 
to  itself  a rent-charge  on  the  land.  But  wherever  and  in  so  far  as 
income  derived  from  land  is  prescrip tively  subject  to  a deduction 
for  public  purposes  beyond  the  rate  of  taxation  levied  on  other 
incomes,  the  surplus  is  not  properly  taxation,  but  a share  of  the 
property  in  the  soil  reserved  by  the  state.  In  this  country  there 
are  no  peculiar  taxes  on  other  classes,  corresponding  to,  or  intended 
to  countervail,  the  land-tax.  The  whole  of  it,  therefore,  is  not 
taxation,  but  a rent-charge,  and  is  as  if  the  state  had  retained,  not  a 
portion  of  the  rent,  but  a portion  of  the  land.  It  is  no  more  a burthen 
on  the  landlord,  than  the  share  of  one  joint  tenant  is  a burthen  on 
the  other.  The  landlords  are  entitled  to  no  compensation  for  it, 
nor  have  they  any  claim  to  its  being  allowed  for,  as  part  of  their 


GENERAL  PRINCIPLES  OF  TAXATION 


821 


taxes.  Its  continuance  on  the  existing  footing  is  no  infringement 
of  the  principle  of  Equal  Taxation.* 

We  shall  hereafter  consider,  in  treating  of  Indirect  Taxation, 
how  far,  and  with  what  modifications,  the  rule  of  equality  is  applic- 
able to  that  department. 

§ 7.  In  addition  to  the  preceding  rules,  another  general  rule  of 
taxation  is  sometimes  laid  down,  namely,  that  it  should  fall  on 
income,  and  not  on  capital.  That  taxation  should  not  encroach 
upon  the  amount  of  the  national  capital,  is  indeed  of  the  greatest 
importance  ; but  this  encroachment,  when  it  occurs,  is  not  so  much 
a consequence  of  any  particular  mode  of  taxation,  as  of  its  excessive 
amount.  Over-taxation,  carried  to  a sufficient  extent,  is  quite 
capable  of  ruining  the  most  industrious  community,  especially 
when  it  is  in  any  degree  arbitrary,  so  that  the  payer  is  never  certain 
how  much  or  how  little  he  shall  be  allowed  to  keep ; or  when  it  is 
so  laid  on  as  to  render  industry  and  economy  a bad  calculation. 
But  if  these  errors  be  avoided,  and  the  amount  of  taxation  be  not 
greater  than  it  is  at  present  even  in  the  most  heavily  taxed  country 
of  Europe,  there  is  no  danger  lest  it  should  deprive  the  country  of  a 
portion  of  its  capital. 

To  provide  that  taxation  shall  fall  entirely  on  income,  and  not 
at  all  on  capital,  is  beyond  the  power  of  any  system  of  fiscal  arrange- 
ments. There  is  no  tax  which  is  not  partly  paid  from  what  would 
otherwise  have  been  saved;  no  tax,  the  amount  of  which,  if  remitted, 
would  be  wholly  employed  in  increased  expenditure,  and  no  part 
whatever  laid  by  as  an  additional  capital.  All  taxes,  therefore,  are 
in  some  sense  partly  paid  out  of  capital ; and  in  a poor  country  it 
is  impossible  to  impose  any  tax  which  will  not  impede  the  increase 
of  the  national  wealth.  But  in  a country  where  capital  abounds, 
and  the  spirit  of  accumulation  is  strong,  this  effect  of  taxation  is 
scarcely  felt.  Capital  having  reached  the  stage  in  which,  were  it 
not  for  a perpetual  succession  of  improvements  in  production,  any 
further  increase  would  soon  be  stopped — and  having  so  strong  a 
tendency  even  to  outrun  those  improvements,  that  profits  are  only 
kept  above  the  minimum  by  emigration  of  capital,  or  by  a periodical 

♦ [1849]  The  same  remarks  obviously  apply  to  those  local  taxes,  of  the 
peculiar  pressure  of  which  on  landed  property  so  much  has  been  said  by  the 
remnant  of  the  Protectionists.  As  much  of  these  burthens  as  is  of  old  standing, 
ought  to  be  regarded  as  a prescriptive  deduction  or  reservation,  for  public 
purposes,  of  a portion  of  the  rent.  And  any  recent  additions  have  either  been 
incurred  for  the  benefit  of  the  owners  of  landed  property,  or  occasioned  by  their 
fault : in  neither  case  giving  them  any  just  ground  of  complaint. 


822 


BOOK  V.  CHAPTER  II.  § ? 


sweep  called  a commercial  crisis ; to  take  from  capital  by  taxation 
wbat  emigration  would  remove,  or  a commercial  crisis  destroy,  is 
only  to  do  what  either  of  those  causes  would  have  done,  namely,  to 
make  a clear  space  for  further  saving. 

I cannot,  therefore,  attach  any  importance,  in  a wealthy  country, 
to  the  objection  made  against  taxes  on  legacies  and  inheritances, 
that  they  are  taxes  on  capital.  It  is  perfectly  true  that  they  are  so. 
As  Eicardo  observes,  if  1001.  are  taken  from  any  one  in  a tax  on 
houses  or  on  wine,  he  will  probably  save  it,  or  a part  of  it,  by  living 
in  a cheaper  house,  consuming  less  wine,  or  retrenching  from  some 
other  of  his  expenses ; but  if  the  same  sum  be  taken  from  him 
because  he  has  received  a legacy  of  lOOOZ.,  he  considers  the  legacy  as 
only  0001.,  and  feels  no  more  inducement  than  at  any  other  time 
(probably  feels  rather  less  inducement)  to  economize  in  his  expendi- 
ture. The  tax,  therefore,  is  wholly  paid  out  of  capital : and  there 
are  countries  in  which  this  would  be  a serious  objection.  But  in 
the  first  place,  the  argument  cannot  apply  to  any  country  which 
has  a national  debt,  and  devotes  any  portion  of  revenue  to  paying 
it  off ; since  the  produce  of  the  tax,  thus  applied,  still  remains 
capital,  and  is  merely  transferred  from  the  tax-payer  to  the  fund- 
holder.  But  the  objection  is  never  applicable  in  a country  which 
increases  rapidly  in  wealth.  The  amount  which  would  be  derived, 
even  from  a very  high  legacy  duty,  in  each  year,  is  but  a small 
fraction  of  the  annual  increase  of  capital  in  such  a country  ; and  its 
abstraction  would  but  make  room  for  saving  to  an  equivalent  amount : 
while  the  effect  of  not  taking  it,  is  to  prevent  that  amount  of  saving, 
or  cause  the  savings,  when  made,  to  be  sent  abroad  for  investment. 
A country  which,  like  England,  accumulates  capital  not  only  for 
itself,  but  for  half  the  world,  may  be  said  to  defray  the  whole  of  its 
public  expenses  from  its  overflowings ; and  its  wealth  is  probably 
at  this  moment  as  great  as  if  it  had  no  taxes  at  all.  What  its  taxes 
really  do  is,  to  subtract  from  its  means,  not  of  production,  but  of 
enjoyment ; since  whatever  any  one  pays  in  taxes,  he  could,  if  it 
were  not  taken  for  that  purpose,  employ  in  indulging  his  ease,  or 
in  gratifying  some  want  or  taste  which  at  present  remains  un- 
satisfied. 


CHAPTER  III 


O?  DIRECT  TAXES 

§ 1.  Taxes  are  either  direct  or  indirect.  A direct  tax  is  one 
which  is  demanded  from  the  very  persons  who,  it  is  intended  or 
desired,  should  pay  it.  Indirect  taxes  are  those  which  are  demanded 
from  one  person  in  the  expectation  and  intention  that  he  shall  in- 
demnify himself  at  the  expense  of  another : such  as  the  excise  or 
customs.  The  producer  or  importer  of  a commodity  is  called  upon 
to  pay  a tax  on  it,  not  with  the  intention  to  levy  a peculiar  con- 
tribution upon  him,  but  to  tax  through  him  the  consumers  of  the 
commodity,  from  whom  it  is  supposed  that  he  will  recover  the 
amount  by  means  of  an  advance  in  price. 

Direct  taxes  are  either  on  income,  or  on  expenditure.  Most 
taxes  on  expenditure  are  indirect,  but  some  are  direct,  being  im- 
posed not  on  the  producer  or  seller  of  an  article,  but  immediately 
on  the  consumer.  A house-tax,  for  example,  is  a direct  tax  on 
expenditure,  if  levied,  as  it  usually  is,  on  the  occupier  of  the  house. 
If  levied  on  the  builder  or  owner,  it  would  be  an  indirect  tax.  A 
window-tax  is  a direct  tax  on  expenditure  ; so  are  the  taxes  on  horses 
and  carriages,  and  the  rest  of  what  are  called  the  assessed  taxes. 

The  sources  of  income  are  rent,  profits,  and  wages.  This  in- 
cludes every  sort  of  income,  except  gift  or  plunder.  Taxes  may  be 
laid  on  any  one  of  the  three  kinds  of  income,  or  an  uniform  tax  on 
all  of  them.  We  will  consider  these  in  their  order. 

§ 2.  A tax  on  rent  falls  wholly  on  the  landlord.  There  are  no 
means  by  which  he  can  shift  the  burthen  upon  any  one  else.  It 
does  not  affect  the  value  or  price  of  agricultural  produce,  for  this  is 
determined  by  the  cost  of  production  in  the  most  unfavourable 
circumstances,  and  in  those  circumstances,  as  we  have  so  often 
demonstrated,  no  rent  is  paid.  A tax  on  rent,  therefore,  has  no 


824 


BOOR  V.  CHAPTER  m.  § 3 


effect,  other  than  its  obvious  one.  It  merely  takes  so  much  from 
the  landlord,  and  transfers  it  to  the  state. 

This,  however,  is,  in  strict  exactness,  only  true  of  the  rent 
which  is  the  result  either  of  natural  causes,  or  of  improvements 
made  by  tenants.  When  the  landlord  makes  improvements  which 
increase  the  productive  power  of  his  land,  he  is  remunerated  for  them 
by  an  extra  payment  from  the  tenant ; and  this  payment,  which  to 
the  landlord  is  properly  a profit  on  capital,  is  blended  and  con- 
foimded  with  rent ; which  indeed  it  really  is,  to  the  tenant,  and  in 
respect  of  the  economical  laws  which  determine  its  amount.  A tax 
on  rent,  if  extending  to  this  portion  of  it,  would  discourage  landlords 
from  making  improvements  : but  it  does  not  follow  that  it  would 
raise  the  price  of  agricultural  produce.  The  same  improvements 
might  be  made  with  the  tenant’s  capital,  or  even  with  the  land- 
lord’s if  lent  by  him  to  the  tenant ; provided  he  is  willing  to  give 
the  tenant  so  long  a lease  as  wiQ  enable  him  to  indemnify  himself 
before  it  expires.  But  whatever  hinders  improvements  from  being 
made  in  the  manner  in  which  people  prefer  to  make  them,  will  often 
prevent  them  from  being  made  at  aU : and  on  this  account  a tax 
on  rent  would  be  inexpedient,  unless  some  means  could  be  devised  of 
excluding  from  its  operation  that  portion  of  the  nominal  rent  which 
may  be  regarded  as  landlord’s  profit.  This  argument,  however, 
is  not  needed  for  the  condemnation  of  such  a tax.  A peculiar  tax 
on  the  income  of  any  class,  not  balanced  by  taxes  on  other  classes, 
is  a violation  of  justice,  and  amounts  to  a partial  confiscation.  1 
have  already  shown  grounds  for  excepting  from  this  censure  a tax 
which,  sparing  existing  rents,  should  content  itself  with  appropriating 
a portion  of  any  future  increase  arising  from  the  mere  action  of 
natural  causes.  But  even  this  could  not  be  justly  done,  without 
offering  as  an  alternative  the  market  price  of  the  land.  In  the  case 
of  a tax  on  rent  which  is  not  peculiar,  but  accompanied  by  an 
equivalent  tax  on  other  incomes,  the  objection  grounded  on  its 
reaching  the  profit  arising  from  improvements  is  less  applicable : 
since,  profits  being  taxed  as  well  as  rent,  the  profit  which  assumes 
the  form  of  rent  is  liable  to  its  share  in  common  with  other  profits  ; i 
but  since  profits  altogether  ought,  for  reasons  formerly  stated,  to 
be  taxed  somewhat  lower  than  rent  properly  so  called,  the  objection 
is  only  diminished,  not  removed. 

§ 3.  A tax  on  profits,  like  a tax  on  rent,  must,  at  least  in  its 
^ [Remaining  words  of  the  paragraph  added  in  4th  ed.  (1857).] 


DIRECT  TAXES 


825 


immediate  operation,  fall  wholly  on  the  payer.  All  profits  being 
alike  affected,  no  relief  can  be  obtained  by  a change  of  employment. 
If  a tax  were  laid  on  the  profits  of  any  one  branch  of  productive 
employment,  the  tax  would  be  virtually  an  increase  of  the  coat  of 
production,  and  the  value  and  price  of  the  article  would  rise  accord- 
iiigly ; by  which  the  tax  would  be  thrown  upon  the  consumers  of 
the  commodity,  and  would  not  affect  profits.  But  a general  and 
equal  tax  on  all  profits  would  not  affect  general  prices,  and  would 
fall,  at  least  in  the  first  instance,  on  capitalists  alone. 

There  is,  however,  an  ulterior  effect,  which,  in  a rich  and  prosper- 
ous country,  requires  to  be  taken  into  account.  When  the  capital 
accumulated  is  so  great  and  the  rate  of  annual  accumulation  so 
rapid,  that  the  country  is  only  kept  from  attaining  the  stationary 
state  by  the  emigration  of  capital,  or  by  continual  improvements  in 
production  ; any  circumstance  which  virtually  lowers  the  rate  of 
profit  cannot  be  without  a decided  influence  on  these  phenomena. 
It  may  operate  in  different  ways.  The  curtailment  of  profit,  and 
the  consequent  increased  difficulty  in  making  a fortune  or  obtaining 
a subsistence  by  the  employment  of  capital,  may  act  as  a stimulus 
to  inventions,  and  to  the  use  of  them  when  made.  If  improvements 
in  production  are  much  accelerated,  and  if  these  improvements 
cheapen,  directly  or  indirectly,  any  of  the  things  habitually  con- 
sumed by  the  labourer,  profits  may  rise,  and  rise  sufficiently  to  make 
up  for  all  that  is  taken  from  them  by  the  tax.  In  that  case  the 
tax  win  have  been  realized  without  loss  to  any  one,  the  produce  of 
the  country  being  increased  by  an  equal,  or  what  would  in  that  case 
be  a far  greater,  amount.  The  tax,  however,  must  even  in  this  case 
be  considered  as  paid  from  profits,  because  the  receivers  of  profits 
are  those  who  would  be  benefited  if  it  were  taken  off. 

But  though  the  artificial  abstraction  of  a portion  of  profits 
would  have  a real  tendency  to  accelerate  improvements  in  pro- 
duction, no  considerable  improvements  might  actually  result,  or 
only  of  such  a kind  as  not  to  raise  general  profits  at  all,  or  not  to 
raise  them  so  much  as  the  tax  had  diminished  them.  If  so,  the  rate 
of  profit  would  be  brought  closer  to  that  practical  minimum  to 
which  it  is  constantly  approaching  : and  this  diminished  return  to 
capital  would  either  give  a decided  check  to  further  accumulation, 
or  would  cause  a greater  proportion  than  before  of  the  annual  in- 
crease to  be  sent  abroad,  or  wasted  in  unprofitable  speculations.  At 
its  first  imposition  the  tax  falls  wholly  on  profits : but  the  amount 
of  increase  of  capital,  which  the  tax  prevents,  would,  if  it  had  been 


826 


BOOK  V.  CHAPTER  III.  § 3 


allowed  to  continue,  have  tended  to  reduce  profits  to  the  same 
level ; and  at  every  period  of  ten  or  twenty  years  there  will  be 
found  less  difference  between  profits  as  they  are,  and  profits  as 
they  would  in  that  case  have  been : until  at  last  there  is  no  difference, 
and  the  tax  is  thrown  either  upon  the  labourer  or  upon  the  landlord. 
The  real  effect  of  a tax  on  profits  is  to  make  the  country  possess,  at 
any  given  period,  a smaller  capital  and  a smaller  aggregate  pro- 
duction, and  to  make  the  stationary  state  be  attained  earlier,  and 
with  a smaller  sum  of  national  wealth.  It  is  possible  that  a tax  on 
profits  might  even  diminish  the  existing  capital  of  the  country.  If 
the  rate  of  profit  is  already  at  the  practical  minimum,  that  is,  at  the 
point  at  which  all  that  portion  of  the  annual  increment  which  would 
tend  to  reduce  profits  is  carried  off  either  by  exportation  or  by  specu- 
lation ; then  if  a tax  is  imposed  which  reduces  profits  still  lower,  the 
same  causes  which  previously  carried  off  the  increase  would  pro- 
bably carry  off  a portion  of  the  existing  capital.  A tax  on  profits  is 
thus,  in  a state  of  capital  and  accumulation  like  that  in  England, 
extremely  detrimental  to  the  national  wealth.  And  this  effect  is  not 
confined  to  the  case  of  a peculiar,  and  therefore  intrinsically  unjust, 
tax  on  profits.  The  mere  fact  that  profits  have  to  bear  their  share 
of  a heavy  general  taxation,  tends,  in  the  same  manner  as  a peculiar 
tax,  to  drive  capital  abroad,  to  stimulate  imprudent  speculations 
by  diminishing  safe  gains,  to  discourage  further  accumulation,  and 
to  accelerate  the  attainment  of  the  stationary  state.  This  is  thought 
to  have  been  the  principal  cause  of  the  decline  of  Holland,  or  rather 
of  her  having  ceased  to  make  progress. 

Even  in  countries  which  do  not  accumulate  so  fast  as  to  be 
always  within  a short  interval  of  the  stationary  state,  it  seems  im- 
possible that,  if  capital  is  accumulating  at  all,  its  accumulation 
should  not  be  in  some  degree  retarded  by  the  abstraction  of  a portion 
of  its  profit ; and  unless  the  effect  in  stimulating  improvements  be 
a full  counter-balance,  it  is  inevitable  that  a part  of  the  burthen 
will  be  thrown  off  the  capitalist,  upon  the  labourer  or  the  landlord. 
One  or  other  of  these  is  always  the  loser  by  a diminished  rate  of 
accumulation.  If  population  continues  to  increase  as  before,  the 
labourer  suffers  : if  not,  cultivation  is  checked  in  its  advance,  and 
the  landlords  lose  the  accession  of  rent  which  would  have  accrued 
to  them.  The  only  countries  in  which  a tax  on  profits  seems  likely 
to  be  permanently  a burthen  on  capitalists  exclusively,  are  those 
in  which  capital  is  stationary,  because  there  is  no  new  accumulation 
In  such  countries  the  tax  might  not  prevent  the  old  capital  from 


DIRECT  TAXES 


827 


being  kept  up  through  habit,  or  from  unwiUingness  to  submit  to 
impoverishment,  and  so  the  capitalist  might  continue  to  bear  the 
whole  of  the  tax.  It  is  seen,  from  these  considerations  that  the  effects 
of  a tax  on  profits  are  much  more  complex,  more  various,  and  in 
some  points  more  uncertain,  than  writers  on  the  subject  have 
commonly  supposed. 

§ 4.  We  now  turn  to  Taxes  on  Wages.  The  incidence  of  these 
is  very  different,  according  as  the  wages  taxed  are  those  of  ordinary 
unskilled  labour,  or  are  the  remuneration  of  such  skilled  or  privileged 
employments,  whether  manual  or  intellectual,  as  are  taken  out  of 
the  sphere  of  competition  by  a natural  or  conferred  monopoly. 

I have  already  remarked,  that  in  the  present  low  state  of  popular 
education,  all  the  higher  grades  of  mental  or  educated  labour  are  at 
a monopoly  price ; exceeding  the  wages  of  common  workmen  in 
a degree  very  far  beyond  that  which  is  due  to  the  expense,  trouble, 
and  loss  of  time  required  in  qualifying  for  the  employment.  Any 
tax  levied  on  these  gains,  which  still  leaves  them  above  (or  not 
below)  their  just  proportion,  falls  on  those  who  pay  it ; they  have  no 
means  of  relieving  themselves  at  the  expense  of  any  other  class.  The 
same  thing  is  true  of  ordinary  wages,  in  cases  like  that  of  the  United 
States,  or  of  a new  colony,  where,  capital  increasing  as  rapidly  as 
population  can  increase,  wages  are  kept  up  by  the  increase  of 
capital,  and  not  by  the  adherence  of  the  labourers  to  a fixed  standard 
of  comforts.  In  such  a case  some  deterioration  of  their  condition, 
whether  by  a tax  or  otherwise,  might  possibly  take  place  without 
checking  the  increase  of  population.  The  tax  would  in  that  case 
fall  on  the  labourers  themselves,  and  would  reduce  them  prematurely 
to  that  lower  state  to  which,  on  the  same  supposition  with  regard 
to  their  habits,  they  would  in  any  case  have  been  reduced  ultimately, 
by  the  inevitable  diminution  in  the  rate  of  increase  of  capital, 
through  the  occupation  of  all  the  fertile  land. 

Some  will  object  that,  even  in  this  case,  a tax  on  wages  cannot 
be  detrimental  to  the  labourers,  since  the  money  raised  by  it,  being 
expended  in  the  country,  comes  back  to  the  labourers  again  through 
the  demand  for  labour.  The  fallacy,  however,  of  this  doctrine  has 
been  so  completely  exhibited  in  the  First  Book,*  that  I need  do  little 
more  than  refer  to  that  exposition.  It  was  there  shown  that  funds 
expended  unproductively  have  no  tendency  to  raise  or  keep  up 
wages,  unless  when  expended  in  the  direct  purchase  of  labour.  If 
♦ Supra,  pp.  79-88. 


828 


BOOK  V.  CHAPTER  III.  § 4 


the  government  took  a tax  of  a shilling  a week  from  every  labourer, 
and  laid  it  all  out  in  hiring  labourers  for  military  service,  public 
works,  or  the  like,  it  would,  no  doubt,  indemnify  the  labourers  as  a 
class  for  all  that  the  tax  took  from  them.  That  would  really  be 
“ spending  the  money  among  the  people.”  But  if  it  expended  the 
whole  in  buying  goods,  or  in  adding  to  the  salaries  of  employes  who 
bought  goods  with  it,  this  would  not  increase  the  demand  for  labour, 
or  tend  to  raise  wages.  Without,  however,  reverting  to  general 
principles,  we  may  rely  on  an  obvious  reiuctio  ad  ahsurdum.  If 
to  take  money  from  the  labourers  and  spend  it  in  commodities  is 
giving  it  back  to  the  labourers,  then,  to  take  money  from  other 
classes,  and  spend  it  in  the  same  manner,  must  be  giving  it  to  the 
labourers ; consequently,  the  more  a government  takes  in  taxes, 
the  greater  will  be  the  demand  for  labour,  and  the  more  opulent  the 
condition  of  the  labourers.  A proposition  the  absurdity  of  which  no 
one  can  fail  to  see. 

In  the  condition  of  most  communities,  wages  are  regulated  by  | 
the  habitual  standard  of  living  to  which  the  labourers  adhere,  and  j 
on  less  than  which  they  will  not  multiply.  Where  there  exists  | 
such  a standard,  a tax  on  wages  will  indeed  for  a time  be  borne  by  j 
the  labourers  themselves  ; but  unless  this  temporary  depression  has  j 
the  effect  of  lowering  the  standard  itself,  the  increase  of  population  j 
will  receive  a check,  which  will  raise  wages,  and  restore  the  labourers 
to  their  previous  condition.  On  whom,  in  this  case,  will  the  tax  fall  ? 
According  to  Adam  Smith,  on  the  community  generally,  in  their 
character  of  consumers  ; since  the  rise  of  wages,  he  thought,  would 
raise  general  prices.  We  have  seen,  however,  that  general  prices 
depend  on  other  causes,  and  are  never  raised  by  any  circumstance 
which  affects  all  kinds  of  productive  employment  in  the  same 
manner  and  degree.  A rise  of  wages  occasioned  by  a tax,  must, 
like  any  other  increase  of  the  cost  of  labour,  be  defrayed  from  profits. 

To  attempt  to  tax  day-labourers,  in  an  old  country,  is  merely  to 
impose  an  extra  tax  upon  all  employers  of  common  labour ; unless 
the  tax  has  the  much  worse  effect  of  permanently  lowering  the 
standard  of  comfortable  subsistence  in  the  minds  of  the  poorest 
class. 

We  find  in  the  preceding  considerations  an  additional  argument 
for  the  opinion  already  expressed,  that  direct  taxation  should  stop 
short  of  the  class  of  incomes  which  do  not  exceed  what  is  necessary 
for  healthful  existence.  These  very  small  incomes  are  mostly  ' 
derived  from  manual  labour  ; and,  as  we  now  see,  any  tax  imposed  on 


DIRECT  TAXES 


829 


these  either  permanently  degrades  the  habits  of  the  labouring  class 
or  falls  on  profits  and  burthens  capitalists  with  an  indirect  tax,  in 
addition  to  their  share  of  the  direct  taxes ; which  is  doubly  objec- 
tionable, both  as  a violation  of  the  fundamental  rule  of  equality, 
and  for  the  reasons  which,  as  already  shown,  render  a peculiar  tax 
on  profits  detrimental  to  the  public  wealth,  and  consequently  to  the 
means  which  society  possesses  of  paying  any  taxes  whatever. 

§ 5.  We  now  pass,  from  taxes  on  the  separate  kinds  of  income 
to  a tax  attempted  to  be  assessed  fairly  upon  all  kinds ; in  othei 
words,  an  Income  Tax.  The  discussion  of  the  conditions  necessary 
for  making  this  tax  consistent  with  justice,  has  been  anticipated  in 
the  last  chapter.  We  shall  suppose,  therefore,  that  these  conditions 
are  complied  with.  They  are,  first,  that  incomes  below  a certain 
amount  should  be  altogether  untaxed.  This  minimum  should  not 
be  higher  than  the  amount  which  suffices  for  the  necessaries  of  the 
existing  population.  The  exemption  from  the  present  [1857]  income 
tax  of  all  incomes  under  lOOZ.  a year,  and  the  lower  percentage 
formerly  levied  on  those  between  lOOZ.  and  150Z.,  are  only  defen- 
sible on  the  ground  that  almost  all  the  indirect  taxes  press  more 
heavily  on  incomes  between  50Z.  and  150Z.  than  on  any  others 
whatever.!  The  second  condition  is,  that  incomes  above  the  limit 
should  be  taxed  only  in  proportion  to  the  surplus  by  which  they 
exceed  the  limit.  ^ Thirdly,  that  all  sums  saved  from  income  and 
invested,  should  be  exempt  from  the  tax : or  if  this  be  found 
impracticable,  that  life  incomes,  and  incomes  from  business  and 
professions,  should  be  less  heavily  taxed  than  inheritable  incomes, 
in  a degree  as  nearly  as  possible  equivalent  to  the  inc^^eased  need 
of  economy  arising  from  their  terminable  character : allowance 
being  also  made,  in  the  case  of  variable  incomes,  for  their  precari- 
ousness. 

An  income-tax,  fairly  assessed  on  these  principles,  would  be, 
in  point  of  justice,  the  least  exceptionable  of  all  taxes.  The  obj ection 
to  it,  in  the  present  low  state  of  public  morality is  the  impossibility 
of  ascertaining  the  real  incomes  of  the  contributors.  The  supposed 

^ [So  since  the  4th  ed.  (1857).  The  original  ran  : “on  the  gr'^und  that 
some  taxes  on  necessaries  are  still  kept  up,  and  that  almost  all  the  existing  taxes 
on  indulgences  press  more  heavily  ” &c.] 

2 [The  third  condition  was  altered  in  its  wording  in  the  3rd  ed.  (1P52),  to 
give  effect  to  the  arguments  introduced  in  that  edition  in  the  preceding  chapter.] 

2 [So  since  the  3rd  ed.  The  original  ran  : “ The  objection  to  it,  which,  with 
much  regret  I cannot  help  regarding  as  insuperable  ” &c.] 


830 


BOOK  V.  CHAPTER  lU.  § 6 


hardship  of  compelling  people  to  disclose  the  amount  of  theii 
incomes,  ought  not,  in  my  opinion,  to  count  for  much.  One  of  the 
social  evils  of  this  country  is  the  practice,  amounting  to  a custom, 
of  maintaining,  or  attempting  to  maintain,  the  appearance  to  the 
world  of  a larger  income  than  is  possessed  ; and  it  would  be  far  better 
for  the  interest  of  those  who  yield  to  this  weakness,  if  the  extent 
of  their  means  were  universally  and  exactly  known,  and  the  tempta- 
tion removed  to  expending  more  than  they  can  afford,  stinting  real 
wants  in  order  to  make  a false  show  externally.  At  the  same 
time,  the  reason  of  the  case,  even  on  this  point,  is  not  so  exclusively 
on  one  side  of  the  argument  as  is  sometimes  supposed.  So  long  as 
the  vulgar  of  any  country  are  in  the  debased  state  of  mind  which  this 
national  habit  presupposes — so  long  as  their  respect  (if  such  a 
word  can  be  applied  to  it)  is  proportioned  to  what  they  suppose  to 
be  each  person’s  pecuniary  means — it  may  be  doubted  whether 
anything  which  would  remove  aU  uncertainty  as  to  that  point,  would 
not  considerably  increase  the  presumption  and  arrogance  of  the 
vulgar  rich,  and  their  insolence  towards  those  above  them  in  mind 
and  character,  but  below  them  in  fortune. 

Notwithstanding,  too,  what  is  called  the  inquisitorial  nature  of 
the  tax,  no  amount  of  inquisitorial  power  which  would  be  tolerated 
by  a people  the  most  disposed  to  submit  to  it,  could  enable  the 
revenue  officers  to  assess  the  tax  from  actual  knowledge  of  the 
circumstances  of  contributors.  Kents,  salaries,  annuities,  and  ah 
fixed  incomes,  can  be  exactly  ascertained.  But  the  variable  gains 
of  professions,  and  still  more  the  profits  of  business,  which  the 
person  interested  cannot  always  himself  exactly  ascertain,  can  still 
less  be  estimated  with  any  approach  to  fairness  by  a tax-collector. 
The  main  reliance  must  be  placed,  and  always  has  been  placed,  on 
the  returns  made  by  the  person  himself.  No  production  of  accounts 
is  of  much  avail,  except  against  the  more  flagrant  cases  of  falsehood  ; 
and  even  against  these  the  check  is  very  imperfect,  for  if  fraud  is 
intended,  false  accounts  can  generally  be  framed  which  it  will  baffle 
any  means  of  inquiry  possessed  by  the  revenue  officers  to  detect : 
the  easy  resource  of  omitting  entries  on  the  credit  side  being  often 
sufficient  without  the  aid  of  fictitious  debts  or  disbursements. 
The  tax,  therefore,  on  whatever  principles  of  equality  it  may  be 
imposed,  is  in  practice  unequal  in  one  of  the  worst  ways,  falling 
heaviest  on  the  most  conscientious.  The  unscrupulous  succeed  in 
evading  a great  proportion  of  what  they  should  pay ; even 
persons  of  integrity  in  their  ordinary  transactions  are  tempted  to 


DIRECT  TAXES 


831 


palter  with  their  conscienceSj  at  least  to  the  extent  of  deciding  in 
their  own  favour  all  points  on  which  the  smallest  doubt  or  discussion 
could  arise  : while  the  strictly  veracious  may  be  made  to  pay  more 
than  the  state  intended,  by  the  powers  of  arbitrary  assessment 
necessarily  intrusted  to  the  Commissioners,  as  the  last  defence  against 
the  tax-payer’s  power  of  concealment. 

It  is  to  be  feared,  therefore,  that  the  fairness  which  belongs 
to  the  principle  of  an  income  tax,  cannot  ^ be  made  to  attach  to  it 
in  practice  : and  that  this  tax,  while  apparently  the  most  just  of  all 
modes  of  raising  a revenue,  is  in  effect  more  unjust  than  many  others 
which  are  primd  facie  more  ob j ectionable.  This  consideration  would 
lead  us  to  concur  in  the  opinion  which,  until  of  late,  has  usually, 
prevailed — that  direct  taxes  on  income  should  be  reserved  as  an 
extraordinary  resource  for  great  national  emergencies,  in  which 
the  necessity  of  a large  additional  revenue  overrules  all  objections. 

The  difficulties  of  a fair  income  tax  have  ehcited  a proposition 
for  a direct  tax  of  so  much  per  cent,  not  on  income,  but  on  expendi- 
ture ; the  aggregate  amount  of  each  person’s  expenditure  being 
ascertained,  as  the  amount  of  income  now  is,  from  statements 
furnished  by  the  contributors  themselves.  The  author  of  this 
suggestion,  Mr.  Kevans,  in  a clever  pamphlet  on  the  subject,* 
contends  that  the  returns  which  persons  would  furnish  of  their 
expenditure  would  be  more  trustworthy  than  those  which  they 
now  make  of  their  income,  inasmuch  as  expenditure  is  in  its  own 
nature  more  public  than  income,  and  false  representations  of  it 
more  easily  detected.  He  cannot,  I think,  have  sufficiently  con- 
sidered, how  few  of  the  items  in  the  annual  expenditure  of  most 
families  can  be  judged  of  with  any  approximation  to  correctness  from 
the  external  signs.  The  only  security  would  still  be  the  veracity 
of  individuals,  and  there  is  no  reason  for  supposing  that  their 
statements  would  be  more  trustworthy  on  the  subject  of  their 
expenses  than  that  of  their  revenues  ; especially  as,  the  expenditure 
of  most  persons  being  composed  of  many  more  items  than  their 
income,  there  would  be  more  scope  for  concealment  and  suppression 
in  the  detail  of  expenses  than  even  of  receipts. 

The  taxes  on  expenditure  at  present  in  force,  either  in  this  or  in 
other  countries,  fall  only  on  particular  kinds  of  expenditure,  and 

1 [“  Cannot  ” replacing  in  the  3rd  ed.  (1852)  “ can  never  ” of  the  original 
text.] 

♦ A Percentage  Tax  on  Domestic  Expenditure  to  supply  the  whole  of  ihA 
Public  Revenue.  By  John  Revans.  Published  bv  Hatchard.  in  1847. 


832 


BOOK  V.  CHAPTER  III.  § 6 


differ  no  otherwise  from  taxes  on  commodities  than  in  being  paid 
directly  by  the  person  who  consumes  or  uses  the  article,  instead 
of  being  advanced  by  the  producer  or  seller,  and  reimbursed  in  the 
price.  The  taxes  on  horses  and  carriages,  on  dogs,  on  servants,  are 
all  of  this  nature.  They  evidently  fall  on  the  persons  from  whom 
they  are  levied — those  who  used  the  commodity  taxed.  A tax  of  a 
similar  description,  and  more  important,  is  a house-tax ; which 
must  be  considered  at  somewhat  greater  length. 

§ 6.  The  rent  of  a house  consists  of  two  parts,  the  ground-rent, 
and  what  Adam  Smith  calls  the  building-rent.  The  first  is  deter- 
mined by  the  ordinary  principles  of  rent.  It  is  the  remuneration 
given  for  the  use  of  the  portion  of  land  occupied  by  the  house 
and  its  appurtenances ; and  varies  from  a mere  equivalent  for  the 
rent  which  the  ground  would  afford  in  agriculture  to  the  monopoly 
rents  paid  for  advantageous  situations  in  populous  thoroughfares. 
The  rent  of  the  house  itself,  as  distinguished  from  the  ground,  is  the 
equivalent  given  for  the  labour  and  capital  expended  on  the  building. 
The  fact  of  its  being  received  in  quarterly  or  half-yearly  payments 
makes  no  difference  in  the  principles  by  which  it  is  regulated.  It 
comprises  the  ordinary  profit  on  the  builder’s  capital,  and  an  annuity, 
sufficient  at  the  current  rate  of  interest,  after  paying  for  all  repairs 
chargeable  on  the  proprietor,  to  replace  the  original  capital  by  the 
time  the  house  is  worn  out,  or  by  the  expiration  of  the  usual  term 
of  a building  lease. 

A tax  of  so  much  per  cent  on  the  gross  rent  falls  on  both  those 
portions  ahke.  The  more  highly  a house  is  rented,  the  more  it  pays 
to  the  tax,  whether  the  quality  of  the  situation  or  that  of  the  house 
itself  is  the  cause.  The  incidence,  however,  of  these  two  portions  of 
the  tax  must  be  considered  separately. 

As  much  of  it  as  is  a tax  on  building-rent,  must  ultimately  fall 
on  the  consumer,  in  other  words  the  occupier.  For  as  the  profits  of 
building  are  already  not  above  the  ordinary  rate,  they  would,  if  the 
tax  fell  on  the  owner  and  not  on  the  occupier,  become  lower  than 
the  profits  of  untaxed  employments,  and  houses  would  not  be 
built.  It  is  probable,  however,  that  for  some  time  after  the  tax 
was  first  imposed,  a great  part  of  it  would  fall,  not  on  the  renter, 
but  on  the  owner  of  the  house.  A large  proportion  of  the  consumers 
either  could  not  afford,  or  would  not  choose,  to  pay  their  former  rent 
with  the  tax  in  addition,  but  would  content  themselves  with  a lower 
scale  of  accommodation.  Houses  therefore  would  be  for  a time  in 


DIRECT  TAXES 


833 


excess  of  the  demand.  The  consequence  of  such  excess,  in  the  case 
of  most  other  articles,  would  be  an  almost  immediate  diminution  of 
the  supply  : but  so  durable  a commodity  as  houses  does  not  rapidly 
diminish  in  amount.  New  buildings  indeed,  of  the  class  for  which 
the  demand  had  decreased,  would  cease  to  be  erected,  except  for 
special  reasons ; but  in  the  meantime  the  temporary  superfluity 
would  lower  rents,  and  the  consumers  would  obtain  perhaps  nearly 
the  same  accommodation  as  formerly  for  the  same  aggregate  pay- 
ment, rent  and  tax  together.  By  degrees,  however,  as  the  existing 
houses  wore  out,  or  as  increase  of  population  demanded  a greater 
supply,  rents  would  again  rise ; until  it  became  profitable  to  recom- 
mence building,  which  would  not  be  until  the  tax  was  wholly 
transferred  to  the  occupier.  In  the  end,  therefore,  the  occupier 
bears  that  portion  of  a tax  on  rent  which  falls  on  the  payment 
made  for  the  house  itself,  exclusively  of  the  ground  it  stands  on. 

The  case  is  partly  different  with  the  portion  which  is  a tax  on 
ground-rent.  As  taxes  on  rent,  properly  so  called,  fall  on  the 
landlord,  a tax  on  ground-rent,  one  would  suppose,  must  fall  on  the 
ground  landlord,  at  least  after  the  expiration  of  the  building  lease. 
It  will  not,  however,  fall  wholly  on  the  landlord,  unless  with  the  tax 
on  ground-rent  there  is  combined  an  equivalent  tax  on  agricultural 
rent.  The  lowest  rent  of  land  let  for  building  is  very  little  above 
the  rent  which  the  same  ground  would  yield  in  agriculture  : since  it  is 
reasonable  to  suppose  that  land,  unless  in  case  of  exceptional  circum- 
stances, is  let  or  sold  for  building  as  soon  as  it  is  decidedly  worth 
more  for  that  purpose  than  for  cultivation.  If,  therefore,  a tax 
were  laid  on  ground-rents  without  being  also  laid  on  agricultural 
rents,  it  would,  unless  of  trifling  amount,  reduce  the  return  from 
the  lowest  ground-rents  below  the  ordinary  return  from  land,  and 
would  check  further  building  quite  as  effectually  as  if  it  were  a tax 
on  building-rents,  until  either  the  increased  demand  of  a growing 
population,  or  a diminution  of  supply  by  the  ordinary  causes  of 
destruction,  had  raised  the  rent  by  a full  equivalent  for  the  tax. 
But  whatever  raises  the  lowest  ground-rents,  raises  all  others,  since 
each  exceeds  the  lowest  by  the  market  value  of  its  peculiar 
advantages.  ^ If,  therefore,  the  tax  on  ground-rents  were  a fixed 

’ [The  remainder  of  this  paragraph,  together  with  the  next,  appeared  first 
in  the  4th  ed.  (1857),  and  the  following  passage  of  the  original  (1848)  was 
removed  ; “ There  is  thus  no  difference  between  the  two  component  elements 
of  house- rent,  in  respect  to  the  incidence  of  the  tax.  Both  alike  fall  ultimately 
on  the  occupier : while,  in  both  alike,  if  the  occupier  in  consequence  reduces 
his  demand  by  contenting  himself  with  inferior  accommodation,  that  is,  if  he 

2 B 


834 


BOOK  V.  CHAPTER  m.  § 0 


Bum  per  square  foot,  the  more  valuable  situations  paying  no  more 
than  those  least  in  request,  this  fixed  payment  would  ultimately 
fall  on  the  occupier.  Suppose  the  lowest  ground-rent  to  be  101. 
per  acre,  and  the  highest  lOOOZ.,  a tax  of  IZ.  per  acre  on  ground- 
rents  would  ultimately  raise  the  former  to  llZ.,  and  the  latter 
consequently  to  lOOlZ.,  since  the  difierence  of  value  between  the  two 
situations  would  be  exactly  what  it  was  before  : the  annual  pound, 
therefore,  would  be  paid  by  the  occupier.  But  a tax  on  ground- 
rent  is  supposed  to  be  a portion  of  a house-tax,  which  is  not  a fixed 
payment,  but  a percentage  on  the  rent.  The  cheapest  site,  therefore, 
being  supposed  as  before  to  pay  11.,  the  dearest  would  pay  lOOZ.,  of 
which  only  the  IZ.  could  be  thrown  upon  the  occupier,  since  the 
rent  would  still  be  only  raised  to  lOOlZ.  Consequently,  99Z.  of  the 
lOOZ.  levied  from  the  expensive  site  would  fall  on  the  ground-land- 
lord. A house-tax  thus  requires  to  be  considered  in  a double 
aspect,  as  a tax  on  all  occupiers  of  houses,  and  a tax  on  ground-rents. 

In  the  vast  majority  of  houses,  the  ground-rent  forms  but  a 
small  proportion  of  the  annual  payment  made  for  the  house,  and 
nearly  aU  the  tax  falls  on  the  occupier.  It  is  only  in  exceptional 
cases,  like  that  of  the  favourite  situations  in  large  towns,  that  the 
predominant  element  in  the  rent  of  the  house  is  the  ground-rent ; 
and  among  the  very  few  kinds  of  income  which  are  fit  subjects  for 
peculiar  taxation,  these  ground-rents  hold  the  principal  place,  being 
the  most  gigantic  example  extant  of  enormous  accessions  of  riches 
acquired  rapidly,  and  in  many  cases  unexpectedly,  by  a few  families, 
from  the  mere  accident  of  their  possessing  certain  tracts  of  land, 
without  their  having  themselves  aided  in  the  acquisition  by  the 
smallest  exertion,  outlay,  or  risk.  So  far  therefore  as  a house-tax 
falls  on  the  ground-landlord,  it  is  liable  to  no  valid  objection. 

In  so  far  as  it  falls  on  the  occupier,  if  justly  proportioned  to  the 
value  of  the  house,  it  is  one  of  the  fairest  and  most  unobjectionable  of 
all  taxes.  No  part  of  a person's  expenditure  is  a better  criterion  of 
his  means,  or  bears,  on  the  whole,  more  nearly  the  same  proportion 
to  them.  A house-tax  is  a nearer  approach  to  a fair  income  tax 
than  a direct  assessment  on  income  can  easily  be ; having  the 
great  advantage,  that  it  makes  spontaneously  all  the  allowances 
which  it  is  so  difficult  to  make,  and  so  impracticable  to  make  exactly, 

prefers  saving  his  tax  from  house-rent  to  saving  it  from  other  parts  of  his 
expenditure,  he  indirectly  lowers  ground-rent,  or  retards  its  increase ; just  as 
a diminished  consumption  of  agricultural  produce,  by  making  cultivation 
retrograde,  would  lower  ordinary  rent.”] 


DIRECT  TAXES 


836 


in  assessing  an  income  tax  : for  if  what  a person  pays  in  house-rent 
is  a test  of  anything,  it  is  a test  not  of  what  he  possesses,  but  of 
what  he  thinks  he  can  afford  to  spend.  The  equality  of  this  tax 
can  only  be  seriously  questioned  on  two  grounds.  The  first  is, 
that  a miser  may  escape  it.  This  objection  applies  to  all  taxes  on 
expenditure  : nothing  but  a direct  tax  on  income  can  reach  a miser. 
But  as  misers  do  not  now  hoard  their  treasure,  but  invest  it  in 
productive  employments,  it  not  only  adds  to  the  national  wealth, 
and  consequently  to  the  general  means  of  paying  taxes,  but  the 
payment  claimable  from  itself  is  only  transferred  from  the  principal 
sum  to  the  income  afterwards  derived  from  it,  which  pays  taxes 
as  soon  as  it  comes  to  be  expended.  The  second  objection  is,  that  a 
person  may  require  a larger  and  more  expensive  house,  not  from 
having  greater  means  but  from  having  a larger  family.  Of  this, 
however,  he  is  not  entitled  to  complain  ; since  having  a large  family 
is  at  a person’s  own  choice  : and,  so  far  as  concerns  the  public  interest, 
is  a thing  rather  to  be  discouraged  than  promoted.* 

A large  portion  of  the  taxation  of  this  country  is  raised  by  a 
house-tax.  The  parochial  taxation  of  the  towns  entirely,  and  of  the 
rural  districts  partially,  consists  of  an  assessment  on  house-rent. 
The  window-tax,  which  was  also  a house-tax,  but  of  a bad  kind, 
operating  as  a tax  on  light,  and  a cause  of  deformity  in  building,  was 
exchanged  in  1851  for  a house-tax  properly  so  called,  but  on  a 
much  lower  scale  than  that  which  existed  previously  to  1834.  It 
is  to  be  lamented  that  the  new  tax  retains  the  unjust  principle  on 

* [1852]  Another  common  objection  is  that  large  and  expensive  accommo- 
dation is  often  required,  not  as  a residence,  but  for  business.  But  it  is  an 
admitted  principle  that  buildings  or  portions  of  buildings  occupied  exclusively 
for  business,  such  as  shops,  warehouses,  or  manufactories,  ought  to  be  exempted 
from  house-tax.  The  plea  that  persons  in  business  may  be  compelled  to  live 
in  situations,  such  as  the  great  thoroughfares  of  London,  where  house-rent  is 
at  a monopoly  rate,  seems  to  me  unworthy  of  regard  : since  no  one  does  so 
but  because  the  extra  profit,  which  he  expects  to  derive  from  the  situation,  is 
more  than  an  equivalent  to  him  for  the  extra  cost.  But  in  any  case,  the  bulk 
of  the  tax  on  tins  extra  rent  will  not  faU  on  him,  but  on  the  ground-landlord. 

[1848]  It  has  been  also  objected  that  house-rent  in  the  rural  districts  is 
much  lower  than  in  towns,  and  lower  in  some  towns  and  in  some  rural  districts 
than  in  others  : so  that  a tax  proportioned  to  it  would  have  a corresponding 
inequality  of  pressure.  To  this,  however,  it  may  be  answered,  that  in  places 
where  house-rent  is  low  persons  of  the  same  amoimt  of  income  usually  five  in 
larger  and  better  houses,  and  thus  expend  in  house-rent  more  nearly  the  same 
proportion  of  their  incomes  than  might  at  first  sight  appear.  Or  if  not,  the 
probability  will  be,  that  many  of  them  live  in  those  places  precisely  because 
they  are  too  poor  to  live  elsewhere,  and  have  therefore  the  strongest  claim  to 
be  taxed  lightly.  In  some  cases,  it  is  precisely  because  the  people  are  poor  that 
house-rent  remains  low. 


S36 


BOOK  V.  CHAPTER  III.  § 6 


which  the  old  house-tax  was  assessed,  and  which  contributed  quite 
as  much  as  the  selfishness  of  the  middle  classes  to  produce  the 
outcry  against  the  tax.  The  public  were  justly  scandalized  on 
learning  that  residences  like  Chatsworth  or  Belvoir  were  only  rated 
on  an  imaginary  rent  of  perhaps  2001.  a year,  under  the  pretext 
that,  owing  to  the  great  expense  of  keeping  them  up,  they  could 
not  be  let  for  more.  Probably,  indeed,  they  could  not  be  let  even 
for  that,  and  if  the  argument  were  a fair  one,  they  ought  not  to 
have  been  taxed  at  all.  But  a house-tax  is  not  intended  as  a tax 
on  incomes  derived  from  houses,  but  on  expenditure  incurred  for 
them.  The  thing  which  it  is  wished  to  ascertain  is  what  a house 
costs  to  the  person  who  lives  in  it,  not  what  it  would  bring  in  if  let  to 
some  one  else.  When  the  occupier  is  not  the  owner,  and  does  not 
hold  on  a repairing  lease,  the  rent  he  pays  is  the  measure  of  what 
the  house  costs  him  : but  when  he  is  the  owner,  some  other  measure 
must  be  sought.  A valuation  should  be  made  of  the  house,  not 
at  what  it  would  sell  for,  but  at  what  would  be  the  cost  of  rebuilding 
it,  and  this  valuation  might  be  periodically  corrected  by  an  allowance 
for  what  it  had  lost  in  value  by  time,  or  gained  by  repairs  and 
improvements.  The  amount  of  the  amended  valuation  would  form 
a principal  sum,  the  interest  of  which,  at  the  current  price  of  the 
public  funds,  would  form  the  annual  value  at  which  the  building 
should  be  assessed  to  the  tax. 

As  incomes  below  a certain  amount  ought  to  be  exempt  from 
income-tax,  so  ought  houses  below  a certain  value  from  house-tax, 
on  the  universal  principle  of  sparing  from  all  taxation  the  absolute 
necessaries  of  healthful  existence.  In  order  that  the  occupiers  of 
lodgings,  as  well  as  of  houses,  might  benefit,  as  in  justice  they  ought, 
by  this  exemption,  it  might  be  optional  with  the  owners  to  have 
every  portion  of  a house  which  is  occupied  by  a separate  tenant 
valued  and  assessed  separately,  as  is  now  usually  the  case  with 
chambers 


CHAPTER  IV 


OF  TAXES  ON  COMMODITIES 

§ 1.  By  taxes  on  commodities  are  commonly  meant  those 
which  are  levied  either  on  the  producers  or  on  the  carriers  or  dealers 
who  intervene  between  them  and  the  final  purchases  for  consump- 
tion. Taxes  imposed  directly  on  the  consumers  of  particular  com- 
modities, such  as  a house-tax,  or  the  tax  in  this  country  on  horses 
and  carriages,  might  be  called  taxes  on  commodities,  but  are  not ; 
the  phrase  being  by  custom  confined  to  indirect  taxes — those  which 
are  advanced  by  one  person,  to  be,  as  is  expected  and  intended, 
reimbursed  by  another.  Taxes  on  commodities  are  either  on  pro- 
duction within  the  country,  or  on  importation  into  it,  or  on  convey- 
ance or  sale  within  it ; and  are  classed  respectively  as  excise, 
customs,  or  tolls  and  transit  duties.  To  whichever  class  they 
belong,  and  at  whatever  stage  in  the  progress  of  the  community 
they  may  be  imposed,  they  are  equivalent  to  an  increase  of  the 
cost  of  production ; using  that  term  in  its  most  enlarged  sense, 
which  includes  the  cost  of  transport  and  distribution,  or,  in 
common  phrase,  of  bringing  the  commodity  to  market. 

When  the  cost  of  production  is  increased  artificially  by  a tax, 
the  efiect  is  the  same  as  -when  it  is  increased  by  natural  causes. 
If  only  one  or  a few  commodities  are  affected,  their  value  and  price 
rise,  so  as  to  compensate  the  producer  or  dealer  for  the  peculiar 
burthen  ; but  if  there  were  a tax  on  all  commodities,  exactly  pro- 
portioned to  their  value,  no  such  compensation  would  be  obtained  : 
there  would  neither  be  a general  rise  of  values,  which  is  an  absurdity, 
nor  of  prices,  which  depend  on  causes  entirely  different.  There 
would,  however,  as  Mr.  M‘Culloch  has  pointed  out,  be  a disturbance 
of  values,  some  falling,  others  rising,  owing  to  a circumstance,  the 
effect  of  which  on  values  and  prices  we  formerly  discussed ; the 
different  durabihty  of  the  capital  employed  in  different  occupations. 
The  gross  produce  of  industry  consists  of  two  parts  : one  portion 


838 


BOOK  V.  CHAPTER  IV.  § 2 


serving  to  replace  the  capital  consumed,  while  the  other  portion  is 
profit.  Now  equal  capitals  in  two  branches  of  production  must 
have  equal  expectations  of  profit ; but  if  a greater  portion  of  the 
one  than  of  the  other  is  fixed  capital,  or  if  that  fixed  capital  is  more 
durable,  there  will  be  a less  consumption  of  capital  in  the  year, 
and  less  will  be  required  to  replace  it,  so  that  the  profit,  if  absolutely 
the  same,  will  form  a greater  proportion  of  the  annual  returns. 
To  derive  from  a capital  of  1000?.  a profit  of  lOOZ.,  the  one  producer 
may  have  to  sell  produce  to  the  value  of  llOOZ.,  the  other  only  to 
the  value  of  500Z.  If  on  these  two  branches  of  industry  a tax  be 
imposed  of  five  per  cent  ad  valorem,  the  last  will  be  charged  only 
with  25Z.,  the  first  with  55Z. ; leaving  to  the  one  75Z.  profit,  to  the 
other  only  45Z.  To  equalize,  therefore,  their  expectation  of  profit,  the 
one  commodity  must  rise  in  price,  or  the  other  must  fall,  or  both: 
commodities  made  chiefly  by  immediate  labour  must  rise  in  value, 
as  compared  with  those  which  are  chiefly  made  by  machinery.  It 
is  unnecessary  to  prosecute  this  branch  of  the  inquiry  any 
further. 

§ 2.  A tax  on  any  one  commodity,  whether  laid  on  its  pro- 
duction, its  importation,  its  carriage  from  place  to  place,  or  its 
sale,  and  whether  the  tax  be  a fixed  sum  of  money  for  a given 
quantity  of  the  commodity,  or  an  ad  valorem  duty,  will,  as  a 
general  rule,  raise  the  value  and  price  of  the  commodity  by 
at  least  the  amount  of  the  tax.  There  are  few  cases  in  which 
it  does  not  raise  them  by  more  than  that  amount.  In  the  first 
place,  there  are  few  taxes  on  production  on  account  of  which  it 
is  not  found  or  deemed  necessary  to  impose  restrictive  regulations 
on  the  manufacturers  or  dealers,  in  order  to  check  evasions  of  the 
tax.  These  regulations  are  always  sources  of  trouble  and  annoyance, 
and  generally  of  expense,  for  all  of  which,  being  peculiar  dis- 
advantages, the  producers  or  dealers  must  have  compensation  in 
the  price  of  their  commodity.  These  restrictions  also  frequently 
interfere  with  the  processes  of  manufacture,  requiring  the  producer 
to  carry  on  his  operations  in  the  way  most  convenient  to  the  revenue, 
though  not  the  cheapest  or  most  efficient  for  purposes  of  production. 
Any  regulations  whatever,  enforced  by  law,  make  it  difficult  for 
the  producer  to  adopt  new  and  improved  processes.  Further,  the 
necessity  of  advancing  the  tax  obliges  producers  and  dealers  to 
carry  on  their  business  with  larger  capitals  than  would  otherwise 
be  necessary,  on  the  whole  of  which  they  must  receive  the  ordinary 


TAXES  ON  COMMODITIES 


839 


rate  of  profit,  though  a part  only  is  employed  in  defraying  the  real 
expenses  of  production  or  importation.  The  price  of  the  article  must 
be  such  as  to  afford  a profit  on  more  than  its  natural  value,  instead 
of  a profit  on  only  its  natural  value.  A part  of  the  capital  of  the 
country,  in  short,  is  not  employed  in  production,  but  in  advances 
to  the  state,  repaid  in  the  price  of  goods ; and  the  consumers  must 
give  an  indemnity  to  the  sellers,  equal  to  the  profit  which  they 
could  have  made  on  the  same  capital  if  really  employed  in  pro- 
duction.* Neither  ought  it  to  be  forgotten,  that  whatever  renders 
a larger  capital  necessary  in  any  trade  or  business  limits  the  com- 
petition in  that  business  ; and,  by  giving  something  like  a monopoly 
to  a few  dealers,  may  enable  them  either  to  keep  up  the  price 
beyond  what  would  afford  the  ordinary  rate  of  profit,  or  to  obtain 
the  ordinary  rate  of  profit  with  a less  degree  of  exertion  for  improving 
and  cheapening  their  commodity.  In  these  several  modes,  taxes 
on  commodities  often  cost  to  the  consumer,  through  the  increased 
price  of  the  article,  much  more  than  they  bring  into  the  treasury 
of  the  state.  There  is  still  another  consideration.  The  higher 
price  necessitated  by  the  tax,  almost  always  checks  the  demand 
for  the  commodity ; and  since  there  are  many  improvements  in 
production  which,  to  make  them  practicable,  require  a certain 
extent  of  demand,  such  improvements  are  obstructed,  and  many 
of  them  prevented  altogether.  It  is  a well-known  fact  that  the 
branches  of  production  in  which  fewest  improvements  are  made 
are  those  with  which  the  revenue  officer  interferes ; and  that  nothing, 
in  general,  gives  a greater  impulse  to  improvements  in  the  production 
of  a commodity,  than  taking  off  a tax  which  narrowed  the  market 
for  it. 

§ 3.  Such  are  the  effects  of  taxes  on  commodities,  considered 
generally ; but  as  there  are  some  commodities  (those  composing 
the  necessaries  of  the  labourer)  of  which  the  values  have  an  influence 
on  the  distribution  of  wealth  among  different  classes  of  the  com- 
munity, it  is  requisite  to  trace  the  effects  of  taxes  on  those  particular 
articles  somewhat  farther.  If  a tax  be  laid,  say  on  corn,  and  the 

♦ [1865]  It  is  true,  this  does  not  constitute,  as  at  first  sight  it  appears  to 
do,  a case  of  taking  more  out  of  the  pockets  of  the  people  than  the  state  re- 
ceives ; since,  if  the  state  needs  the  advance,  and  gets  it  in  this  manner,  it  can 
disp.ense  with  an  equivalent  amount  of  borrowing  in  stock  or  exchequer  bills. 
But  it  is  more  economical  that  the  necessities  of  the  state  should  be  supplied 
from  the  disposable  capital  in  the  hands  of  the  lending  class,  than  by  an  artificial 
addition  to  the  expenses  of  one  or  several  classes  of  producers  or  dealers. 


840 


BOOK  V.  CHAPTER  IV.  § 3 


price  rises  in  proportion  to  tlie  tax,  the  rise  of  price  may  operate 
in  two  ways.  First : it  may  lower  the  condition  of  the  labouring 
classes ; temporarily  indeed  it  can  scarcely  fail  to  do  so.  If  it 
diminishes  their  consumption  of  the  produce  of  the  earth,  or  makes 
them  resort  to  a food  which  the  soil  produces  more  abundantly,  and 
therefore  more  cheaply,  it  to  that  extent  contributes  to  throw  back 
agriculture  upon  more  fertile  lands  or  less  costly  processes,  and  to 
lower  the  value  and  price  of  corn ; which  therefore  ultimately 
settles  at  a price,  increased  not  by  the  whole  amount  of  the  tax, 
but  by  only  a part  of  its  amount.  Secondly,  however,  it  may  happen 
that  the  dearness  of  the  taxed  food  does  not  lower  the  habitual 
standard  of  the  labourer’s  requirements,  but  that  wages,  on  the 
contrary,  through  an  action  on  population,  rise,  in  a shorter  or 
longer  period,  so  as  to  compensate  the  labourers  for  their  portion  of 
the  tax  ; the  compensation  being  of  course  at  the  expense  of  profits. 
Taxes  on  necessaries  must  thus  have  one  of  two  efiects.  Either 
they  lower  the  condition  of  the  labouring  classes ; or  they  exact 
from  the  owners  of  capital,  in  addition  to  the  amount  due  to  the  state 
on  their  own  necessaries,  the  amount  due  on  those  consumed  by  the 
labourers.  In  the  last  case,  the  tax  on  necessaries,  like  a tax  on 
wages,  is  equivalent  to  a peculiar  tax  on  profits ; which  is,  like  all 
other  partial  taxation,  unjust,  and  is  specially  prejudicial  to  the 
increase  of  the  national  wealth. 

It  remains  to  speak  of  the  efiect  on  rent.  Assuming  (what  is 
usually  the  fact)  that  the  consumption  of  food  is  not  diminished, 
the  same  cultivation  as  before  will  be  necessary  to  supply  the  wants 
of  the  community  ; the  margin  of  cultivation,  to  use  Dr.  Chalmers’ 
expression,  remains  where  it  was ; and  the  same  land  or  capital 
which,  as  the  least  productive,  already  regulated  the  value  and 
price  of  the  whole  produce,  will  continue  to  regulate  them.  The 
effect  which  a tax  on  agricultural  produce  will  have  on  rent,  depends 
on  its  affecting  or  not  affecting  the  difference  between  the  return  to 
this  least  productive  land  or  capital,  and  the  returns  to  other  lands 
and  capitals.  Now  this  depends  on  the  manner  in  which  the  tax 
is  imposed.  If  it  is  an  ad  valorem  tax,  or,  what  is  the  same  thing,  a 
fixed  proportion  of  the  produce,  such  as  tithe  for  example,  it 
evidently  lowers  corn-rents.  For  it  takes  more  corn  from  the 
better  lands  than  from  the  worse  ; and  exactly  in  the  degree  in  which 
they  are  better ; land  of  twice  the  productiveness  paying  twice  as 
much  to  the  tithe.  Whatever  takes  more  from  the  greater  of  two 
quantities  than  from  the  less,  diminishes  the  difference  between 


TAXES  ON  COMMODITIES 


641 

them.  The  imposition  of  a tithe  on  corn  would  take  a tithe  also 
from  corn-rent : for  if  we  reduce  a series  of  numbers  by  a tenth 
each,  the  differences  between  them  are  reduced  one-tenth. 

For  example,  let  there  be  five  qualities  of  land,  which  severally 
yield,  on  the  same  extent  of  ground,  and  with  the  same  expenditure, 
100,  90,  80,  70,  and  60  bushels  of  wheat ; the  last  of  these  being  the 
lowest  quality  which  the  demand  for  food  renders  it  necessary  to 
cultivate.  The  rent  of  these  lands  will  be  as  follows  : — 


The  land 
producing  j 

100  bushels 

f will  yield  1 
1 a rent  of  j 

100- 

-60, 

or 

40  bushels 

That  producing 

90 

„ 

90- 

-60, 

or 

30 

80  „ 

,, 

80 

-60, 

or 

20 

,, 

70  „ 

,, 

70 

-60, 

or 

10 

,, 

60  „ 

„ 

no 

rent. 

Now  let  a tithe  be  imposed,  which  takes  from  these  five  pieces  of 
land,  10,  9,  8,  7,  and  6 bushels  respectively,  the  fifth  quality  still 
being  the  one  which  regulates  the  price,  but  returning  to  the  farmer, 
after  payment  of  tithe,  no  more  than  54  bushels  : — 

pr’‘<rfuo'lng}“0  'Educed  to  90,  { | _54.  or  36  bushels 

prodocW®®  " ” ” 81 -64,  or  27  „ 

„ 80  „ 72  „ 72-54, or  18  „ 

„ 70  „ „ 63  „ 63-54,  or  9 

and  that  producing  60  bushels,  reduced  to  54,  will  yield,  as  before, 
no  rent.  So  that  the  rent  of  the  first  quality  of  land  has  lost  four 
bushels  ; of  the  second,  three  ; of  the  third,  two  ; and  of  the  fourth, 
one  : that  is,  each  has  lost  exactly  one-tenth.  A tax,  therefore,  of 
a fixed  proportion  of  the  produce,  lowers,  in  the  same  proportion, 
corn-rent. 

But  it  is  only  corn-rent  that  is  lowered,  and  not  rent  estimated  in 
money,  or  in  any  other  commodity.  For,  in  the  same  proportion  as 
corn-rent  is  reduced  in  quantity,  the  corn  composing  it  is  raised  in 
value.  Under  the  tithe,  54  bushels  will  be  worth  in  the  market 
what  60  were  before ; and  nine-tenths  will  in  all  cases  sell  for  as 
much  as  the  whole  ten- tenths  previously  sold  for.  The  landlords 
will  therefore  be  compensated  in  value  and  price  for  what  they  lose 
in  quantity  ; and  will  suffer  only  so  far  as  they  consume  their  rent 
in  kind,  or,  after  receiving  it  in  money,  expend  it  in  agricultural 
produce  : that  is,  they  only  suffer  as  consumers  of  agricultural 
produce,  and  in  common  with  all  the  other  consumers.  Considered 


842 


BOOR  V.  CHAPTER  IV.  § 4 


as  landlords,  they  have  the  same  income  as  before ; the  tithe,  therefore, 
falls  on  the  consumer,  and  not  on  the  landlord. 

The  same  effect  would  be  produced  on  rent,  if  the  tax,  instead  of 
being  a fixed  proportion  of  the  produce,  were  a fixed  sum  per  quarter 
or  per  bushel.  A tax  which  takes  a shilling  for  every  bushel,  takes 
more  shillings  from  one  field  than  from  another,  just  in  proportion 
as  it  produces  more  bushels  ; and  operates  exactly  hke  tithe,  except 
that  tithe  is  not  only  the  same  proportion  on  all  lands,  but  is  also 
the  same  proportion  at  all  times,  while  a fixed  sum  of  money  per 
bushel  will  amount  to  a greater  or  a less  proportion,  according  as 
corn  is  cheap  or  dear. 

There  are  other  modes  of  taxing  agriculture,  which  would  affect 
rent  differently.  A tax  proportioned  to  the  rent  would  fall  wholly 
on  the  rent,  and  would  not  at  all  raise  the  price  of  corn,  which  is 
regulated  by  the  portion  of  the  produce  that  pays  no  rent.  A fixed 
tax  of  so  much  per  cultivated  acre,  without  distinction  of  value, 
would  have  effects  directly  the  reverse.  Taking  no  more  from 
the  best  qualities  of  land  than  from  the  worst,  it  would  leave  the 
differences  the  same  as  before,  and  consequently  the  same  corn-rents, 
and  the  landlords  would  profit  to  the  full  extent  of  the  rise  of  price. 
To  put  the  thing  in  another  manner  ; the  price  must  rise  sufficiently 
to  enable  the  worst  land  to  pay  the  tax ; thus  enabling  all  lands 
which  produce  more  than  the  worst  to  pay  not  only  the  tax,  but 
also  an  increased  rent  to  the  landlords.  These,  however,  are  not  so 
much  taxes  on  the  produce  of  land,  as  taxes  on  the  land  itself. 
Taxes  on  the  produce,  properly  so  called,  whether  fixed  or  ad  valorem^ 
do  not  affect  rent,  but  fall  on  the  consumer : profits,  however, 
generally  bearing  either  the  whole  or  the  greatest  part  of  the  portion 
which  is  levied  on  the  consumption  of  the  labouring  classes. 

§ 4.  The  preceding  is,  I apprehend,  a correct  statement  of  the 
manner  in  which  taxes  on  agricultural  produce  operate  when  first 
laid  on.  When,  however,  they  are  of  old  standing,  their  effect  may 
be  different,  as  was  first  pointed  out,  I believe,  by  Mr.  Senior.  It  is, 
as  we  have  seen,  an  almost  infallible  consequence  of  any  reduction 
of  profits  to  retard  the  rate  of  accumulation.  Now  the  effect 
of  accumulation,  when  attended  by  its  usual  accompaniment,  an 
increase  of  population,  is  to  increase  the  value  and  price  of  food,  to 
raise  rent  and  to  lower  profits  : that  is,  to  do  precisely  what  is  done 
by  a tax  on  agricultural  produce,  except  that  this  does  not  raise 
rent.  The  tax,  therefore,  merely  anticipates  the  rise  of  price,  and  fall 


TAXES  ON  COMMODITIES 


843 


of  profits,  which  would  have  taken  place  ultimately  through  the  mere 
progress  of  accumulation  ; while  it  at  the  same  time  prevents,  or 
at  least  retards,  that  progress.  If  the  rate  of  profit  was  such, 
previous  to  the  imposition  of  a tithe,  that  the  effect  of  the  tithe 
reduces  it  to  the  practical  minimum,  the  tithe  will  put  a stop  to  all 
further  accumulation,  or  cause  it  to  take  place  out  of  the  country  ; 
and  the  only  effect  which  the  tithe  will  then  have  had  on  the  consumer 
is  to  make  him  pay  earlier  the  price  which  he  would  have  had  to  pay 
somewhat  later — part  of  which,  indeed,  in  the  gradual  progress  of 
wealth  and  population,  he  would  have  almost  immediately  begun  to 
pay.  After  a lapse  of  time  which  would  have  admitted  of  a rise  of 
one-tenth  through  the  natural  progress  of  wealth,  the  consumer  will 
be  paying  no  more  than  he  would  have  paid  if  the  tithe  had  never 
existed  ; he  will  have  ceased  to  pay  any  portion  of  it,  and  the  person 
who  will  really  pay  it  is  the  landlord,  whom  it  deprives  of  the  increase 
of  rent  which  would  by  that  time  have  accrued  to  him.  At  every 
successive  point  in  this  interval  of  time,  less  of  the  burthen  will  rest 
on  the  consumer,  and  more  of  it  on  the  landlord  : and  in  the  ultimate 
result  the  minimum  of  profits  will  be  reached  with  a smaller  capital 
and  population,  and  a lower  rental,  than  if  the  course  of  things  had 
not  been  disturbed  by  the  imposition  of  the  tax.  If,  on  the  other 
hand,  the  tithe  or  other  tax  on  agricultural  produce  does  not  reduce 
profits  to  the  minimum,  but  to  something  above  the  minimum, 
accumulation  will  not  be  stopped,  but  only  slackened  : and  if  popula- 
tion also  increases,  the  two-fold  increase  will  continue  to  produce  its 
effects — a rise  of  the  price  of  corn,  and  an  increase  of  rent.  These 
consequences,  however,  will  not  take  place  with  the  same  rapidity 
as  if  the  higher  rate  of  profit  had  continued.  At  the  end  of  twenty 
years  the  country  will  have  a smaller  population  and  capital  than, 
but  for  the  tax,  it  would  by  that  time  have  had  ; the  landlords  will 
have  a smaller  rent ; and  the  price  of  corn,  having  increased  less 
rapidly  than  it  would  otherwise  have  done,  will  not  be  so  much  as  a 
tenth  higher  than  what,  if  there  had  been  no  tax,  it  would  by  that 
time  have  become.  A part  of  the  tax,  therefore,  will  already  have 
ceased  to  fall  on  the  consumer,  and  devolved  upon  the  landlord ; 
and  the  proportion  will  become  greater  and  greater  by  lapse  of  time. 

Mr.  Senior  illustrates  this  view  of  the  subject  by  likening  the 
effects  of  tithes,  or  other  taxes  on  agricultural  produce,  to  those 
of  natural  sterility  of  soil.  If  the  land  of  a country  without  access 
to  foreign  supplies  were  suddenly  smitten  with  a permanent  deterio- 
ration of  quality,  to  an  extent  which  would  make  a tenth  more 


844 


BOOK  V.  CHAPTER  IV.  § 4 


labour  necessary  to  raise  the  existing  produce,  the  price  of  corn 
would  undoubtedly  rise  one-tenth.  But  it  cannot  hence  be  inferred 
that  if  the  soil  of  the  country  had  from  the  beginning  been  one-tenth 
worse  than  it  is,  corn  would  at  present  have  been  one-tenth  dearer 
than  we  find  it.  It  is  far  more  probable,  that  the  smaller  return 
to  labour  and  capital,  ever  since  the  first  settlement  of  the  country, 
would  have  caused  in  each  successive  generation  a less  rapid  increase 
than  has  taken  place  : that  the  country  would  now  have  contained 
less  capital,  and  maintained  a smaller  population,  so  that,  notwith- 
standing the  inferiority  of  the  soil,  the  price  of  corn  would  not 
have  been  higher,  nor  profits  lower,  than  at  present ; rent  alone 
would  certainly  have  been  lower.  We  may  suppose  two  islands, 
which,  being  ahke  in  extent,  in  natural  fertility,  and  industrial 
advancement,  have  up  to  a certain  time  been  equal  in  population 
and  capital,  and  have  had  equal  rentals,  and  the  same  price  of  corn. 
Let  us  imagine  a tithe  imposed  in  one  of  these  islands,  but  not  in 
the  other.  There  will  be  immediately  a difference  in  the  price  of 
corn,  and  therefore  probably  in  profits.  While  profits  are  not 
tending  downwards  in  either  country,  that  is,  while  improvements 
in  the  production  of  necessaries  fully  keep  pace  with  the  increase 
of  population,  this  difference  of  prices  and  profits  between  the 
islands  may  continue.  But  if,  in  the  untithed  island,  capital  in- 
creases, and  population  along  with  it,  more  than  enough  to  counter- 
balance any  improvements  which  take  place,  the  price  of  corn  will 
gradually  rise,  profits  will  fall,  and  rent  will  increase ; while  in  the 
tithed  island  capital  and  population  will  either  not  increase  (beyond 
what  is  balanced  by  the  improvements),  or  if  they  do,  will  increase 
in  a less  degree  ; so  that  rent  and  the  price  of  corn  will  either  not 
rise  at  all,  or  rise  more  slowly.  Rent,  therefore,  will  soon  be  higher 
in  the  un tithed  than  in  the  tithed  island,  and  profits  not  so  much 
higher,  nor  corn  so  much  cheaper,  as  they  were  on  the  first  imposi- 
tion of  the  tithe.  These  effects  will  be  progressive.  At  the  end 
of  every  ten  years  there  will  be  a greater  difference  between  the 
rentals  and  between  the  aggregate  wealth  and  population  of  the  two 
islands,  and  a less  difference  in  profits  and  in  the  price  of  corn. 

At  what  point  will  these  last  differences  entirely  cease,  and  the 
temporary  effect  of  taxes  on  agricultural  produce,  in  raising  the 
price,  have  entirely  given  place  to  the  ultimate  effect,  that  of 
limiting  the  total  produce  of  the  country  ? Though  the  untithed 
island  is  always  verging  towards  the  point  at  which  the  price  of 
food  would  overtake  that  in  the  tithed  island,  its  progress  towards 


TAXES  ON  COMMODITIES 


845 


that  point  naturally  slackens  as  it  draws  neaier  to  attaining  it ; 
since — the  difference  between  the  two  islands  in  the  rapidity  of 
accumulation  depending  upon  the  difference  in  the  rates  of  profit 
— in  proportion  as  these  approximate,  the  movement  which  draws 
them  closer  together  abates  of  its  force.  The  one  may  not  actually 
overtake  the  other,  until  both  islands  reach  the  minimum  of  profits  : 
up  to  that  point,  the  tithed  island  may  continue  more  or  less  ahead 
of  the  untithed  island  in  the  price  of  corn  : considerably  ahead  if 
it  is  far  from  the  minimum,  and  is  therefore  accumulating  rapidly  ; 
very  little  ahead  if  it  is  near  the  minimum,  and  accumulating 
slowly. 

But  whatever  is  true  of  the  tithed  and  untithed  islands  in  our 
hypothetical  case,  is  true  of  any  country  having  a tithe,  compared 
with  the  same  country  if  it  had  never  had  a tithe. 

In  England  the  great  emigration  of  capital,  and  the  almost 
periodical  occuirence  of  commercial  crises  through  the  speculations 
occasioned  by  the  habitually  low  rate  of  profit,  are  indications  that 
profit  has  attained  the  practical,  though  not  the  ultimate  minimum, 
and  that  all  the  savings  which  take  place  (beyond  what  improve- 
ments, tending  to  the  cheapening  of  necessaries,  make  room  for) 
are  either  sent  abroad  for  investment,  or  periodically  swept  away. 
There  can  therefore,  I think,  be  little  doubt  that  if  England  had 
never  had  a tithe,  or  any  tax  on  agricultural  produce,  the  price  of 
corn  would  have  been  by  this  time  as  high,  and  the  rate  of  profits 
as  low,  as  at  present.  Independently  of  the  more  rapid  accumula- 
tion w^hich  would  have  taken  place  if  profits  had  not  been  prematurely 
lowered  by  these  imposts  ; the  mere  saving  of  a part  of  the  capital 
which  has  been  wasted  in  unsuccessful  speculations;  and  the  keeping 
at  home  a part  of  that  which  has  been  sent  abroad,  would  have 
been  quite  sufficient  to  produce  the  effect.  I think,  therefore, 
with  Mr.  Senior,  that  the  tithe,  even  before  its  commutation,  had 
ceased  to  be  a cause  of  high  prices  or  low  profits,  and  had  become  a 
mere  deduction  from  rent ; its  other  effects  being,  that  it  caused 
the  country  to  have  no  greater  capital,  no  larger  production,  and 
no  more  numerous  population  than  if  it  had  been  one-tenth  less 
fertile  than  it  is  ; or  let  us  rather  say  one-twentieth  (considering 
how  great  a portion  of  the  land  of  Great  Britain  w^as  tithe-free). 

But  though  tithes  and  other  taxes  on  agricultural  produce, 
when  of  long  standing,  either  do  not  raise  the  price  of  food  and 
lower  profits  at  all,  or,  if  at  all,  not  in  proportion  to  the  tax ; yet 
the  abrogation  of  such  taxes,  when  they  exist,  does  not  the  legg 


846 


BOOK  V.  CHAPTER  IV.  | 4 


diminisli  price,  and,  in  general,  raise  the  rate  of  profit.  The 
abolition  of  a tithe  takes  one-tenth  from  the  cost  of  production, 
and  consequently  from  the  price,  of  all  agricultural  produce ; and 
unless  it  permanently  raises  the  labourers’  requirements,  it  lowers 
the  cost  of  labour,  and  raises  profits.  Kent,  estimated  in  money 
or  in  commodities,  'generally  remains  as  before  ; estimated  in 
agricultural  produce,  it  is  raised.  The  country  adds  as  much  by 
the  repeal  of  a tithe  to  the  margin  which  intervenes  between  it 
and  the  stationary  state,  as  is  cut  off  from  that  margin  by  a tithe 
when  first  imposed.  Accumulation  is  greatly  accelerated  ; and  if 
population  also  increases,  the  price  of  corn  immediately  begins  to 
recover  itself,  and  rent  to  rise ; thus  gradually  transferring  the 
benefit  of  the  remission  from  the  consumer  to  the  landlord. 

The  effects  which  thus  result  from  abolishing  tithe,  result  equally 
from  what  has  been  done  by  the  arrangements  under  the  Commuta- 
tion Act  for  converting  it  into  a rent-charge.  When  the  tax,  instead 
of  being  levied  on  the  whole  produce  of  the  soil,  is  levied  only  from 
the  portions  which  pay  rent,  and  does  not  touch  any  fresh  extension 
of  cultivation,  the  tax  no  longer  forms  any  part  of  the  cost  of  pro- 
duction of  the  portion  of  the  produce  which  regulates  the  price  of 
all  the  rest.  The  land  or  capital  which  pays  no  rent  can  now  send 
its  produce  to  market  one-tenth  cheaper.  The  commutation  of 
tithe  ought  therefore  to  have  produced  a considerable  fall  in  the 
average  price  of  corn.  If  it  had  not  come  so  gradually  into  operation, 
and  if  the  price  of  corn  had  not  during  the  same  period  been  under 
the  influence  of  several  other  causes  of  change,  the  effect  would 
probably  have  been  markedly  conspicuous.  As  it  is,  there  can 
be  no  doubt  that  this  circumstance  has  had  its  share  in  the  fall 
which  has  taken  place  in  the  cost  of  production  and  in  the  price  of 
home-grown  produce ; though  the  effects  of  the  great  agricultural 
improvements  which  have  been  simultaneously  advancing,  and  of 
the  free  admission  of  agricultural  produce  from  foreign  countries,^ 
have  masked  those  of  the  other  cause.  This  fall  of  price  would 
not  in  itself  have  any  tendency  injurious  to  the  landlord,  since 
corn-rents  are  increased  in  the  same  ratio  in  which  the  price  of  corn 
is  diminished.  But  neither  does  it  in  any  way  tend  to  increase 
his  income.  The  rent-charge,  therefore,  which  is  substituted  for 
tithe,  is  a dead  loss  to  him  at  the  expiration  of  existing  leases  : and 
the  commutation  of  tithe  was  not  a mere  alteration  in  the  mode 


[The  reference  to  “ free  admission,”  inserted  in  4th  cd.  (1867).] 


TAXES  ON  COMMODITIES 


84? 


in  w'jxich  the  landlord  bore  an  existing  burthen,  but  the  imposition 
of  a new  one  ; relief  being  afforded  to  the  consumer  at  the  expense 
of  the  landlord,  who,  however,  begins  immediately  to  receive 
progressive  indemnification  at  the  consumer’s  expense,  by  the 
impulse  given  to  accumulation  and  population. 

§ 5.  We  have  hitherto  inquired  into  the  effects  of  taxes  on 
commodities,  on  the  assumption  that  they  are  levied  impartially 
on  every  mode  in  which  the  commodity  can  be  produced  or  brought 
to  market.  Another  class  of  considerations  is  opened,  if  we  suppose 
that  this  impartiality  is  not  maintained,  and  that  the  tax  is 
imposed,  not  on  the  commodity,  but  on  some  particular  mode  of 
obtaining  it. 

Suppose  that  a commodity  is  capable  of  being  made  by  two 
different  processes  ; as  a manufactured  commodity  may  be  produced 
either  by  hand  or  by  steam-power  ; sugar  may  be  made  either  from 
the  sugar-cane  or  from  beet-root,  cattle  fattened  either  on  hay  and 
green  crops,  or  on  oil-cake  and  the  refuse  of  breweries.  It  is  the 
interest  of  the  community  that,  of  the  two  methods,  producers 
should  adopt  that  which  produces  the  best  article  at  the  lowest 
price.  This  being  also  the  interest  of  the  producers,  unless  pro- 
tected against  competition,  and  shielded  from  the  penalties  of 
indolence  ; the  jprocess  most  advantageous  to  the  community  is 
that  which,  if  not  interfered  with  by  government,  they  ultimately 
find  it  to  their  advantage  to  adopt.  Suppose,  however,  that  a tax 
is  laid  on  one  of  the  processes,  and  no  tax  at  all,  or  one  of  smaller 
amount,  on  the  other.  If  the  taxed  process  is  the  one  which  the 
producers  would  not  have  adopted,  the  measure  is  simply  nugatory. 
But  if  the  tax  falls,  as  it  is  of  course  intended  to  do,  upon  the  one 
which  they  would  have  adopted,  it  creates  an  artificial  motive  for 
preferring  the  untaxed  process,  though  the  inferior  of  the  two.  If, 
therefore,  it  has  any  effect  at  all,  it  causes  the  commodity  to  be 
produced  of  worse  quality,  or  at  a greater  expense  of  labour ; it 
causes  so  much  of  the  labour  of  the  community  to  be  wasted,  and 
the  capital  employed  in  supporting  and  remunerating  the  labour 
to  be  expended  as  uselessly  as  if  it  were  spent  in  hiring  men  to  dig 
holes  and  fill  them  up  again.  This  waste  of  labour  and  capital 
constitutes  an  addition  to  the  cost  of  production  of  the  commodity, 
which  raises  its  value  and  price  in  a corresponding  ratio,  and  thus 
the  owners  of  the  capital  are  indemnified.  The  loss  falls  on  the 
consumers ; though  the  capital  of  the  country  is  also  eventually 


041 


BOOK  V.  CHAPTER  IV.  § 6 


diminislied  by  the  diminution  of  their  means  of  saving,  and  in  s^roe 
degree,  of  their  inducements  to  save. 

The  kind  of  tax,  therefore,  which  comes  under  the  general 
denomination  of  a discriminating  duty,  transgresses  the  rale  that 
taxes  should  take  as  little  as  possible  from  the  tax-payer  beyond 
what  they  bring  into  the  treasury  of  the  state.  A discriminating 
duty  makes  the  consumer  pay  two  distinct  taxes,  only  one  of  which 
is  paid  to  the  government,  and  that  frequently  the  less  onerous  of 
the  two.  If  a- tax  were  laid  on  sugar  produced  from  the  cane, 
leaving  the  sugar  from  beet-root  un taxed,  then,  in  so  far  as  cane  sugar 
continued  to  be  used,  the  tax  on  it  would  be  paid  to  the  treasury, 
and  might  be  as  unobjectionable  as  most  other  taxes  ; but  if  cane 
sugar,  having  previously  been  cheaper  than  beet-root  sugar,  was 
now  dearer,  and  beet-root  sugar  was  to  any  considerable  amount 
substituted  for  it,  and  fields  laid  out  and  manufactories  established 
in  consequence,  the  government  would  gain  no  revenue  from  the 
beet-root  sugar,  while  the  consumers  of  it  would  pay  a real  tax. 
They  would  pay  for  beet-root  sugar  more  than  they  had  previously 
paid  for  cane  sugar,  and  the  difference  would  go  to  indemnify 
producers  for  a portion  of  the  labour  of  the  country  actually  thrown 
away,  in  producing  by  the  labour  of  (say)  three  hundred  men,  what 
could  be  obtained  by  the  other  process  with  the  labour  of  two 
hundred. 

One  of  the  commonest  cases  of  discriminating  duties,  is  that 
of  a tax  on  the  importation  of  a commodity  capable  of  being  pro- 
duced at  home,  unaccompanied  by  an  equivalent  tax  on  the  home 
production.  A commodity  is  never  permanently  imported,  unless 
it  can  be  obtained  from,  abroad  at  a smaller  cost  of  labour  and  capital, 
on  the  whole,  than  is  necessary  for  producing  it.  If,  therefore,  by 
a duty  on  the  importation,  it  is  rendered  cheaper  to  produce  the 
article  than  to  import  it,  an  extra  quantity  of  labour  and  capital 
is  expended,  without  any  extra  result.  The  labour  is  useless,  and 
the  capital  is  spent  in  paying  people  for  laboriously  doing  nothing. 
All  custom  duties  which  operate  as  an  encouragement  to  the  home 
production  of  the  taxed  article,  are  thus  an  eminently  wasteful  mode 
of  raising  a revenue. 

This  character  belongs  in  a peculiar  degree  to  custom  duties  on 
the  produce  of  land,  unless  countervailed  by  excise  duties  on  the 
home  production.  Such  taxes  bring  less  into  tbe  public  treasury, 
compared  with  what  they  take  from  the  consumers,  than  any 
other  imposts  to  which  civilized  nations  are  usually  subject.  If  the 


TAXES  ON  COMMODITIES 


m 

wheat  produced  in  a country  is  twenty  millions  of  quarters,  and 
the  consumption  twenty-one  millions,  a million  being  annually 
imported,  and  if  on  this  million  a duty  is  laid  which  raises  the  price 
ten  shillings  per  quarter,  the  price  which  is  raised  is  not  that  of  the 
million  only,  but  of  the  whole  twenty-one  millions.  Taking  the 
most  favourable,  but  extremely  improbable,  supposition,  that  the 
Importation  is  not  at  all  checked,  nor  the  home  production  enlarged, 
the  state  gains  a revenue  of  only  half  a million,  while  the  consumers 
are  taxed  ten  millions  and  a half ; the  ten  millions  being  a contri- 
bution to  the  home  growers,  who  are  forced  by  competition  to 
resign  it  all  to  the  landlords.  The  consumer  thus  pays  to  the  owners 
of  land  an  additional  tax  equal  to  twenty  times  that  which  he  pays 
to  the  state.  Let  us  now  suppose  that  the  tax  really  checks  impor- 
tation. Suppose  importation  stopped  altogether  in  ordinary  years  ; 
it  being  found  that  the  million  of  quarters  can  be  obtained,  by  a 
more  elaborate  cultivation,  or  by  breaking  up  inferior  land,  at  a 
less  advance  than  ten  shillings  upon  the  previous  price — say,  for 
instance,  five  shillings  a quarter.  The  revenue  now  obtains  nothing, 
except  from  the  extraordinary  imports  which  may  happen  to  take 
place  in  a season  of  scarcity.  But  the  consumers  pay  every  year 
a tax  of  five  shilhngs  on  the  whole  twenty-one  millions  of  quarters, 
amounting  to  millions  sterling.  Of  this  the  odd  250,000Z.  goes 
to  compensate  the  growers  of  the  last  million  of  quarters  for  the 
labour  and  capital  wasted  under  the  compulsion  of  the  law.  The 
remaining  five  millions  go  to  enrich  the  landlords  as  before. 

Such  is  the  operation  of  what  are  technically  termed  Corn  Laws, 
when  first  laid  on ; and  such  continues  to  be  their  operation,  so 
long  as  they  have  any  effect  at  all  in  raising  the  price  of  corn.  But 
I am  by  no  means  of  opinion  that  in  the  long  run  they  keep  up  either 
prices  or  rents  in  the  degree  which  these  considerations  might  lead 
us  to  suppose.  What  we  have  said  respecting  the  effect  of  tithes 
and  other  taxes  on  agricultural  produce,  applies  in  a great  degree 
to  corn  laws  : they  anticipate  artificially  a rise  of  price  and  of  rent, 
which  would  at  all  events  have  taken  place  through  the  increase  of 
population  and  of  production.  The  difference  between  a country 
without  corn  laws,  and  a country  which  has  long  had  corn  laws,  is 
not  so  much  that  the  last  has  a higher  price  or  a larger  rental,  but 
that  it  has  the  same  price  and  the  same  rental  with  a smaller  aggregate 
capital  and  a smaller  population.  The  imposition  of  corn  laws 
raises  rents,  but  retards  that  progress  of  accumulation  which  would 
in  no  long  period  have  raised  them  fully  as  much.  The  repeal  of 


850 


BOOK  V.  CHAPTER  IV.  § 6 


corn  laws  tends  to  lower  rents,  but  it  unchains  a force  which,  in 
a progressive  state  of  capital  and  population,  restores  and  even 
increases  the  former  amount.  There  is  every  reason  to  expect  that 
under  the  virtually  free  importation  of  agricultural  produce,  at 
last  extorted  from  the  ruling  powers  of  this  country,  the  price  of 
food,  if  population  goes  on  increasing,  will  gradually  but  steadily 
rise  ; though  this  effect  may  for  a time  be  postponed  by  the  strong 
current  which  in  this  country  has  set  in  (and  the  impulse  is  extending 
itself  to  other  countries)  towards  the  improvement  of  agricultural 
science,  and  its  increased  application  to  practice. 

What  we  have  said  of  duties  on  importation  generally,  is  equally 
applicable  to  discriminating  duties  which  favour  importation  from 
one  place  or  in  one  particular  manner,  in  contradistinction  to 
others  : such  as  the  preference  given  to  the  produce  of  a colony,  or 
of  a country  with  which  there  is  a commercial  treaty  : or  the  higher 
duties  formerly  imposed  by  our  navigation  laws  on  goods  imported 
in  other  than  British  shipping.  Whatever  else  may  be  alleged  in 
favour  of  such  distinctions,  whenever  they  are  not  nugatory,  they 
are  economically  wasteful.  They  induce  a resort  to  a more  costly 
mode  of  obtaining  a commodity,  in  lieu  of  one  less  costly,  and  thus 
cause  a portion  of  the  labour  which  the  country  employs  in  providing 
itself  with  foreign  commodities,  to  be  sacrificed  without  return. 

§ 6.  There  is  one  more  point  relating  to  the  operation  of  taxes 
on  commodities  conveyed  from  one  country  to  another,  which 
requires  notice  : the  infiuence  which  they  exert  on  international 
exchanges.  Every  tax  on  a commodity  tends  to  raise  its  price,  and 
consequently  to  lessen  the  demand  for  it  in  the  market  in  which 
it  is  sold.  All  taxes  on  international  trade  tend,  therefore,  to 
produce  a disturbance  and  a readjustment  of  what  we  have  termed 
the  Equation  of  International  Demand.  This  consideration  leads 
to  some  rather  curious  consequences,  which  have  been  pointed  out 
in  the  separate  essay  on  International  Commerce,  already  several 
times  referred  to  in  this  treatise. 

Taxes  on  foreign  trade  are  of  two  kinds — ^taxes  on  imports,  and 
on  exports.  On  the  first  aspect  of  the  matter  it  would  seem  that 
both  these  taxes  are  paid  by  the  consumers  of  the  commodity ; 
that  taxes  on  exports  consequently  fall  entirely  on  foreigners,  taxes  j 
on  imports  wholly  on  the  home  consumer.  The  true  state  of  the 
case,  however,  is  much  more  complicated. 

“ By  taxing  exports,  we  may,  in  certain  circumstances,  produce  : 


TAXES  ON  COMMODITIES 


861 


a division  of  the  advantage  of  the  trade  more  favourable  to  ourselves. 
In  some  cases  we  may  draw  into  our  coffers,  at  the  expense  of 
foreigners,  not  only  the  whole  tax,  but  more  than  the  tax  : in  other 
cases,  we  should  gain  exactly  the  tax ; in  others,  less  than  the  tax. 
In  this  last  case,  a part  of  the  tax  is  borne  by  ourselves  : possibly  the 
whole,  possibly  even,  as  we  shall  show,  more  than  the  whole.” 

Keverting  to  the  supposititious  case  employed  in  the  Essay,  of  a 
trade  between  Germany  and  England  in  broadcloth  and  linen, 
“ suppose  that  England  taxes  her  export  of  cloth,  the  tax  not  being 
supposed  high  enough  to  induce  Germany  to  produce  cloth  for 
herself.  The  price  at  which  cloth  can  be  sold  in  Germany  ia 
augmented  by  the  tax.  This  will  probably  diminish  the  quantity 
consumed.  It  may  diminish  it  so  much  that,  even  at  the  increased 
price,  there  will  not  be  required  so  great  a money  value  as  before. 
Or  it  may  not  diminish  it  at  all,  or  so  little,  that  in  consequence  of 
the  higher  price,  so  great  a money  value  will  be  purchased  than 
before.  In  this  last  case,  England  will  gain,  at  the  expense  of 
Germany,  not  only  the  whole  amount  of  the  duty,  but  more ; for, 
the  money  value  of  her  exports  to  Germany  being  increased,  while 
her  imports  remain  the  same,  money  will  flow  into  England  from 
Germany.  The  price  of  cloth  will  rise  in  England,  and  consequently 
in  Germany  ; but  the  price  of  linen  will  fall  in  Germany,  and  conse- 
quently in  England.  We  shall  export  less  cloth,  and  import  more 
hnen,  till  the  equilibrium  is  restored.  It  thus  appears  (what  is  at 
first  sight  somewhat  remarkable)  that  by  taxing  her  exports,  England 
would,  in  some  conceivable  circumstances,  not  only  gain  from  her 
foreign  customers  the  whole  amount  of  the  tax,  but  would  also 
get  her  imports  cheaper.  She  would  get  them  cheaper  in  two 
ways ; for  she  would  obtain  them  for  less  money,  and  would  have 
more  money  to  purchase  them  with.  Germany,  on  the  other  hand, 
would  suffer  doubly  : she  would  have  to  pay  for  her  cloth  a price 
increased  not  only  by  the  duty,  but  by  the  influx  of  money  into 
England,  while  the  same  change  in  the  distribution  of  the  circulating 
medium  would  leave  her  less  money  to  purchase  it  with. 

“ This,  however,  is  only  one  of  three  possible  cases.  If,  after  the 
imposition  of  the  duty,  Germany  requires  so  diminished  a quantity 
of  cloth,  that  its  total  value  is  exactly  the  same  as  before,  the 
balance  of  trade  would  be  undisturbed ; England  will  gain  the 
duty,  Germany  will  lose  it,  and  nothing  more.  If,  again,  the 
imposition  of  the  duty  occasions  such  a falling  off  in  the  demand 
that  Germany  requires  a less  pecuniary  value  than  before,  our 


852 


BOOK  V.  CHAPTER  IV.  § 6 


exports  will  no  longer  pay  for  our  imports ; money  must  pass  from 
England  into  Germany  ; and  Germany’s  share  of  the  advantage 
of  the  trade  will  be  increased.  By  the  change  in  the  distribution 
of  money,  cloth  will  fall  in  England  ; and  therefore  it  will,  of  course, 
fall  in  Germany.  Thus  Germany  will  not  pay  the  whole  of  the  tax. 
From  the  same  cause,  linen  will  rise  in  Germany,  and  consequently 
in  England.  When  this  alteration  of  prices  has  so  adjusted  the 
demand  that  the  cloth  and  the  linen  again  pay  for  one  another,  the 
result  is  that  Germany  has  paid  only  a part  of  the  tax,  and  the 
remainder  of  what  has  been  received  into  our  treasury  has  come 
indirectly  out  of  the  pockets  of  our  own  consumers  of  hnen,  who  pay 
a higher  price  for  that  imported  commodity  in  consequence  of  the 
tax  on  our  exports,  while  at  the  same  time  they,  in  consequence  of 
the  efflux  of  money  and  the  fall  of  prices,  have  smaller  money 
incomes  wherewith  to  pay  for  the  hnen  at  that  advanced  price. 

“ It  is  not  an  impossible  supposition  that  by  taxing  our  expxirts 
we  might  not  only  gain  nothing  from  the  foreigner,  the  tax  being 
paid  out  of  our  own  pockets,  but  might  even  compel  our  own  people 
to  pay  a second  tax  to  the  foreigner.  Suppose,  as  before,  that  the 
demand  of  Germany  for  cloth  falls  ofi  so  much  on  the  imposition 
of  the  duty,  that  she  requires  a smaller  money  value  than  before, 
but  that  the  case  is  so  different  with  hnen  in  England,  that  when 
the  price  rises  the  demand  either  does  not  fall  off  at  all,  or  so  httle 
that  the  money  value  required  is  greater  than  before.  The  first 
effect  of  laying  on  the  duty  is,  as  before,  that  the  cloth  exported  will 
no  longer  pay  for  the  hnen  imported.  Money  will  therefore  flow 
out  of  England  into  Germany.  One  effect  is  to  raise  the  price  of 
hnen  in  Germany,  and  consequently  in  England.  But  this,  by  the 
supposition,  instead  of  stopping  the  efflux  of  money,  only  makes 
it  greater,  because  the  higher  the  price,  the  greater  the  money  value 
of  the  hnen  consumed.  The  balance,  therefore,  can  only  be  restored 
by  the  other  effect,  which  is  going  on  at  the  same  time,  namely,  the 
fall  of  cloth  in  the  Enghsh  and  consequently dn  the  German  market. 
Even  when  cloth  has  faUen  so  low  that  its  price  with  the  duty  is 
only  equal  to  what  its  price  without  the  duty  was  at  first,  it  is  not  a 
necessary  consequence  that  the  fall  wiU  stop  ; for  the  same  amount 
of  exportation  as  before  will  not  now  suffice  to  pay  the  increased 
money  value  of  the  imports  ; and  although  the  German  consumers  i 

have  now  not  only  cloth  at  the  old  price,  but  hkewise  increased  j 

money  incomes,  it  is  not  certain  that  they  will  be  inclined  to  employ 
the  increase  of  their  incomes  in  increasing  their  purchases  of  cloth. 


TAXES  ON  COMMODITIES 


863 


The  price  of  cloth,  therefore,  must  perhaps  fall,  to  restore  the 
equilibrium,  more  than  the  whole  amount  of  the  duty  ; Germany 
may  be  enabled  to  import  cloth  at  a lower  price  when  it  is  taxed, 
than  when  it  was  untaxed  : and  this  gain  she  will  acquire  at  the 
expense  of  the  English  consumers  of  linen,  who,  in  addition,  will 
be  the  real  payers  of  the  whole  of  what  is  received  at  their  own 
custom-house  under  the  name  of  duties  on  the  export  of  cloth.” 

It  is  almost  unnecessary  to  remark  that  cloth  and  linen  are  here 
merely  representatives  of  exports  and  imports  in  general ; and 
that  the  effect  which  a tax  on  exports  might  have  in  increasing  the 
cost  of  imports,  would  affect  the  imports  from  all  countries,  and  not 
peculiarly  the  articles  which  might  be  imported  from  the  particular 
country  to  which  the  taxed  exports  were  sent. 

“ Such  are  the  extremely  various  effects  which  may  result  to 
ourselves  and  to  our  customers  from  the  imposition  of  taxes  on  our 
exports ; and  the  determining  circumstances  are  of  a nature  so 
imperfectly  ascertainable,  that  it  must  be  almost  impossible  to  decide 
with  any  certainty,  even  after  the  tax  has  been  imposed,  whether  we 
have  been  gainers  by  it  or  losers.”  In  general,  however,  there  could 
be  little  doubt  that  a country  which  imposed  such  taxes  would  succeed 
in  making  foreign  countries  contribute  something  to  its  revenue ; 
but  unless  the  taxed  article  be  one  for  which  their  demand  is  ex- 
tremely urgent,  they  will  seldom  pay  the  whole  of  the  amount  which 
the  tax  brings  in.*  “ In  any  case,  whatever  we  gain  is  lost  by  some- 
body else,  and  there  is  the  expense  of  the  collection  besides  : if 
international  morality,  therefore,  were  rightly  understood  and  acted 
upon,  such  taxes,  as  being  contrary  to  the  universal  weal,  would 
not  exist.” 

Thus  far  of  duties  on  exports.  We  now  proceed  to  the  more 
ordinary  case  of  duties  on  imports.  “We  have  had  an  example  of  a 
tax  on  exports,  that  is,  on  foreigners,  falling  in  part  on  ourselves.  We 
shall  therefore  not  be  surprised  if  we  find  a tax  on  imports,  that  is, 
on  ourselves,  partly  falling  upon  foreigners.  q / 

“ Instead  of  taxing  the  cloth  which  we  export,  suppose  that 
we  tax  the  linen  which  we  import.  The  duty  which  we  are  now 
supposing  must  not  be  what  is  termed  a protecting  duty,  that  is, 
a duty  sufficiently  high  to  induce  us  to  produce  the  article  at  home. 

♦ Probably  the  strongest  known  instance  of  a large  revenue  raised  from 
foreigners  by  a tax  on  exports,  is  the  opium  trade  with  China.  The  high  price 
of  the  article  under  the  government  monopoly  (which  is  equivalent  to  a high 
export  duty)  has  so  little  effect  in  discouraging  its  consumption,  that  it  is  said 
to  have  been  occasionally  sold  in  China  for  as  much  as  its  weight  in  silver. 


854 


BOOK  V.  CHAPTER  IV.  § 6 


If  it  had  this  effect,  it  would  destroy  entirely  the  trade  both  in 
cloth  and  in  linen,  and  both  countries  would  lose  the  whole  of  the 
advantage  which  they  previously  gained  by  exchanging  those 
commodities  with  one  another.  We  suppose  a duty  which  might 
diminish  the  consumption  of  the  article,  but  which  would  not  prevent 
us  from  continuing  to  import,  as  before,  whatever  linen  we  did 
consume. 

“ The  equilibrium  of  trade  would  be  disturbed  if  the  imposition 
of  the  tax  diminished,  in  the  slightest  degree,  the  quantity  of  linen 
consumed.  For,  as  the  tax  is  levied  at  our  own  custom-house,  the 
German  exporter  only  receives  the  same  price  as  formerly,  though 
the  English  consumer  pays  a higher  one.  If,  therefore,  there  be  any 
diminution  of  the  quantity  bought,  although  a larger  sum  of  money 
may  be  actually  laid  out  in  the  article,  a smaller  one  will  be  due  from 
England  to  Germany  : this  sum  will  no  longer  be  an  equivalent  for 
the  sum  due  from  Germany  to  England  for  cloth,  the  balance 
therefore  must  be  paid  in  money.  Prices  will  fall  in  Germany  and 
rise  in  England ; linen  will  fall  in  the  German  market ; cloth  will 
rise  in  the  English.  The  Germans  will  pay  a higher  price  for  cloth, 
and  will  have  smaller  money  incomes  to  buy  it  with ; while  the 
English  will  obtain  linen  cheaper,  that  is,  its  price  will  exceed  what 
it  previously  was  by  less  than  the  amount  of  the  duty,  while  their 
means  of  purchasing  it  will  be  increased  by  the  increase  of  their 
money  incomes. 

“ If  the  imposition  of  the  tax  does  not  diminish  the  demand,  it 
wiU  leave  the  trade  exactly  as  it  was  before.  We  shall  import 
as  much,  and  export  as  much  ; the  whole  of  the  tax  will  be  paid  out 
of  our  own  pockets. 

“ But  the  imposition  of  a tax  on  a commodity  almost  always 
diminishes  the  demand  more  or  less  ; and  it  can  never,  or  scarcely 
ever,  increase  the  demand.  It  may,  therefore,  be  laid  down  as  a 
principle,  that  a tax  on  imported  commodities,  when  it  really  operates 
as  a tax,  and  not  as  a prohibition  either  total  or  partial,  almost 
always  falls  in  part  upon  the  foreigners  who  consume  our  goods ; 
and  that  this  is  a mode  in  which  a nation  may  appropriate  to  itself, 
at  the  expense  of  foreigners,  a larger  share  than  would  otherwise 
belong  to  it  of  the  increase  in  the  general  productiveness  of  the  labour 
and  capital  of  the  world,  which  results  from  the  interchange  of 
commodities  among  nations.” 

Those  are,  therefore,  in  the  right  who  maintain  that  taxes  on 
imports  are  partly  paid  by  foreigners  ; but  they  are  mistaken  when 


TAXES  ON  COMMODITIES 


855 


they  say,  that  it  is  by  the  foreign  producer.  It  is  not  on  the  person 
from  whom  we  buy,  but  on  all  those  who  buy  from  us,  that  a portion 
of  our  custom-duties  spontaneously  falls.  It  is  the  foreign  consumer 
of  our  exported  commodities,  who  is  obliged  to  pay  a higher  price  for 
them  because  we  maintain  revenue  duties  on  foreign  goods. 

There  are  but  two  cases  in  which  duties  on  commodities  can  in  any 
degree,  or  in  any  manner,  fall  on  the  producer.  One  is,  when  the 
article  is  a strict  monopoly,  and  at  a scarcity  price.  The  price  in 
this  case  being  only  limited  by  the  desires  of  the  buyer ; the  sum 
obtained  from  the  restricted  supply  being  the  utmost  which  the 
buyers  would  consent  to  give  rather  than  go  without  it ; if  the 
treasury  intercepts  a part  of  this,  the  price  cannot  be  further  raised 
to  compensate  for  the  tax,  and  it  must  be  paid  from  the  monopoly 
profits.  A tax  on  rare  and  high-priced  wines  will  fall  wholly  on  the 
growers,  or  rather,  on  the  owners  of  the  vineyards.  The  second 
case  in  which  the  producer  sometimes  bears  a portion  of  the  tax,  is 
more  important : the  case  of  duties  on  the  produce  of  land  or  of 
mines.  These  might  be  so  high  as  to  diminish  materially  the  demand 
for  the  produce,  and  compel  the  abandonment  of  some  of  the  inferior 
qualities  of  land  or  mines.  Supposing  this  to  be  the  effect,  the 
consumers,  both  in  the  country  itself  and  in  those  which  dealt  with 
it,  would  obtain  the  produce  at  smaller  cost ; and  a part  only, 
instead  of  the  whole,  of  the  duty  would  fall  on  the  purchaser,  who 
would  be  indemnified  chiefly  at  the  expense  of  the  landowners  or 
mine-owners  in  the  producing  country. 

Duties  on  importation  may,  then,  be  divided  “ into  two  classes  : 
those  which  have  the  effect  of  encouraging  some  particular  branch 
of  domestic  industry,  and  those  which  have  not.  The  former  are 
purely  mischievous,  both  to  the  country  imposing  them,  and  to 
those  with  whom  it  trades.  They  prevent  a saving  of  labour  and 
capital,  which,  if  permitted  to  be  made,  would  be  divided  in  some 
proportion  or  other  between  the  importing  country  and  the  countries 
which  buy  what  that  country  does  or  might  export. 

“ The  other  class  of  duties  are  those  which  do  not  encourage  one 
mode  of  procuring  an  article  at  the  expense  of  another,  but  allow 
interchange  to  take  place  just  as  if  the  duty  did  not  exist,  and  to 
produce  the  saving  of  labour  which  constitutes  the  motive  to  inter- 
national, as  to  all  other  commerce.  Of  this  kind  are  duties  on  the 
importation  of  any  commodity  which  could  not  by  any  possibility 
be  produced  at  home ; and  duties  not  sufficiently  high  to  counter- 
balance the  difference  of  expense  between  the  production  of  the 


856 


BOOK  V.  CHAPdCKR  IV.  § 6 


article  at  home  and  its  importation.  Of  the  money  which  is  brought 
into  the  treasury  orahyncountry  hy  taxes  of  this  last  description,  a 
part  only  is  paid  by  the  people  of  that  country ; the  remainder  by 
the  foreign  consumers  of  their  goods. 

“ Nevertheless,  this  latter  kind  of  taxes  are  in  principle  as 
ineligible  as  the  former,  though  not  precisely  on  the  same  ground. 
A protecting  duty  can  never  be  a cause  of  gain,  but  always  and 
necessarily  of  loss,  to  the  country  imposing  it,  just  so  far  as  it  is 
efiBcacious  to  its  end.  A non-protecting  duty,  on  the  contrary, 
would  in  most  cases  be  a source  of  gain  to  the  country  imposing  it, 
in  so  far  as  throwing  part  of  the  weight  of  its  taxes  upon  other 
people  is  a gain ; but  it  would  be  a means  which  it  could  seldom 
be  advisable  to  adopt,  being  so  easily  counteracted  by  a precisely 
similar  proceeding  on  the  other  side. 

“ If  England,  in  the  case  already  supposed,  sought  to  obtain  for 
herself  more  than  her  natural  share  of  the  advantage  of  the  trade 
with  Germany,  by  imposing  a duty  upon  linen,  Germany  would 
only  have  to  impose  a duty  upon  cloth,  sufficient  to  diminish  the 
demand  for  that  article  about  as  much  as  the  demand  for  linen  had 
been  diminished  in  England  by  the  tax.  Things  would  then  be  as 
before,  and  each  country  would  pay  its  own  tax.  Unless,  indeed, 
the  sum  of  the  two  duties  exceeded  the  entire  advantage  of  the 
trade ; for  in  that  case  the  trade,  and  its  advantage,  would  cease 
entirely. 

“ There  would  be  no  advantage,  therefore,  in  imposing  duties 
of  this  kind,  with  a view  to  gain  by  them  in  the  manner  which  has 
been  pointed  out.  But  when  any  part  of  the  revenue  is  derived 
from  taxes  on  commodities,  these  may  often  be  as  little  objectionable 
as  the  rest.  It  is  evident,  too,  that  considerations  of  reciprocity, 
which  are  quite  unessential  when  the  matter  in  debate  is  a protecting 
duty,  are  of  material  importance  when  the  repeal  of  duties  of  this 
other  description  is  discussed.  A country  cannot  be  expected  to 
renounce  the  power  of  taxing  foreigners,  unless  foreigners  will  in 
return  practise  towards  itself  the  same  forbearance.  The  only  mode 
in  which  a country  can  save  itself  from  being  a loser  by  the  revenue 
duties  imposed  by  other  countries  on  its  commodities,  is  to  impose 
corresponding  revenue  duties  on  theirs.  Only  it  must  take  care  that 
those  duties  be  not  so  high  as  to  exceed  all  that  remains  of  the 
advantage  of  the  trade,  and  put  an  end  to  importation  altogether, 
causing  the  article  to  be  either  produced  at  home,  or  imported  from 
another  and  a dearer  market.” 


CHAPTER  V 


OF  SOME  OTHER  TAXES 

§ 1.  Besides  direct  taxes  on  income,  and  taxes  on  consump- 
tion, the  financial  systems  of  most  countries  comprise  a variety  of 
miscellaneous  imposts,  not  strictly  included  in  either  class.  The 
modern  European  systems  retain  many  such  taxes,  though  in  much 
less  number  and  variety  than  those  semi-barbarous  governments 
which  European  influence  has  not  yet  reached.  In  some  of  these, 
scarcely  any  incident  of  life  has  escaped  being  made  an  excuse  for 
some  fiscal  exaction  ; hardly  any  act,  not  belonging  to  daily  routine, 
can  be  performed  by  any  one,  without  obtaining  leave  from  some 
agent  of  government,  which  is  only  granted  in  consideration  of  a 
payment : especially  when  the  act  requires  the  aid  or  the  peculiar 
guarantee  of  a pubhc  authority.  In  the  present  treatise  we  may 
confine  our  attention  to  such  taxes  as  lately  existed,  or  still  exist, 
in  countries  usually  classed  as  civilized. 

In  almost  all  nations  a considerable  revenue  is  drawn  from  taxes 
on  contracts.  These  are  imposed  in  various  forms.  One  expedient 
is  that  of  taxing  the  legal  instrument  which  serves  as  evidence  of  the 
contract,  and  which  is  commonly  the  only  evidence  legally  admissible. 
In  England,  scarcely  any  contract  is  binding  unless  executed  on 
stamped  paper,  which  has  paid  a tax  to  government ; and  until  very 
lately,  when  the  contract  related  to  property  the  tax  was  proportion- 
ally much  heavier  on  the  smaller  than  on  the  larger  transactions  ; 
which  is  still  true  of  some  of  those  taxes.^  There  are  also  stamp- 
duties  on  the  legal  instruments  which  are  evidence  of  the  fulfilment  of 
contracts ; such  as  acknowledgments  of  receipt,  and  deeds  of  release. 
Taxes  on  contracts  are  not  always  levied  by  means  of  stamps.  The 
duty  on  sales  by  auction,  abrogated  by  Sir  Robert  Peel,  was  an 

‘ [So  since  the  3rd  ed.  (1852).  The  original  text  ran:  “and  when  the 
contract  relates  to  property  the  tax  rises,  though  in  an  irregular  manner, 
with  the  pecuniary  value  of  the  property."] 


858 


BOOK  V.  CHAPTER  V.  § 1 


instance  in  point.  The  taxes  on  transfers  of  landed  property,  in 
France,  are  another  : in  England  there  are  stamp-duties.  In  some 
countries,  contracts  of  many  kinds  are  not  valid  unless  registered, 
and  their  registration  is  made  an  occasion  for  a tax. 

Of  taxes  on  contracts,  the  most  important  are  those  on  the 
transfer  of  property  ; chiefly  on  purchases  and  sales.  Taxes  on  the 
sale  of  consumable  commodities  are  simply  taxes  on  those  com- 
modities. If  they  affect  only  some  particular  commodities,  they 
raise  the  prices  of  those  commodities,  and  are  paid  by  the  consumer. 
If  the  attempt  were  made  to  tax  all  purchases  and  sales,  which, 
however  absurd,  was  for  centuries  the  law  of  Spain,  the  tax,  if  it 
could  be  enforced,  would  be  equivalent  to  a tax  on  all  comimodities, 
and  would  not  affect  prices  : if  levied  from  the  sellers,  it  would  be  a 
tax  on  profits,  if  from  the  buyers,  a tax  on  consumption ; and 
neither  class  could  throw  the  burthen  upon  the  other.  If  confined 
to  some  one  mode  of  sale,  as  for  example  by  auction,  it  discourages 
recourse  to  that  mode,  and  if  of  any  material  amount,  prevents  it 
from  being  adopted  at  all,  unless  in  a case  of  emergency  ; in  which 
case  as  the  seller  is  under  a necessity  to  sell,  but  the  buyer  under 
no  necessity  to  buy,  the  tax  falls  on  the  seller ; and  this  was  the 
strongest  of  the  objections  to  the  auction  duty:  it  almost  always 
fell  on  a necessitous  person,  and  in  the  crisis  of  his  necessities. 

Taxes  on  the  purchase  and  sale  of  land  are,  in  most  countries, 
liable  to  the  same  objection.  Landed  property  in  old  countries  is 
seldom  parted  with,  except  from  reduced  circumstances,  or  some 
urgent  need  : the  seller,  therefore,  must  take  what  he  can  get,  while 
the  buyer,  'whose  object  is  an  investment,  makes  his  calculations  on 
the  interest  which  he  can  obtain  for  his  money  in  other  ways,  and 
wiU  not  buy  if  he  is  charged  with  a government  tax  on  the  trans- 
action.* It  has  indeed  been  objected,  that  this  argument  would 
not  apply  if  all  modes  of  permanent  investment,  such  as  the  purchase 
of  government  securities,  shares  in  joint-stock  companies,  mortgages, 
and  the  like,  were  subject  to  the  same  tax.  But  even  then,  if  paid  by 
the  buyer,  it  would  be  equivalent  to  a tax  on  interest : if  sufficiently 
heavy  to  be  of  any  importance,  it  would  disturb  the  established 
relation  between  interest  and  profit ; and  the  disturbance  would 

♦ [1865]  The  statement  in  the  text  requires  modification  in  the  case  oi 
countries  where  the  land  is  owned  in  small  portions.  These,  being  neither  a 
badge  of  importance,  nor  in  general  an  object  of  local  attachment,  are  readily 
parted  with  at  a small  advance  on  their  original  cost,  with  the  intention  of 
buying  elsewhere ; and  the  desire  of  acquiring  land  even  on  disadvantageous 
terms  is  so  great  as  to  be  little  checked  by  even  a high  rate  of  taxation. 


MISCELLANEOUS  TAXES 


859 


redress  its-  If  by  a rise  in  the  rate  of  interest,  and  a fall  of  the  price  of 
land  and  of  all  securities.  It  appears  to  me,  therefore,  that  the  seller 
is  the  person  by  whom  such  taxes,  unless  under  pecuhar  circumstances, 
will  generally  be  borne. 

All  taxes  must  be  condemned  which  throw  obstacles  in  the  way 
of  the  sale  of  land,  or  other  instruments  of  production.  Such  sales 
tend  naturally  to  render  the  property  more  productive.  The  seller, 
whether  moved  by  necessity  or  choice,  is  probably  some  one  who  is 
either  without  the  means,  or  without  the  capacity,  to  make  the  most 
advantageous  use  of  the  property  for  productive  purposes ; while 
the  buyer,  on  the  other  hand,  is  at  any  rate  not  needy,  and  is  fre- 
quently both  inclined  and  able  to  improve  the  property,  since,  as 
it  is  worth  more  to  such  a person  than  to  any  other,  he  is  likely  to 
offer  the  highest  price  for  it.  All  taxes,  therefore,  and  all  difficulties 
and  expenses,  annexed  to  such  contracts,  are  decidedly  detrimental ; 
especially  in  the  case  of  land,  the  source  of  subsistence,  and  the 
original  foundation  of  all  wealth,  on  the  improvement  of  which, 
therefore,  so  much  depends.  Too  great  facilities  cannot  be  given  to 
enable  land  to  pass  into  the  hands,  and  assume  the  modes  of  aggrega- 
tion or  division,  most  conducive  to  its  productiveness.  If  landed 
properties  are  too  large,  alienation  should  be  free,  in  order  that  they 
may  be  subdivided  ; if  too  small,  in  order  that  they  may  be  united. 
All  taxes  on  the  transfer  of  landed  property  should  be  abolished ; 
but,  as  the  landlords  have  no  claim  to  be  relieved  from  any  reserva- 
tion which  the  state  has  hitherto  made  in  its  own  favour  from  the 
amount  of  their  rent,  an  annual  impost  equivalent  to  the  average 
produce  of  these  taxes  should  be  distributed  over  the  land  generally, 
in  the  form  of  a land-tax.^ 

Some  of  the  taxes  on  contracts  are  very  pernicious,  imposing  a 
virtual  penalty  upon  transactions  which  it  ought  to  be  the  pohcy 
of  the  legislator  to  encourage.  Of  this  sort  is  the  stamp-duty  on 
leases,  which  in  a country  of  large  properties  are  an  essential  con- 
dition of  good  agriculture ; and  the  taxes  on  insurances,  a direct 
discouragement  to  prudence  and  forethought.^ 

* [The  long  footnote  in  the  original  edition  illustrating  the  higher  rate  of 
stamp  duties  on  smaller  contracts,  disappeared  from  the  3rd  ed.  (1852).] 

2 [At  this  point  the  following  passage  remained,  with  an  unimportant 
verbal  alteration,  through  the  first  six  editions  and  disappeared  in  1871  ; “ In 
the  case  of  fire  insurances,  the  tax  is  exactly  double  the  amount  of  the  premium 
of  insurance  on  common  risks ; so  that  the  person  insuring  is  obliged  by  the 
government  to  pay  for  the  insurance  just  three  times  the  value  of  the  risk.  If 
this  tax  existed  in  France,  we  should  not  see,  as  we  do  in  some  of  her  pro- 
vinces,  the  plate  of  an  insurance  company  onv  almost  every  cottage  or  hovel 


860 


BOOK  V.  CHAPTER  V.  § 2 


§ 2.  Nearly  allied  to  the  taxes  on  contracts  are  those  on  com- 
munication. The  principal  of  these  is  the  postage  tax ; to  which 
may  be  added  taxes  on  advertisements,  and  on  newspapers,  which 
are  taxes  on  the  communication  of  information. 

The  common  mode  of  levying  a tax  on  the  conveyance  of  letters 
is  by  making  the  government  the  sole  authorized  carrier  of  them, 
and  demanding  a monopoly  price.  When  this  price  is  so  moderate 
as  it  is  in  this  country  under  the  uniform  penny  postage,  scarcely 
if  at  all  exceeding  what  would  be  charged  under  the  freest  oompeti- 
tion  by  any  private  company,  it  can  hardly  be  considered  as  taxa- 
tion, but  rather  as  the  profits  of  a business  ; whatever  excess  there 
is  above  the  ordinary  profits  of  stock  being  a fair  result  of  the  saving 
of  expense,  caused  by  having  only  one  establishment  and  one  set 
of  arrangements  for  the  whole  country,  instead  of  many  competing 
ones.  The  business,  too,  being  one  which  both  can  and  ought  to 
be  conducted  on  fixed  rules,  is  one  of  the  few  businesses  which  it  is 
not  unsuitable  to  a government  to  conduct.  The  post  office,  there- 
fore, is  at  present  one  of  the  best  of  the  sources  from  which  this 
country  derives  its  revenue.  But  a postage  much  exceeding  what 
would  be  paid  for  the  same  service  in  a system  of  freedom  is  not  a 
desirable  tax.  Its  chief  weight  falls  on  letters  of  business,  and 
increases  the  expense  of  mercantile  relations  between  distant 
places.  It  is  like  an  attempt  to  raise  a large  revenue  by  heavy 
tolls  ; it  obstructs  all  operations  by  which  goods  are  conveyed  from 
place  to  place,  and  discourages  the  production  of  commodities  in 
one  place  for  consumption  in  another ; which  is  not  only  in  itself 
one  of  the  greatest  sources  of  economy  of  labour,  but  is  a necessary 
condition  of  almost  all  improvements  in  production,  and  one  of  the 
strongest  stimulants  to  industry,  and  promoters  of  civilization. 

The  tax  on  advertisements  was  not  i free  from  the  same  objection, 
since  in  whatever  degree  advertisements  are  useful  to  business,  by 
facilitating  the  coming  together  of  the  dealer  or  producer  and  the 
consumer,  in  that  same  degree,  if  the  tax  be  high  enough  to  be  a 
serious  discouragement  to  advertising,  it  prolongs  the  period  during 
which  goods  remain  unsold,  and  capital  locked  up  in  idleness.^ 

This,  indeed,  must  be  ascribed  to  the  provident  and  calculating  habits  produced 
by  the  dissemination  of  property  through  the  labouring  class  : but  a tax  of 
so  extravagant  an  amount  would  be  a heavy  drag  upon  any  habits  of  pro- 
vidence.”] 

^ [“  Is  not  ” until  the  7th  ed.  (1871).] 

2 [The  next  sentence  of  the  original  text  disappeared  from  the  3rd  ed. 
(1852) : “ In  this  country  the  amount  of  the  duty  is  moderate,  and  the  abuse 


MISCELLANEOUS  TAXES 


861 


A tax  on  newspapers  is  objectionable,  not  so  much  where  it  does 
fall  as  where  it  does  not,  that  is,  where  it  prevents  newspapers  from 
being  used.  To  the  generality  of  those  who  buy  them,  newspapers 
are  a luxury  which  they  can  as  well  afford  to  pay  for  as  any  other 
indulgence,  and  which  is  as  unexceptionable  a source  of  revenue. 
But  to  that  large  part  of  the  community  who  have  been  taught  to 
read,  but  have  received  little  other  intellectual  education,  news- 
papers are  the  source  of  nearly  all  the  general  information  which 
they  possess,  and  of  nearly  all  their  acquaintance  with  the  ideas  and 
topics  current  among  mankind  ; and  an  interest  is  more  easily  excited 
in  newspapers,  than  in  books  or  other  more  recondite  sources  of 
instruction.  Newspapers  contribute  so  little,  in  a direct  way,  to 
the  origination  of  useful  ideas,  that  many  persons  undervalue  the 
importance  of  their  office  in  disseminating  them.  They  correct 
many  prejudices  and  superstitions,  and  keep  up  a habit  of  dis- 
cussion, and  interest  in  public  concerns,  the  absence  of  which  is  a 
great  cause  of  the  stagnation  of  mind  usually  found  in  the  lower  and 
middle,  if  not  in  all,  ranks  of  those  countries  where  newspapers  of 
an  important  or  interesting  character  do  not  exist.  There  ought 
to  be  no  taxes  (as  in  this  country  there  now  are  not)  ^ which  render 
this  great  diffuser  of  information,  of  mental  excitement,  and  mental 
exercise,  less  accessible  to  that  portion  of  the  public  which  most 
needs  to  be  carried  into  a region  of  ideas  and  interest  beyond  its  own 
limited  horizon. 

§ 3.  In  the  enumeration  of  bad  taxes,  a conspicuous  place  must 
be  assigned  to  law  taxes  ; which  extract  a revenue  for  the  state  from 
the  various  operations  involved  in  an  application  to  the  tribunals. 
Like  all  needless  expenses  attached  to  law  proceedings,  they  are  a 
tax  on  redress,  and  therefore  a premium  on  injury.  Although  such 
taxes  have  been  abolished  in  this  country  as  a general  source  of 
revenue,  they  still  exist  in  the  form  of  fees  of  court,  for  defraying  the 
expense  of  the  courts  of  justice ; under  the  idea,  apparently,  that 
those  may  fairly  be  required  to  bear  the  expenses  of  the  administra- 
tion of  justice  who  reap  the  benefit  of  it.  The  fallacy  of  this  doctrine 
was  powerfully  exposed  by  Bentham.  As  he  remarked,  those  who 
are  under  the  necessity  of  going  to  law  are  those  who  benefit  least,  not 

of  advertising,  which  is  quite  as  conspicuous  as  the  use,  renders  the  abolition 
of  the  tax,  though  right  in  principle,  a matter  of  less  urgency  than  it  might 
otherwise  be  deemed.”] 

^ [The  parenthesis  added  in  7th  ed.  (1871).‘l 


862 


BOOK  V.  GHAPTER  V.  § 4 


most,  by  the  law  and  its  administration.  To  them  the  protection 
which  the  law  affords  has  not  been  complete,  since  they  have  been 
obliged  to  resort  to  a court  of  justice  to  ascertain  their  rights,  or 
maintain  those  rights  against  infringement : while  the  remainder 
of  the  public  have  enjoyed  the  immunity  from  injury  conferred  by 
the  law  and  the  tribunals,  without  the  inconvenience  of  an  appeal 
to  them. 


§ 4.  Besides  the  general  taxes  of  the  State,  there  are  in  all  or 
most  countries  local  taxes,  to  defray  any  expenses  of  a public  nature 
which  it  is  thought  best  to  place  under  the  control  or  management 
of  a local  authority.  Some  of  these  expenses  are  incurred  for  pur- 
poses in  which  the  particular  locality  is  solely  or  chiefly  interested ; 
as  the  paving,  cleansing,  and  lighting  of  the  streets  ; or  the  making 
and  repairing  of  roads  and  bridges,  which  may  be  important  to 
people  from  any  part  of  the  country,  but  only  in  so  far  as  they,  or 
goods  in  which  they  have  an  interest,  pass  along  the  roads  or  over 
the  bridges.  In  other  cases  again,  the  expenses  are  of  a kind  as 
nationally  important  as  any  others,  but  are  defrayed  locally,  because 
supposed  more  likely  to  be  well  administered  by  local  bodies ; as, 
in  England,  the  relief  of  the  poor,  and  the  support  of  gaols,  and  in 
some  other  countries,  of  schools.  To  decide  for  what  public  objects 
local  superintendence  is  best  suited,  and  what  are  those  which  should 
be  kept  immediately  under  the  central  government,  or  under  a 
mixed  system  of  local  management  and  central  superintendence,  is 
a question  not  of  political  economy,  but  of  administration.  It  is 
an  important  principle,  however,  that  taxes  imposed  by  a local 
authority,  being  less  amenable  to  publicity  and  discussion  than  the 
acts  of  the  government,  should  always  be  special — laid  on  for  some 
definite  service,  and  not  exceeding  the  expense  actually  incurred  in 
rendering  the  service.  Thus  limited,  it  is  desirable,  whenever 
practicable,  that  the  burthen  should  fall  on  those  to  whom  the 
service  is  rendered ; that  the  expense,  for  instance,  of  roads  and 
bridges,  should  be  defrayed  by  a toll  on  passengers  and  goods  con- 
veyed by  them,  thus  dividing  the  cost  between  those  who  use  them 
for  pleasure  or  convenience,  and  the  consumers  of  the  goods  which 
they  enable  to  be  brought  to  and  from  the  market  at  a diminished 
expense.  When,  however,  the  tolls  have  repaid  with  interest  the 
whole  of  the  expenditure,  the  road  or  bridge  should  be  thrown  open 
free  of  toll,  that  it  may  be  used  also  by  those  to  whom,  unless 
open  gratuitously,  it  would  be  valueless  ; provision  being  made  Loi 


MISCELLANEOUS  TAXES 


863 


repairs  either  from  the  funds  of  the  state,  or  by  a rate  levied  on  the 
localities  which  reap  the  principal  benefit. 

In  England,  almost  all  local  taxes  are  direct,  (the  coal  duty  of 
the  City  of  London,  and  a few  similar  imposts,  being  the  chief 
exceptions,)  though  the  greatest  part  of  the  taxation  for  general 
purposes  is  indirect.  On  the  contrary,  in  France,  Austria,  and  other 
countries  where  direct  taxation  is  much  more  largely  employed  by 
the  state,  the  local  expenses  of  towns  are  principally  defrayed  by 
taxes  levied  on  commodities  when  entering  them.  These  indirect 
taxes  are  much  more  objectionable  in  towns  than  on  the  frontier, 
because  the  things  which  the  country  supplies  to  the  towns  are 
chiefly  the  necessaries  of  life  and  the  materials  of  manufacture, 
while,  of  what  a country  imports  from  foreign  countries,  the  greater 
part  usually  [1848]  consists  of  luxuries.  An  octroi  cannot  produce 
a large  revenue,  without  pressing  severely  upon  the  labouring  classes 
of  the  towns  ; unless  their  wages  rise  proportionally,  in  which  case 
the  tax  falls  in  a great  measure  on  the  consumers  of  town  produce, 
whether  residing  in  town  or  country,  since  capital  will  not  remain 
in  the  towns  if  its  profits  fall  below  their  ordinary  proportion  as 
compared  with  the  rural  districts.^ 


^ [See  Appendix  GG.  The  Iruiidenc^  of  Taxation.] 


CHAPTER  VI 


COMPARISON  BETWEEN  DIRECT  AND  INDIRECT  TAXATION 

1.  xIre  direct  or  indirect  taxes  the  most  eligible  ? This 
question,  at  all  times  interesting,  has  of  late  excited  a considerable 
amount  of  discussion.  In  England  there  is  a popular  feeling,  of  old 
standing,  in  favour  of  indirect,  or  it  should  rather  be  said  in  opposi- 
tion to  direct,  taxation.  The  feeling  is  not  grounded  on  the  merits 
01  the  case,  and  is  of  a puerile  kind.  An  Englishman  dislikes,  not 
so  much  the  payment,  as  the  act  of  paying.  He  dislikes  seeing  the 
face  of  the  tax-collector,  and  being  subjected  to  his  peremptory 
demand.  Perhaps,  too,  the  money  which  he  is  required  to  pay 
directly  out  of  his  pocket  is  the  only  taxation  which  he  is  quite  sure 
that  he  pays  at  all.  That  a tax  of  one  shilling  per  pound  on  tea, 
or  of  two  shillings  per  bottle  on  wine,  raises  the  price  of  each  pound 
of  tea  and  bottle  of  wine  which  he  consumes,  by  that  and  more  than 
that  amount,  cannot  indeed  be  denied  ; it  is  the  fact,  and  is  intended 
to  be  so,  and  he  himself,  at  times,  is  perfectly  aware  of  it ; but  it 
makes  hardly  any  impression  on  his  practical  feelings  and  associations, 
serving  to  illustrate  the  distinction  between  what  is  merely  known 
to  be  true  and  what  is  felt  to  be  so.  The  unpopularity  of  direct 
taxation,  contrasted  with  the  easy  manner  in  which  the  public 
consent  to  let  themselves  be  fleeced  in  the  prices  of  commodities, 
has  generated  in  many  friends  of  improvement  a directly  opposite 
mode  of  thinking  to  the  foregoing.  They  contend  that  the  very 
reason  which  makes  direct  taxation  disagreeable,  makes  it  preferable. 
Under  it,  every  one  knows  how  much  he  really  pays  ; and  if  he  votes 
for  a war,  or  any  other  expensive  national  luxury,  he  does  so  with 
his  eyes  open  to  what  it  costs  him.  If  all  taxes  were  direct,  taxation 
would  be  much  more  perceived  than  at  present ; and  there  would 
be  a security  which  now  there  is  not,  for  economy  in  the  public 
expenditure. 

Although  this  argument  is  not  without  force,  its  weight  is  likely 


DIRECT  AND  INDIRECT  TAXES  COMPARED 

to  be  constantly  diminishing.  The  real  incidence  of  indirect  taxa- 
tion is  every  day  more  generally  understood  and  more  familiarly 
recognised  : and  whatever  else  may  be  said  of  the  changes  which 
are  taking  place  in  the  tendencies  of  the  human  mind,  it  can  scarcely, 
I think,  be  denied,  that  things  are  more  and  more  estimated  accord- 
ing to  their  calculated  value,  and  less  according  to  their  non-essential 
accompaniments.  The  mere  distinction  between  paying  money 
directly  to  the  tax-collector,  and  contributing  the  same  sum  through 
the  intervention  of  the  tea-dealer  or  the  wine-merchant,  no  longer 
makes  the  whole  difference  between  dislike  or  opposition  and 
passive  acquiescence.  But  further,  while  any  such  infirmity  of 
the  popular  mind  subsists,  the  argument  grounded  on  it  tells  partly 
on  the  other  side  of  the  question.  If  our  present  revenue  of  about 
seventy  [1862]  millions  were  all  raised  by  direct  taxes,  an  extreme 
dissatisfaction  would  certainly  arise  at  having  to  pay  so  much  ; 
but  while  men’s  minds  are  so  little  guided  by  reason,  as  such  a change 
of  feehng  from  so  irrelevant  a cause  would  imply,  so  great  an  aversion 
to  taxation  might  not  be  an  unqualified  good.  Of  the  seventy  millions 
in  question,  nearly  thirty  are  pledged,  under  the  most  binding 
obligations,  to  those  whose  property  has  been  borrowed  and  spent 
by  the  state : and  while  this  debt  remains  unredeemed,  a greatly 
increased  impatience  of  taxation  would  involve  no  little  danger  of  a 
breach  of  faith,  similar  to  that  which,  in  the  defaulting  states  of 
America,  has  been  produced,  and  in  some  of  them  still  continues, 
from  the  same  cause.  That  part,  indeed,  of  the  pubhc  expenditure 
which  is  devoted  to  the  maintenance  of  civil  and  military  establish- 
ments (that  is,  all  except  the  interest  of  the  national  debt)  affords, 
in  many  of  its  details,  ample  scope  for  retrenchment.^  But  while 
much  of  the  revenue  is  wasted  under  the  mere  pretence  of  public 
service,  so  much  of  the  most  important  business  of  government  is 
left  undone,  that  whatever  can  be  rescued  from  useless  expenditure 
is  urgently  required  for  useful.  Whether  the  object  be  education  ; 
a more  efiicient  and  accessible  administration  of  justice ; reforms 
of  any  kind  which,  like  the  Slave  Emancipation,  require  compensa- 
tion to  individual  interests  ; or  what  is  as  important  as  any  of  these, 
the  entertainment  of  a sufficient  staff  of  able  and  educated  public 

‘ [So  since  the  3rd  ed.  (1852).  According  to  the  original  text,  the  expendi- 
ture on  civil  and  military  establishments  was  “ still  in  many  cases  unnecessarily 
profuse,  but  though  many  of  the  items  will  bear  great  reduction,  others  cer- 
tainly require  increase,”  and  the  hope  was  not  held  out,  as  in  the  parenthesis 
also  inserted  further  on  in  the  paragraph  in  the  3rd  ed.,  that  retrenchment  would 
provide  sufiicient  means  for  the  new  purposes.] 


866 


BOOK  V.  CHAPTER  VI.  § 1 


servants,  to  conduct  in  a better  than  the  present  awkward  raannei 
the  business  of  legislation  and  administration ; every  one  of  these 
things  implies  considerable  expense,  and  many  of  them  have  again 
and  again  been  prevented  by  the  reluctance  which  existed  to  apply 
to  Parliament  for  an  increased  grant  of  public  money,  though 
(besides  that  the  existing  means  would  probably  be  sufficient  if 
applied  to  the  proper  purposes)  the  cost  would  be  repaid,  often 
a hundred-fold,  in  mere  pecuniary  advantage  to  the  community 
generally.  If  so  great  an  addition  were  made  to  the  pubhc  dishke 
of  taxation  as  might  be  the  consequence  of  confining  it  to  the 
direct  form,  the  classes  who  profit  by  the  misapplication  of  public 
money  might  probably  succeed  in  saving  that  by  which  they 
profit,  at  the  expense  of  that  which  would  only  be  useful  to  the 
public. 

There  is,  however,  a frequent  plea  in  support  of  indirect  taxation 
which  must  be  altogether  rejected,  as  grounded  on  a fallacy.  We 
are  often  told  that  taxes  on  commodities  are  less  burthensome 
than  other  taxes,  because  the  contributor  can  escape  from  them 
by  ceasing  to  use  the  taxed  commodity.  He  certainly  can,  if  that 
be  his  object,  deprive  the  government  of  the  money  : but  he  does  so 
by  a sacrifice  of  his  own  indulgences,  which  (if  he  chose  to  undergo 
it)  would  equally  make  up  to  him  for  the  same  amount  taken  from 
him  by  a direct  taxation.  Suppose  a tax  laid  on  wine,  sufficient 
to  add  five  pounds  to  the  price  of  the  quantity  of  wine  which  he 
consumes  in  a year.  He  has  only  (we  are  told)  to  diminish  his 
consumption  of  wine  by  5^.,  and  he  escapes  the  burthen.  True : but 
if  the  5Z.,  instead  of  being  laid  on  wine,  had  been  taken  from  him  by 
an  income  tax,  he  could,  by  expending  5Z.  less  in  wine,  equally  save 
the  amount  of  the  tax,  so  that  the  difference  between  the  two  cases 
is  really  illusory.  If  the  government  takes  from  the  contributor 
five  pounds  a year,  whether  in  one  way  or  another,  exactly  that 
amount  must  be  retrenched  from  his  consumption  to  leave  him  as 
well  off  as  before  ; and  in  either  way  the  same  amount  of  sacrifice, 
neither  more  nor  less,  is  imposed  on  him. 

On  the  other  hand,  it  is  some  advantage  on  the  side  of  indirect - 
taxes,  that  what  they  exact  from  the  contributor  is  taken  at  a time 
and  in  a manner  hkely  to  be  convenient  to  him.  It  is  paid  at  a time 
when  he  has  at  any  rate  a payment  to  make ; it  causes,  therefore, 
no  additional  trouble,  nor  (unless  the  tax  be  on  necessaries)  any 
inconvenience  but  what  is  inseparable  from  the  payment  of  the 
amount.  He  can  also,  except  in  the  case  of  very  perishable  articles, 


DIRECT  AND  INDIRECT  TAXES  COMPARED 


867 


select  his  own  time  for  laying  in  a stock  of  the  commodity,  and 
consequently  for  payment  of  the  tax.  The  producer  or  dealer  who 
advances  these  taxes  is,  indeed,  sometimes  subjected  to  incon- 
venience ; but,  in  the  case  of  imported  goods,  this  inconvenience  is 
reduced  to  a minimum  by  what  is  called  the  Warehousing  System, 
under  which,  instead  of  paying  the  duty  at  the  time  of  importation, 
he  is  only  required  to  do  so  when  he  takes  out  the  goods  for  con- 
sumption, which  is  seldom  done  until  he  has  either  actually  found, 
or  has  the  prospect  of  immediately  finding,  a purchaser. 

1 The  strongest  objection,  however,  to  raising  the  whole  or  the 
greater  part  of  a large  revenue  by  direct  taxes,  is  the  impossibility 
of  assessing  them  fairly  without  a conscientious  co-operation  on 
the  part  of  the  contributors,  not  to  be  hoped  for  in  the  present  low 
state  of  public  morality.  In  the  case  of  an  income  tax,  we  have 
already  seen  that  unless  it  be  found  practicable  to  exempt  savings 
altogether  from  the  tax,  the  burthen  cannot  be  apportioned  with 
any  tolerable  approach  to  fairness  upon  those  whose  incomes  are 
derived  from  business  or  professions ; and  this  is  in  fact  admitted 
by  most  of  the  advocates  of  direct  taxation,  who,  I am  afraid, 
generally  get  over  the  difficulty  by  leaving  those  classes  untaxed, 
and  confining  their  projected  income  tax  to  “ realized  property,”  in 
which  form  it  certainly  has  the  merit  of  being  a very  easy  form  of 
plunder.  But  enough  has  been  said  in  condemnation  of  this  expe- 
dient. We  have  seen,  however,  that  a house  tax  is  a form  of  direct 
taxation  not  liable  to  the  same  objections  as  an  income  tax,  and 
indeed  liable  to  as  few  objections  of  any  kind  as  perhaps  any  of  our 
indirect  taxes.  But  it  would  be  impossible  to  raise  by  a house  tax 
alone  the  greatest  part  of  the  revenue  of  Great  Britain,  without 
producing  a very  objectionable  overcrowding  of  the  population, 
through  the  strong  motive  which  all  persons  would  have  to  avoid 
the  tax  by  restricting  their  house  accommodation.  Besides,  even 
a house  tax  has  inequalities,  and  consequent  injustices ; no  tax  is 
exempt  from  them,  and  it  is  neither  just  nor  p oh  tic  to  make  all  the 
inequahties  fall  in  the  same  places,  by  calling  upon  one  tax  to  defray 
the  whole  or  the  chief  part  of  the  pubhc  expenditure.  So  much  of 

^ [The  present  text  of  the  first  two  sentences  of  this  paragraph  dates  from 
the  3rd  ed.  (1852).  The  original  (1848)  ran  : 

“ The  decisive  objection,  however,  to  raising  the  whole  or  the  greater 
part  of  a large  revenue  by  direct  taxes,  is  the  impossibility  of  assessing  them 
fairly.  In  the  case  of  an  income-tax,  I have  pointed  out  that  the  burthen 
can  never  be  apportioned  with  any  tolerable  approach  to  fairness  upon  those 
whose  incomes  are  derived  from  a business  or  profession.”] 


868 


BOOK  V.  CHAPTER  VI.  § 2 


the  local  taxation  in  this  country  being  already  in  the  form  of  a 
house  tax,  it  is  probable  that  ten  millions  a year  would  be  fully  as 
much  as  could  beneficially  be  levied,  through  this  medium,  for 
general  purposes. 

A certain  amount  of  revenue  may,  as  we  have  seen,  be  obtained 
without  injustice  by  a peculiar  tax  on  rent.  Besides  the  present 
land-tax,  and  an  equivalent  for  the  revenue  now  derived  from  stamp 
duties  on  the  conveyance  of  land,  some  further  taxation  might,  I 
have  contended,  at  some  future  period  be  imposed,  to  enable  the 
state  to  participate  in  the  progressive  increase  of  the  incomes  of 
landlords  from  natural  causes.  Legacies  and  inheritances,  we  have 
also  seen,  ought  to  be  subjected  to  taxation  sufficient  to  yield  a 
considerable  revenue.  With  these  taxes  and  a house  tax  of  suitable 
amount,  we  should,  I think,  have  reached  the  prudent  limits  of  direct 
taxation,  save  in  a national  emergency  so  urgent  as  to  justify  the 
government  in  disregarding  the  amount  of  inequality  and  unfair- 
ness which  may  ultimately  be  found  inseparable  from  an  income  tax.^ 
The  remainder  of  the  revenue  would  have  to  be  provided  by  taxes 
on  consumption,  and  the  question  is,  which  of  these  are  the  least 
objectionable. 

§ 2.  There  are  some  forms  of  indirect  taxation  which  must  be 
peremptorily  excluded.  Taxes  on  commodities,  for  revenue  pur- 
poses, must  not  operate  as  protecting  duties,  but  must  be  levied 
impartially  on  every  mode  in  which  the  articles  can  be  obtained, 
whether  produced  in  the  country  itself  or  imported.  An  exclusion 
must  also  be  put  upon  all  taxes  on  the  necessaries  of  life,  or  on  the 
materials  or  instruments  employed  in  producing  those  necessaries. 
Such  taxes  are  always  hable  to  encroach  on  what  should  be  left  un- 
taxed, the  incomes  barely  sufficient  for  healthful  existence  ; and  on 
the  most  favourable  supposition,  namely,  that  wages  rise  to  com 
pensate  the  labourers  for  the  tax,  it  operates  as  a peculiar  tax  on 
profits,  which  is  at  once  imjust,  and  detrimental  to  national  wealth.* 

' [So  since  the  3rd  ed.  (1862).  The  original  ran : “ in  disregarding  the 
inequality  and  unfairness  inseparable  from  every  practicable  form  of  income 
tax.”] 

* Some  argue  that  the  materials  and  instruments  of  aU  production  should 
be  exempt  from  taxation ; but  these,  wh«n  they  do  not  enter  into  the  pro- 
duction of  necessaries,  seem  as  proper  subjects  of  taxation  as  the  finished 
article.  It  is  chiefly  with  reference  to  foreign  trade  that  such  taxes  have  been 
considered  injurious.  Internationally  speaking,  they  may  be  looked  upon  as 
export  duties,  and,  unless  in  cases  in  which  an  export  duty  is  advisable,  they 
should  be  accompanied  with  an  equivalent  drawback  on  exportation.  But 


DIRECT  AND  INDIRECT  TAXES  COMPARED 


869 


What  remain  are  taxes  on  luxuries.  And  these  have  some  pro- 
perties which  strongly  recommend  them.  In  the  first  place,  they 
can  never,  by  any  possibility,  touch  those  whose  whole  income  is 
expended  on  necessaries  ; while  they  do  reach  those  by  whom  what 
is  required  for  necessaries  is  expended  on  indulgences.  In  the 
next  place,  they  operate  in  some  cases  as  an  useful,  and  the  only 
useful,  kind  of  sumptuary  law.  I disclaim  aU  asceticism,  and  by  no 
means  wish  to  see  discouraged,  either  by  law  or  opinion,  any  in- 
dulgence (consistent  with  the  means  and  obligations  of  the  person 
using  it)  which  is  sought  from  a genuine  inclination  for,  and  enjoy- 
ment of,  the  thing  itself  ; but  a great  portion  of  the  expenses  of  the 
higher  and  middle  classes  in  most  countries,  and  the  greatest  in 
this,  is  not  incurred  for  the  sake  of  the  pleasure  afforded  by  the 
things  on  which  the  money  is  spent,  but  from  regard  to  opinion,  and 
an  idea  that  certain  expenses  are  expected  from  them  as  an  append- 
age of  station ; and  I cannot  but  think  that  expenditure  of  this 
sort  is  a most  desirable  subject  of  taxation.  If  taxation  discourages 
it,  some  good  is  done,  and  if  not,  no  harm  ; for  in  so  far  as  taxes  are 
levied  on  things  which  are  desired  and  possessed  from  motives  of  this 
description,  nobody  is  the  worse  for  them.  When  a thing  is  bought 
not  for  its  use  but  for  its  costliness,  cheapness  is  no  recommendation. 
As  Sismondi  remarks,  the  consequence  of  cheapening  articles  of 
vanity,  is  not  that  less  is  expended  on  such  things,  but  that  the 
buyers  substitute  for  the  cheapened  article  some  other  which  is 
more  costly,  or  a more  elaborate  quahty  of  the  same  thing ; and  as 
the  inferior  quahty  answered  the  purpose  of  vanity  equally  weU 
when  it  was  equally  expensive,  a tax  on  the  article  is  really  paid 
by  nobody  : it  is  a creation  of  pubhc  revenue  by  which  nobody  loses.* 

there  is  no  sufficient  reason  against  taxing  the  materials  and  instruments  used 
in  the  production  of  anything  which  is  itself  a fit  object  of  taxation. 

* “ Were  we  to  suppose  that  diamonds  could  only  be  procured  from  one 
particular  and  distant  country,  and  pearls  from  another,  and  were  the  produce 
of  the  mines  in  the  former,  and  of  the  fishery  in  the  latter,  from  the  operation 
of  natural  causes,  to  become  doubly  difficult  to  procure,  the  effect  would  merely 
be  that  in  time  half  the  quantity  of  diamonds  and  pearls  would  be  sufficient  to 
mark  a certain  opulence  and  rank,  that  it  had  before  been  necessary  to  employ 
for  that  purpose.  The  same  quantity  of  gold  or  some  commodity  reducible  at 
last  to  labour,  would  be  required  to  produce  the  now  reduced  amount,  as 
the  former  larger  amount.  Were  the  difficulty  interposed  by  the  regulations 

of  legislators it  could  make  no  difference  to  the  fitness  of  these  articles 

to  serve  the  purposes  of  vanity.”  Suppose  that  means  were  discovered  whereby 
the  physiological  process  which  generates  the  pearl  might  be  induced  ad  libitum, 
the  result  being  that  the  amount  of  labour  expended  in  procuring  each  pearl 
came  to  be  only  the  fivo-hundredth  part  of  what  it  was  before.  “ The  ultimate 
effect  of  such  a change  would  depend  on  whether  the  fishery  were  free  or  not. 


870 


BOOK  V.  CHAPTER  VI.  § 3 


§ 3.  In  order  to  reduce  as  much  as  possible  the  inconveniences, 
and  increase  the  advantages,  incident  to  taxes  on  commodities,  the 
following  are  the  practical  rules  which  suggest  themselves.  1st. 
To  raise  as  large  a revenue  as  conveniently  may  be  from  those 
classes  of  luxuries  which  have  most  connexion  with  vanity  and  least 
with  positive  enjoyment ; such  as  the  more  costly  qualities  of  all 
kinds  of  personal  equipment  and  ornament.  2ndly.  Whenevei 
possible,  to  demand  the  tax,  not  from  the  producer,  but  directly 
from  the  consumer,  since  when  levied  on  the  producer  it  raises  the 
price  always  by  more,  and  often  by  much  more,  than  the  mere 
amount  of  the  tax.  Most  of  the  minor  assessed  taxes  in  this  country 
are  recommended  by  both  these  considerations.  But  with  regard 
to  horses  and  carriages,  as  there  are  many  persons  to  whom,  from 
health  or  constitution,  these  are  not  so  much  luxuries  as  necessaries, 
the  tax  paid  by  those  who  have  but  one  riding  horse,  or  but  one 
carriage,  especially  of  the  cheaper  descriptions,  should  be  low  ; 
while  taxation  should  rise  very  rapidly  with  the  number  of  horses 
and  carriages,  and  with  their  costliness.  3rdly.  But  as  the  only 
indirect  taxes  which  yield  a large  revenue  are  those  which  fall  on 
articles  of  universal  or  very  general  consumption,  and  as  it  is  there- 
fore necessary  to  have  some  taxes  on  real  luxuries,  that  is,  on  things 
which  afford  pleasure  in  themselves,  and  are  valued  on  that  account 
rather  than  for  their  cost ; these  taxes  should,  if  possible,  be  so 
adjusted  as  to  fall  with  the  same  proportional  weight  on  small,  on 
moderate,  and  on  large  incomes.  This  is  not  an  easy  matter  ; since 
the  things  which  are  the  subjects  of  the  more  productive  taxes  are 
in  proportion  more  largely  consumed  by  the  poorer  members  of  the 
community  than  by  the  rich.  Tea,  coffee,  sugar,  tobacco,  fer- 
mented drinks,  can  hardly  be  so  taxed  that  the  poor  shall  not  bear 

Were  it  free  to  all,  as  pearls  could  be  got  simply  for  the  labour  of  fishing  for 
them,  a string  of  them  might  be  had  for  a few  pence.  The  very  poorest  class 
of  society  could  therefore  afford  to  decorate  their  persons  with  them.  They 
would  thus  soon  become  extremely  vulgar  and  unfashionable,  and  so  at  last 
valueless.  If  however  we  suppose  that  instead  of  the  fishery  being  free,  the 
legislator  owns  and  has  complete  command  of  the  place,  where  alone  pearls 
are  to  be  procured  ; as  the  progress  of  discovery  advanced,  he  might  impose  a 
duty  on  them  equal  to  the  diminution  of  labour  necessary  to  procure  them. 
They  would  then  be  as  much  esteemed  as  they  were  before.  What  simple 
beauty  they  have  would  remain  unchanged.  The  difficulty  to  be  surmounted 
in  order  to  obtain  them  would  be  different,  but  equally  great,  and  they  would 
therefore  equally  serve  to  mark  the  opulence  of  those  who  possessed  them.” 
The  net  revenue  obtained  by  such  a tax  “ would  not  cost  the  society  anything. 
If  not  abused  in  its  application,  it  would  be  a clear  addition  of  so  much  to  the 
resources  of  the  community.” — Rae,  New  Principles  of  Political  Economy, 
pp.  369-71.  [Sociological  Theory  of  Capital,  pp.  286-88.] 


DIRECT  AND  INDIRECT  TAXES  COMPARED 


871 


more  than  their  due  share  of  the  burthen.  Something  might  be 
done  by  making  the  duty  on  the  superior  qualities,  which  are  used 
by  the  richer  consumers,  much  higher  in  proportion  to  the  value 
(instead  of  much  lower,  as  is  almost  universally  the  practice,  under 
the  present  [1848]  English  system) ; but  in  some  cases  the  difficulty 
of  at  all  adjusting  the  duty  to  the  value,  so  as  to  prevent  evasion,  is 
said,  with  what  truth  I know  not,  to  be  insuperable ; so  that  it  is 
thought  necessary  to  levy  the  same  fixed  duty  on  all  the  qualities 
alike  : a flagrant  injustice  to  the  poorer  class  of  contributors,  unless 
compensated  by  the  existence  of  other  taxes  from  which,  as  from 
the  present  income  tax,  they  are  altogether  exempt.  4thly.  As 
far  as  is  consistent  with  the  preceding  rules,  taxation  should  rather 
be  concentrated  on  a few  articles  than  difiused  over  many,  in  order 
that  the  expenses  of  collection  may  be  smaller,  and  that  as  few 
employments  as  possible  may  be  burthensomely  and  vexatiously 
interfered  with.  5thly.  Among  luxuries  of  general  consumption, 
taxation  should  by  preference  attach  itself  to  stimulants,  because 
these,  though  in  themselves  as  legitimate  indulgences  as  any 
others,  are  more  liable  than  most  others  to  be  used  in  excess, 
so  that  the  check  to  consumption,  naturally  arising  from  taxation, 
is  on  the  whole  better  applied  to  them  than  to  other  things.  6thly. 
As  far  as  other  considerations  permit,  taxation  should  be  confined 
to  imported  articles,  since  these  can  be  taxed  with  a less  degree  of 
vexatious  interference,  and  with  fewer  incidental  bad  effects,  than 
when  a tax  is  levied  on  the  field  or  on  the  workshop.  Custom-duties 
are,  cceteris  'paribus , much  less  objectionable  than  excise  : but  they 
must  be  laid  only  on  things  which  either  cannot,  or  at  least  will  not, 
be  produced  in  the  country  itself ; or  else  their  production  there 
must  be  prohibited  (as  in  England  is  the  case  with  tobacco),  or 
subjected  to  an  excise  duty  of  equivalent  amount.  7thly.  No  tax 
ought  to  be  kept  so  high  as  to  furnish  a motive  to  its  evasion  too 
strong  to  be  counteracted  by  ordinary  means  of  prevention  : and 
especially  no  commodity  should  be  taxed  so  highly  as  to  raise  up 
a class  of  lawless  characters,  smugglers,  illicit  distillers,  and  the 
like. 

Of  the  excise  and  custom  duties  lately  existing  in  this  country,  all 
which  are  intrinsically  unfit  to  form  part  of  a good  system  of  taxa- 
tion have,  since  the  last  reforms  by  Mr.  Gladstone,  been  got  rid  of.^ 

^ [So  since  the  6th  ed.  (1862).  The  original  (1848)  ran : “ Among  the 
excise  and  custom  duties  now  existing  in  this  country,  some  must,  on  the 
principles  we  have  laid  down,  be  altogether  condemned.”] 


872 


BOOK  V.  CHAPTER  VI.  § 3 


Among  these  are  all  duties  on  ordinary  articles  of  food,^  whether 
for  human  beings  or  for  cattle ; those  on  timber,  as  falling  on 
the  materials  of  lodging,  which  is  one  of  the  necessaries  of  life ; 
all  duties  on  the  metals,  and  on  implements  made  of  them ; taxes 
on  soap,  which  is  a necessary  of  cleanliness,  and  on  tallow,  the 
material  both  of  that  and  of  some  other  necessaries  ; the  tax  on 
paper,  an  indispensable  instrument  of  almost  all  business  and  of 
most  kinds  of  instruction.  The  duties  which  now  yield  nearly  the 
whole  of  the  customs  and  excise  revenue,  those  on  sugar,  coffee,  tea, 
wine,  beer,  spirits,  and  tobacco,  are  in  themselves,  where  a large 
amount  of  revenue  is  necessary,  extremely  proper  taxes ; but  at 
present  grossly  unjust,  from  the  disproportionate  weight  with  which 
they  press  on  the  poorer  classes ; and  some  of  them  (those  on 
spirits  and  tobacco)  are  so  high  as  to  cause  a considerable  ^ amount 
of  smuggling.  It  is  probable  that  most  of  these  taxes  might  bear 
a great  reduction  without  any  material  loss  of  revenue.  In  what 
manner  the  finer  articles  of  manufacture,  consumed  by  the  rich, 
might  most  advantageously  be  taxed,  I must  leave  to  be  decided 
by  those  who  have  the  requisite  practical  knowledge.  The  difficulty 
would  be  to  effect  it  without  an  inadmissible  degree  of  interference 
with  production.  In  countries  which,  hke  the  United  States,  import 
the  principal  part  of  the  finer  manufactures  which  they  consume, 
there  is  httle  difficulty  in  the  matter : and  even  where  nothing  is 
imported  but  the  raw  material,  that  may  be  taxed,  especially  the 
quahties  of  it  which  are  exclusively  employed  for  the  fabrics  used 
by  the  richer  class  of  consumers.  Thus,  in  England  a high  custom- 
duty  on  raw  silk  would  be  consistent  with  principle ; and  it  might 
perhaps  be  practicable  to  tax  the  finer  qualities  of  cotton  or  hnen 
yarn,  whether  spim  in  the  country  itself  or  imported. 

' [Th©  footnote  added  to  the  6th  ed.  (1865)  was  omitted  from  the  7 th 
(1871) : “ Except  the  shilling  per  quarter  duty  on  com,  ostensibly  for 
registration,  and  scarcely  felt  as  a burthen.”] 

2 [So  since  5th  ed.  (1862).  In  the  original : “ enormous.”] 


CHAPTER  VII 


OF  A NATIONAL  DEBT 

§ 1.  The  question  must  now  be  considered,  how  far  it  is  right 
or  expedient  to  raise  money  for  the  purposes  of  government,  not  by 
laying  on  taxes  to  the  amount  required,  but  by  taking  a portion  of  the 
capital  of  the  country  in  the  form  of  a loan,  and  charging  the  public 
revenue  with  only  the  interest.  Nothing  needs  be  said  about 
providing  for  temporary  wants  by  taking  up  money ; for  instance, 
by  an  issue  of  exchequer  bills,  destined  to  be  paid  ofi,  at  furthest  in 
a year  or  two,  from  the  proceeds  of  the  existing  taxes.  This  is  a 
convenient  expedient,  and  when  the  government  does  not  possess 
a treasure  or  hoard,  is  often  a necessary  one,  on  the  occurrence  of 
extraordinary  expenses,  or  of  a temporary  failure  in  the  ordinary 
sources  of  revenue.  What  we  have  to  discuss  is  the  propriety  of 
contracting  a national  debt  of  a permanent  character ; defraying 
the  expenses  of  a war,  or  of  any  season  of  difficulty,  by  loans,  to  be 
redeemed  either  very  gradually  and  at  a distant  period,  or  not  at  all. 

This  question  has  already  been  touched  upon  in  the  First  Book.* 
We  remarked,  that  if  the  capital  taken  in  loans  is  abstracted  from 
funds  either  engaged  in  production,  or  destined  to  be  employed  in  it, 
their  diversion  from  that  purpose  is  equivalent  to  taking  the  amount 
from  the  wages  of  the  labouring  classes.  Borrowing,  in  this  case,  is 
not  a substitute  for  raising  the  supphes  within  the  year.  A govern- 
ment which  borrows  does  actually  take  the  amount  within  the  year, 
and  that  too  by  a tax  exclusively  on  the  labouring  classes  : than 
which  it  could  have  done  nothing  worse,  if  it  had  supplied  its  wants 
by  avowed  taxation  ; and  in  that  case  the  transaction,  and  its  evils, 
would  have  ended  with  the  emergency ; while  by  the  circuitous 
mode  adopted,  the  value  exacted  from  the  labourers  is  gained,  not 
by  the  state,  but  by  the  employers  of  labour,  the  state  remaining 


Supra,  pp.  77-8. 


874 


BOOR  V.  CHAPTER  VIL  § 1 


charged  with  the  debt  besides,  and  with  its  interest  in  perpetuity. 
The  system  of  public  loans,  in  such  circumstances,  may  be  pro- 
nounced the  very  worst  which,  in  the  present  state  of  civilization, 
is  still  included  in  the  catalogue  of  financial  expedients. 

We  however  remarked  that  there  are  other  circumstances  in 
which  loans  are  not  chargeable  with  these  pernicious  consequences  : 
namely,  first,  when  what  is  borrowed  is  foreign  capital,  the  over- 
flowings of  the  general  accumulation  of  the  world ; or,  secondly, 
when  it  is  capital  which  either  would  not  have  been  saved  at  all  unless 
this  mode  of  investment  had  been  open  to  it,  or,  after  being  saved, 
would  have  been  wasted  in  unproductive  enterprises,  or  sent  to  seek 
employment  in  foreign  countries.  When  the  progress  of  accumu- 
lation has  reduced  profits  either  to  the  ultimate  or  to  the  practical 
minimum, — to  the  rate  less  than  which  would  either  put  a stop  to 
the  increase  of  capital,  or  send  the  whole  of  the  new  accumulations 
abroad  ; government  may  annually  intercept  these  new  accumula-  | 
tions,  without  trenching  on  the  employment  or  wages  of  the  labouring  i 
classes  in  the  country  itself,  or  perhaps  in  any  other  country.  To 
this  extent,  therefore,  the  loan  system  may  be  carried,  without  being 
liable  to  the  utter  and  peremptory  condemnation  which  is  due  to 
it  when  it  overpasses  this  limit.  What  is  wanted  is  an  index  to 
determine  whether,  in  any  given  series  of  years,  as  during  the  last  great 
war  for  example  \i.e.  1793-1815],  the  limit  has  been  exceeded  or  not. 

Such  an  index  exists,  at  once  a certain  and  an  obvious  one.  Did 
the  government,  by  its  loan  operations,  augment  the  rate  of  interest  ? 

If  it  only  opened  a channel  for  capital  which  would  not  otherwise 
have  been  accumulated,  or  which,  if  accumulated,  would  not  have 
been  employed  within  the  country ; this  implies  that  the  capital, 
which  the  government  took  and  expended,  could  not  have  found 
employment  at  the  existing  rate  of  interest.  So  long  as  the  loans  do 
no  more  than  absorb  this  surplus,  they  prevent  any  tendency  to  a 
fall  of  the  rate  of  interest,  but  they  cannot  occasion  any  rise.  When 
they  do  raise  the  rate  of  interest,  as  they  did  in  a most  extraordinary 
degree  during  the  French  war,  this  is  positive  proof  that  the  govern- 
ment is  a competitor  for  capital  with  the  ordinary  channels  of 
productive  investment,  and  is  carrying  off,  not  merely  funds  which 
would  not,  but  funds  which  would,  have  found  productive  employ-  | 
ment  within  the  country.  To  the  full  extent,  therefore,  to  which  the  ^ 
loans  of  government,  during  the  war,  caused  the  rate  of  interest 
to  exceed  what  it  was  before,  and  what  it  has  been  since,  those  loans  ^ 
are  chargeable  with  all  the  evils  which  have  been  described.  If  it  be  ? 


A NATIONAL  DEBT 


876 


objected  that  interest  only  rose  because  profits  rose,  I reply  that 
this  does  not  weaken,  but  strengthens,  the  argument.  If  the 
government  loans  produced  the  rise  of  profits  by  the  great  amount 
of  capital  which  they  absorbed,  by  what  means  can  they  have  had 
this  effect,  unless  by  lowering  the  wages  of  labour  ? It  will  perhaps 
be  said,  that  what  kept  profits  high  during  the  war  was  not  the 
drafts  made  on  the  national  capital  by  the  loans,  but  the  rapid 
progress  of  industrial  improvements.  This,  in  a great  measure, 
was  the  fact ; and  it  no  doubt  alleviated  the  hardship  to  the  labour- 
ing classes,  and  made  the  financial  system  which  was  pursued  less 
actively  mischievous,  but  not  less  contrary  to  principle.  These 
very  improvements  in  industry  made  room  for  a larger  amount  of 
capital ; and  the  government,  by  draining  away  a great  part  of  the 
annual  accumulations,  did  not  indeed  prevent  that  capital  from 
existing  ultimately  (for  it  started  into  existence  with  great  rapidity 
after  the  peace),  but  prevented  it  from  existing  at  the  time,  and 
subtracted  just  so  much,  while  the  war  lasted,  from  distribution 
among  productive  labourers.  If  the  government  had  abstained 
from  taking  this  capital  by  loan,  and  had  allowed  it  to  reach  the 
labourers,  but  had  raised  the  supphes  which  it  required  by  a direct 
tax  on  the  labouring  classes,  it  would  have  produced  (in  every  respect 
but  the  expense  and  inconvenience  of  collecting  the  tax)  the  very 
same  economical  effects  which  it  did  produce,  except  that  we  should 
not  now  have  had  the  debt.  The  course  it  actually  took  was 
therefore  worse  than  the  very  worst  mode  which  it  could  possibly 
have  adopted  of  raising  the  supplies  within  the  year ; i and  the 
only  excuse,  or  justification,  which  it  admits  of  (so  far  as  that  excuse 
could  be  truly  pleaded),  was  hard  necessity ; the  impossibility  of 
raising  so  enormous  an  annual  sum  by  taxation,  without  resorting 
to  taxes  which  from  their  odiousness,  or  from  the  facihty  of  evasion, 
it  would  have  been  found  impracticable  to  enforce. 

When  government  loans  are  limited  to  the  overflowings  of  the 
national  capital,  or  to  those  accumulations  which  would  not  take 
place  at  all  unless  suffered  to  overflow,  they  are  at  least  not  liable 
to  this  grave  condemnation  : they  occasion  no  privation  to  any  one 
at  the  time,  except  by  the  payment  of  the  interest,  and  may  even  be 
beneficial  to  the  labouring  class  during  the  term  of  their  expenditure, 

^ [The  concluding  words  of  this  paragraph  were  added  in  the  4th  ed.  (1857). 
At  the  same  time  the  parenthesis  “ (in  every  respect  . . . the  tax)  ” was 
inserted  above  ; and  the  words  “ by  the  whole  of  that  great  fact  ” were  omitted 
after  “ was  therefore  worse.”] 


876 


BOOK  V.  CHAPTER  VII.  § 2 


by  employing  in  the  direct  purchase  of  labour,  as  that  of  soldiers, 
sailors,  &c.,  funds  which  might  otherwise  have  quitted  the  country 
altogether.  In  this  case,  therefore,  the  question  really  is,  what  it  is 
commonly  supposed  to  be  in  all  cases,  namely,  a choice  between  a 
great  sacrifice  at  once,  and  a small  one  indefinitely  prolonged.  On 
this  matter  it  seems  rational  to  think,  that  the  prudence  of  a nation 
will  dictate  the  same  conduct  as  the  prudence  of  an  individual ; 
to  submit  to  as  much  of  the  privation  immediately  as  can  easily  be 
borne,  and  only  when  any  further  burthen  would  distress  or  cripple 
them  too  much  to  provide  for  the  remainder  by  mortgaging  their 
future  income.  It  is  an  excellent  maxim  to  make  present  resources 
suffice  for  present  wants ; the  future  will  have  its  own  wants  to 
provide  for.  On  the  other  hand,  it  may  reasonably  be  taken  into 
consideration  that  in  a country  increasing  in  wealth,  the  necessary 
expenses  of  government  do  not  increase  in  the  same  ratio  as  capital 
or  population  ; any  burthen,  therefore,  is  always  less  and  less  felt : 
and  since  those  extraordinary  expenses  of  government  which  are 
fit  to  be  incurred  at  all  are  mostly  beneficial  beyond  the  existing 
generation,  there  is  no  injustice  in  making  posterity  pay  a part  of 
the  price,  if  the  inconvenience  would  be  extreme  of  defraying  the 
whole  of  it  by  the  exertions  and  sacrifices  of  the  generation  which 
first  incurred  it. 

§ 2.  When  a country,  wisely  or  unwisely,  has  burthened  itself 
with  a debt,  is  it  expedient  to  take  steps  for  redeeming  that  debt  t 
In  principle  it  is  impossible  not  to  maintain  the  affirmative.  It  is 
true  that  the  payment  of  the  interest,  when  the  creditors  are  members 
of  the  same  community,  is  no  national  loss,  but  a mere  transfer. 
The  transfer,  however,  being  compulsory,  is  a serious  evil,  and  the 
raising  a great  extra  revenue  by  any  system  of  taxation  necessitates 
so  much  expense,  vexation,  disturbance  of  the  channels  of  industry, 
and  other  mischiefs  over  and  above  the  mere  payment  of  the  money 
wanted  by  the  government,  that  to  get  rid  of  the  necessity  of  such 
taxation  is  at  all  times  worth  a considerable  effort.  The  same 
amount  of  sacrifice  which  would  have  been  worth  incurring  to  avoid 
contracting  the  debt  it  is  worth  while  to  incur,  at  any  subsequent 
time,  for  the  purpose  of  extinguishing  it. 

Two  modes  have  been  contemplated  of  pajdng  off  a national  debt : 
either  at  once  by  a general  contribution,  or  gradually  by  a surplus 
revenue.  The  first  would  be  incomparably  the  best,  if  it  were 
practicable  ; and  it  would  be  practicable  if  it  could  justly  be  done  by 


A NATIONAL  DEBT 


877 


assessment  on  property  alone.  If  property  bore  the  whole  interest 
of  the  debt,  property  might,  with  great  advantage  to  itself,  pay  it 
off ; since  this  would  be  merely  surrendering  to  a creditor  the 
principal  sum,  the  whole  annual  proceeds  of  which  were  already  his 
by  law ; and  would  be  equivalent  to  what  a landowner  does  when 
he  sells  part  of  his  estate  to  free  the  remainder  from  a mortgage. 
But  property,  it  needs  hardly  be  said,  does  not  pay,  and  cannot 
justly  be  required  to  pay,  the  whole  interest  of  the  debt.  Some 
indeed  affirm  that  it  can,  on  the  plea  that  the  existing  generation 
is  only  bound  to  pay  the  debts  of  its  predecessors  from  the  assets  it 
has  received  from  them,  and  not  from  the  produce  of  its  own  industry. 
But  has  no  one  received  anything  from  previous  generations  except 
those  who  have  succeeded  to  property  ? Is  the  whole  differenci 
between  the  earth  as  it  is,  with  its  clearings  and  improvements,  its 
roads  and  canals,  its  towns  and  manufactories,  and  the  earth  as  it 
was  when  the  first  human  being  set  foot  on  it,  of  no  benefit  to  any 
but  those  who  are  called  the  owners  of  the  soil  ? Is  the  capital 
accumulated  by  the  labour  and  abstinence  of  all  former  generations 
of  no  advantage  to  any  but  those  who  have  succeeded  to  the  legal 
ownership  of  part  of  it  ? And  have  we  not  inherited  a mass  of 
acquired  knowledge,  both  scientific  and  empirical,  due  to  the 
sagacity  and  industry  of  those  who  preceded  us,  the  benefits  of  which 
are  the  common  wealth  of  all  ? Those  who  are  born  to  the  owner- 
ship of  property  have,  in  addition  to  these  common  benefits,  a 
separate  inheritance,  and  to  this  difference  it  is  right  that  advertence 
should  be  had  in  regulating  taxation.  It  belongs  to  the  general 
financial  system  of  the  country  to  take  due  account  of  this  principle, 
and  I have  indicated,  as  in  my  opinion  a proper  mode  of  taking 
account  of  it,  a considerable  tax  on  legacies  and  inheritances.  Let 
it  be  determined  directly  and  openly  what  is  due  from  property  to 
the  state,  and  from  the  state  to  property,  and  let  the  institutions 
of  the  state  be  regulated  accordingly.  Whatever  is  the  fitting  con- 
tribution from  property  to  the  general  expenses  of  the  state,  in  the 
same  and  in  no  greater  proportion  should  it  contribute  towards 
either  the  interest  or  the  repayment  of  the  national  debt. 

This,  however,  if  admitted,  is  fatal  to  any  scheme  for  the  extinc- 
tion of  the  debt  by  a general  assessment  on  the  community.  Persons 
of  property  could  pay  their  share  of  the  amount  by  a sacrifice  of 
property,  and  have  the  same  net  income  as  before  ; but  if  those  who 
have  no  accumulations,  but  only  incomes,  were  required  to  make 
up  by  a single  payment  the  equivalent  of  the  annual  charge  laid  on 


878 


BOOK  V.  CHAPTER  VII.  § 3 


them  by  the  taxes  maintained  to  pay  the  interest  of  the  debt,  they 
could  only  do  so  by  incurring  a private  debt  equal  to  their  share  of 
the  public  debt ; while  from  the  insufficiency,  in  most  cases,  of  the 
security  which  they  could  give,  the  interest  would  amount  to  a 
much  larger  annual  sum  than  their  share  of  that  now  paid  by  the 
state.  Besides,  a collective  debt  defrayed  by  taxes  has,  over  the 
same  debt  parcelled  out  among  individuals,  the  immense  advantage, 
that  it  is  virtually  a mutual  insurance  among  the  contributors. 
If  the  fortune  of  a contributor  diminishes,  his  taxes  diminish  ; if  he 
is  ruined,  they  cease  altogether,  and  his  portion  of  the  debt  is  wholly 
transferred  to  the  solvent  members  of  the  community.  If  it  were 
laid  on  him  as  a private  obligation,  he  would  still  be  liable  to  it  even 
when  penniless. 

When  the  state  possesses  property,  in  land  or  otherwise,  which 
there  are  not  strong  reasons  of  public  utility  for  its  retaining  at  its 
disposal,  this  should  be  employed,  as  far  as  it  will  go,  in  extinguishing 
debt.  Any  casual  gain,  or  godsend,  is  naturally  devoted  to  the  same 
purpose.  Beyond  this,  the  only  mode  which  is  both  just  and 
feasible,  of  extinguishing  or  reducing  a national  debt,  is  by  means  of 
a surplus  revenue. 

§ 3.  The  desirableness,  per  se,  of  maintaining  a surplus  for  this 
purpose,  does  not,  I think,  admit  of  a doubt.  We  sometimes, 
indeed,  hear  it  said  that  the  amount  should  rather  be  left  to  “ fructify 
in  the  pockets  of  the  people.”  This  is  a good  argument,  as  far  as  it 
goes,  against  levying  taxes  unnecessarily  for  purposes  of  unproductive 
expenditure,  but  not  against  paying  off  a national  debt.  For,  what 
is  meant  by  the  word  fructify  ? If  it  means  anything,  it  means 
productive  employment ; and  as  an  argument  against  taxation,  we 
must  understand  it  to  assert,  that  if  the  amount  were  left  with  the 
people  they  would  save  it,  and  convert  it  into  capital.  It  is  probable, 
indeed,  that  they  would  save  a part,  but  extremely  improbable  that 
they  would  save  the  whole  : while  if  taken  by  taxation,  and  em- 
ployed in  paying  ofi  debt,  the  whole  is  saved,  and  made  productive. 
To  the  fundholder  who  receives  the  payment  it  is  already  capital, 
not  revenue,  and  he  will  make  it  “ fructify,”  that  it  may  continue 
to  afford  him  an  income.  The  objection,  therefore,  is  not  only 
groundless,  but  the  real  argument  is  on  the  other  side  : the  amount 
is  much  more  certain  of  fructifying  if  it  is  not  “ left  in  the  pockets  of 
the  people.” 

It  is  not,  however,  advisable  in  all  cases  to  maintain  a surplus 


A NATIONAL  DEBT 


879 


revenue  for  the  extinction  of  debt.  The  advantage  of  paying  off 
the  r.ational  debt  of  Great  Britain,  for  instance,  is  that  it  would  enable 
us  to  get  rid  of  the  worse  half  of  our  taxation.  But  of  this  worse 
half  some  portions  must  be  worse  than  others,  and  to  get  rid  of  those 
would  be  a greater  benefit  proportionally  than  to  get  rid  of  the  rest. 
If  renouncing  a surplus  revenue  would  enable  us  to  dispense  with  a 
tax,  we  ought  to  consider  the  very  worst  of  all  our  taxes  as  precisely 
the  one  which  we  are  keeping  up  for  the  sake  of  ultimately  abolishing 
taxes  not  so  bad  as  itself.  In  a country  advancing  in  wealth, 
whose  increasing  revenue  gives  it  the  power  of  ridding  itself  from 
time  to  time  of  the  most  inconvenient  portions  of  its  taxation,  I 
conceive  that  the  increase  of  revenue  should  rather  be  disposed  of 
by  taking  ofi  taxes,  than  by  liquidating  debt,  as  long  as  any  very  ob- 
jectionable imposts  remain.  In  the  present  state  of  England  [1848], 
therefore,  I hold  it  to  be  good  policy  in  the  government,  when  it  has 
a surplus  of  an  apparently  permanent  character,  to  take  oS  taxes, 
provided  these  are  rightly  selected.  Even  when  no  taxes  remain 
but  such  as  are  not  unfit  to  form  part  of  a permanent  system,  it  is 
wise  to  continue  the  same  policy  by  experimental  reductions  of 
those  taxes,  until  the  point  is  discovered  at  which  a given  amount 
of  revenue  can  be  raised  with  the  smallest  pressure  on  the  con- 
tributors. After  this,  such  surplus  revenue  as  might  arise  from  any 
further  increase  of  the  produce  of  the  taxes  should  not,  I conceive, 
be  remitted,  but  applied  to  the  redemption  of  debt.  Eventually, 
it  might  be  expedient  to  appropriate  the  entire  produce  of  particular 
taxes  to  this  purpose  ; since  there  would  be  more  assurance  that  the 
liquidation  would  be  persisted  in,  if  the  fund  destined  to  it  were 
kept  apart,  and  not  blended  with  the  general  revenues  of  the  state. 
The  succession  duties  would  be  peculiarly  suited  to  such  a purpose, 
since  taxes  paid,  as  they  are,  out  of  capital  would  be  better  employed 
in  reimbursing  capital  than  in  defraying  current  expenditure.  If 
this  separate  appropriation  were  made,  any  surplus  afterwards 
arising  from  the  increasing  produce  of  the  other  taxes,  and  from 
the  saving  of  interest  on  the  successive  portions  of  debt  paid  ofi, 
might  form  a ground  for  a remission  of  taxation. 

It  has  been  contended  that  some  amount  of  national  debt  is 
desirable,  and  almost  indispensable,  as  an  investment  for  the  savings 
of  the  poorer  or  more  inexperienced  part  of  the  community.  Its 
convenience  in  that  respect  is  imdeniable ; but  (besides  that  the 
progress  of  industry  is  gradually  afiording  other  modes  of  investment 
almost  as  safe  and  untroublesome,  such  as  the  shares  or  obligations 


BOOK  V.  CHAPTER  VII.  § 3 


of  great  public  companies)  the  only  real  superiority  of  an  investment 
in  the  funds  consists  in  the  national  guarantee,  and  this  could  be 
afforded  by  other  means  than  that  of  a public  debt  involving 
compulsory  taxation.  One  mode  which  would  answer  the  purpose 
would  be  a national  bank  of  deposit  and  discount,  with  ramifications 
throughout  the  country ; which  might  receive  any  money  confided 
to  it,  and  either  fund  it  at  a fixed  rate  of  interest,  or  allow  interest 
on  a floating  balance,  hke  the  joint  stock  banks  ; the  interest  given 
being  of  course  lower  than  the  rate  at  which  individuals  can  borrow, 
in  proportion  to  the  greater  security  of  a government  investment ; 
and  the  expenses  of  the  establishment  being  defrayed  by  the  differ- 
ence between  the  interest  which  the  bank  would  pay,  and  that 
which  it  would  obtain,  by  lending  its  deposits  on  mercantile,  landed, 
or  other  security.  There  are  no  insuperable  objections  in  principle, 
nor,  I should  think,  in  practice,  to  an  institution  of  this  sort,  as  a 
means  of  supplying  the  same  convenient  mode  of  investment  now 
afforded  by  the  public  funds.  It  would  constitute  the  state  a great 
insurance  company,  to  insure  that  part  of  the  community  who  live 
on  the  interest  of  their  property,  against  the  risk  of  losing  it  by  the 
bankruptcy  of  those  to  whom  they  might  otherwise  be  under  the 
necessity  of  confiding  it. 


CHAPTER  VIII 


OP  THE  ORDINARY  FUNCTIONS  OF  GOVERNMENT,  CONSIDERED  AS  TO 
THEIR  ECONOMICAL  EFFECTS 

§ 1.  Before  we  discuss  the  line  of  demarcation  between  the 
things  with  which  the  government  should,  and  those  with  which  they 
should  not,  directly  interfere,  it  is  necessary  to  consider  the  econo- 
mical effects,  whether  of  a bad  or  of  a good  complexion,  arising  from 
the  manner  in  which  they  acquit  themselves  of  the  duties  which 
devolve  on  them  in  all  societies,  and  which  no  one  denies  to  be 
incumbent  on  them. 

The  first  of  these  is  the  protection  of  person  and  property.  There 
is  no  need  to  expatiate  on  the  influence  exercised  over  the  economical 
interests  of  society  by  the  degree  of  completeness  with  which  this 
duty  of  government  is  performed.  Insecurity  of  person  and  pro- 
perty is  as  much  as  to  say  uncertainty  of  the  connexion  between  all 
human  exertion  or  sacrifice  and  the  attainment  of  the  ends  for  the 
sake  of  which  they  are  undergone.  It  means,  uncertainty  whether 
they  who  sow  shall  reap,  whether  they  who  produce  shall  consume, 
and  they  who  spare  to-day  shall  enjoy  to-morrow.  It  means,  not 
only  that  labour  and  frugality  are  not  the  road  to  acquisition,  but 
that  violence  is.  When  person  and  property  are  to  a certain  degree 
insecure,  all  the  possessions  of  the  weak  are  at  the  mercy  of  the 
strong.  No  one  can  keep  what  he  has  produced,  unless  he  is  more 
capable  of  defending  it  than  others  who  give  no  part  of  their  time 
and  exertions  to  useful  industry  are  of  taking  it  from  him.  The 
productive  classes,  therefore,  when  the  insecurity  surpasses  a certain 
point,  being  imequal  to  their  own  protection  against  the  predatory 
population,  are  obhged  to  place  themselves  individually  in  a state 
of  dependence  on  some  member  of  the  predatory  class,  that  it 
may  be  his  interest  to  shield  them  from  all  depredation  except 
his  own.  In  this  manner,  in  the  Middle  Ages,  allodial  property 
generally  became  feudal,  and  numbers  of  the  poorer  freemen 


882  BOOjS  V.  CHAPTER  VIII.  § 1 

voluntarily  made  themselves  and  their  posterity  serfs  of  some 
military  lord. 

Nevertheless,  in  attaching  to  this  great  requisite,  seciirity  of 
person  and  property,  the  importance  which  is  justly  due  to  it, 
we  must  not  forget  that  even  for  economical  purposes  there  are  other 
things  quite  as  indispensable,  the  presence  of  which  will  often  make 
up  for  a very  considerable  degree  of  imperfection  in  the  protective 
arrangements  of  government.  As  was  observed  in  a previous 
chapter,*  the  free  cities  of  Italy,  Flanders,  and  the  Hanseatic  league, 
were  habitually  in  a state  of  such  internal  turbulence,  varied  by 
such  destructive  external  wars,  that  person  and  property  enjoyed 
very  imperfect  protection ; yet  during  several  centuries  they  in- 
creased rapidly  in  wealth  and  prosperity,  brought  many  of  the 
industrial  arts  to  a high  degree  of  advancement,  carried  on  distant 
and  dangerous  voyages  of  exploration  and  commerce  with  extra- 
ordinary success,  became  an  overmatch  in  power  for  the  greatest 
feudal  lords,  and  could  defend  themselves  even  against  the  sovereigns 
of  Europe  : because  in  the  midst  of  turmoil  and  violence  the  citizens 
of  those  towns  enjoyed  a certain  rude  freedom,  under  conditions  of 
union  and  co-operation,  which,  taken  together,  made  them  a brave, 
energetic,  and  high-spirited  people,  and  fostered  a great  amount  of 
public  spirit  and  patriotism.  The  prosperity  of  these  and  other 
free  states  in  a lawless  age  shows  that  a certain  degree  of  insecurity, 
in  some  combinations  of  circumstances,  has  good  as  well  as  bad 
ejects,  by  making  energy  and  practical  ability  the  conditions  of 
safety.  Insecurity  paralyzes  only  when  it  is  such  in  nature  and  in 
degree  that  no  energy  of  which  mankind  in  general  are  capable 
affords  any  tolerable  means  of  self-protection.  And  this  is  a main 
reason  why  oppression  by  the  government,  whose  power  is  generally 
irresistible  by  any  efforts  that  can  be  made  by  individuals,  has  so 
much  more  baneful  an  effect  on  the  springs  of  national  prosperity, 
than  almost  any  degree  of  lawlessness  and  turbulence  under  free 
institutions.  Nations  have  acquired  some  wealth,  and  made  some 
progress  in  improvement,  in  states  of  social  union  so  imperfect  as 
to  border  on  anarchy : but  no  countries  in  which  the  people  were 
exposed  without  limit  to  arbitrary  exactions  from  the  officers  of 
government  ever  yet  continued  to  have  industry  or  wealth.  A few 
generations  of  such  a government  never  fail  to  extinguish  both. 
Some  of  the  fairest,  and  once  the  most  prosperous,  regions  of  the 


Supra,  p.  114. 


ORDINARY  FUNCTIONS  OF  GOVERNMENT 


883 


earth,  have,  under  the  Roman  and  afterwards  under  the  Turkish 
dominion,  been  reduced  to  a desert,  solely  by  that  cause.  I say 
solely,  because  they  would  have  recovered  with  the  utmost  rapidity, 
as  countries  always  do,  from  the  devastations  of  war,  or  any  other 
temporary  calamities.  Difficulties  and  hardships  are  often  but  an 
incentive  to  exertion  : what  is  fatal  to  it,  is  the  belief  that  it  will  not 
be  suffered  to  produce  its  fruits. 

§ 2.  Simple  over- taxation  by  government,  though  a great  evil, 
is  not  comparable  in  the  economical  part  of  its  mischiefs  to  exactions 
much  more  moderate  in  amount,  which  either  subject  the  contributor 
to  the  arbitrary  mandate  of  government  officers,  or  are  so  laid  on  as 
to  place  skill,  industry,  and  frugality  at  a disadvantage.  The  burthen 
of  taxation  in  our  own  country  is  very  great,  yet  as  every  one  knows 
its  limit,  and  is  seldom  made  to  pay  more  than  he  expects  and 
calculates  on,  and  as  the  modes  of  taxation  are  not  of  such  a kind 
as  much  to  impair  the  motives  to  industry  and  economy,  the  sources 
of  prosperity  are  little  diminished  by  the  pressure  of  taxation ; 
they  may  even,  as  some  think,  be  increased,  by  the  extra  exertions 
made  to  compensate  for  the  pressure  of  the  taxes.  But  in  the 
barbarous  despotisms  of  many  countries  of  the  East,  where  taxation 
consists  in  fastening  upon  those  who  have  succeeded  in  acquiring 
something,  in  order  to  confiscate  it,  unless  the  possessor  buys  its 
release  by  submitting  to  give  some  large  sum  as  a compromise,  we 
cannot  expect  to  find  voluntary  industry,  or  wealth  derived  from  any 
source  but  plunder.  And  even  in  comparatively  civilized  countries, 
bad  modes  of  raising  a revenue  have  had  effects  similar  in  kind, 
though  in  an  inferior  degree.  French  writers  before  the  Revolution 
represented  the  taille  as  a main  cause  of  the  backward  state  of 
agriculture,  and  of  the  wretched  condition  of  the  rural  population ; 
not  from  its  amount,  but  because,  being  proportioned  to  the  visible 
capital  of  the  cultivator,  it  gave  him  a motive  for  appearing  poor, 
which  sufficed  to  turn  the  scale  in  favour  of  indolence.  The  arbitrary 
powers  also  of  fiscal  officers,  of  intendants  and  suhdelegues,  were 
more  destructive  of  prosperity  than  a far  larger  amount  of  exactions, 
because  they  destroyed  security  : there  was  a marked  superiority  in 
the  condition  of  the  pays  d’etats,  which  were  exempt  from  this 
scourge.  The  universal  venality  ascribed  [1848]  to  Russian  function- 
aries must  be  an  immense  drag  on  the  capabilities  of  economical 
improvement  possessed  so  abundantly  by  the  Russian  empire ; 
since  the  emoluments  of  public  officers  must  depend  on  the  success 


884 


BOOK  V.  CHAPTER  VIII.  § 3 


with  which  they  can  multiply  vexations,  for  the  purpose  of  being 
bought  o£E  by  bribes. 

Yet  mere  excess  of  taxation,  even  when  not  aggravated  by 
uncertainty,  is,  independently  of  its  injustice,  a serious  economical 
evil.  It  may  be  carried  so  far  as  to  discourage  industry  by 
insufficiency  of  reward.  Very  long  before  it  reaches  this  point  it 
prevents  or  greatly  checks  accumulation,  or  causes  the  capital 
accumulated  to  be  sent  for  investment  to  foreign  countries.  Taxes 
which  fall  on  profits,  even  though  that  kind  of  income  may  not  pay 
more  than  its  just  share,  necessarily  diminish  the  motive  to  any 
saving,  except  for  investment  in  foreign  countries  where  profits 
are  higher.  Holland,  for  example,  seems  to  have  long  ago  reached 
the  practical  minimum  of  profits  : already  in  the  last  century  her 
wealthy  capitalists  had  a great  part  of  their  fortunes  invested  in  the 
loans  and  joint-stock  speculations  of  other  countries  : and  this  low 
rate  of  profit  is  ascribed  to  the  heavy  taxation,  which  had  been  in 
some  measure  forced  on  her  by  the  circumstances  of  her  position  and 
history.  The  taxes  indeed,  besides  their  great  amount,  were  many 
of  them  on  necessaries,  a kind  of  tax  peculiarly  injurious  to  industry 
and  accumulation.  But  when  the  aggregate  amount  of  taxation  is 
very  great,  it  is  inevitable  that  recourse  must  be  had  for  part  of  it 
to  taxes  of  an  objectionable  character.  And  any  taxes  on  consump- 
tion, when  heavy,  even  if  not  operating  on  profits,  have  something 
of  the  same  effect,  by  driving  persons  of  moderate  means  to  live 
abroad,  often  taking  their  capital  with  them.  Although  I by  no 
means  join  with  those  political  economists  who  think  no  state  of 
national  existence  desirable  in  which  there  is  not  a rapid  increase  of 
wealth,  I cannot  overlook  the  many  disadvantages  to  an  independent 
nation  from  being  brought  prematurely  to  a stationary  state, 
while  the  neighbouring  countries  continue  advancing. 

§ 3.  The  subject  of  protection  to  person  and  property,  considered 
as  afforded  by  government,  ramifies  widely,  into  a number  of  indirect 
channels.  It  embraces,  for  example,  the  whole  subject  of  the  per- 
fection or  inefficiency  of  the  means  provided  for  the  ascertainment 
of  rights  and  the  redress  of  injuries.  Person  and  property  cannot 
be  considered  secure  where  the  administration  of  justice  is  imperfect, 
either  from  defect  of  integrity  or  capacity  in  the  tribimals,  or 
because  the  delay,  vexation,  and  expense  accompanying  their 
operation  impose  a heavy  tax  on  those  who  appeal  to  them,  and 
make  it  preferable  to  submit  to  any  endurable  amount  of  the  evils 


ORDINARY  FUNCTIONS  OF  GOVERNMENT 


885 


which  they  are  designed  to  remedy.  In  England  there  is  no  fault 
to  be  found  with  the  administration  of  justice,  in  point  of  pecuniary 
integrity ; a result  which  the  progress  of  social  improvement  may 
also  be  supposed  to  have  brought  about  in  several  other  nations 
of  Europe.  But  legal  and  judicial  imperfections  of  other  kinds  are 
abundant ; and,  in  England  especially,  are  a large  abatement  from 
the  value  of  the  services  which  the  government  renders  back  to  the 
people  in  return  for  our  enormous  taxation.  In  the  first  place,  the 
incognoscibility  (as  Bentham  termed  it)  of  the  law,  and  its  extreme 
uncertainty,  even  to  those  who  best  know  it,  render  a resort  to  the 
tribunals  often  necessary  for  obtaining  justice,  when,  there  being 
no  dispute  as  to  facts,  no  litigation  ought  to  be  required.  In  the  next 
place,  the  procedure  of  the  tribunals  is  so  replete  with  delay,  vexation, 
and  expense,  that  the  price  at  which  justice  is  at  last  obtained  is  an 
evil  outweighing  a very  considerable  amount  of  injustice ; and  the 
wrong  side,  even  that  which  the  law  considers  such,  has  many 
chances  of  gaining  its  point,  through  the  abandonment  of  litigation 
by  the  other  party  for  want  of  funds,  or  through  a compromise  in 
which  a sacrifice  is  made  of  just  rights  to  terminate  the  suit,  or 
through  some  technical  quirk,  whereby  a decision  is  obtained  on 
some  other  ground  than  the  merits.  This  last  detestable  incident 
often  happens  without  blame  to  the  judge,  under  a system  of  law 
of  which  a great  part  rests  on  no  rational  principles  adapted  to 
the  present  state  of  society,  but  was  originally  founded  partly  on  a 
kind  of  whims  and  conceits,  and  partly  on  the  principles  and  incidents 
of  feudal  tenure  (which  now  survive  only  as  legal  fictions) ; and  has 
only  been  very  imperfectly  adapted,  as  cases  arose,  to  the  changes 
which  had  taken  place  in  society.  Of  all  parts  of  the  English  legal 
system,  the  Court  of  Chancery,  which  has  the  best  substantive  law, 
has  been  incomparably  the  worst  as  to  delay,  vexation,  and  expense  ; 
and  this  is  the  only  tribunal  for  most  of  the  classes  of  cases  which  are 
in  their  nature  the  most  complicated,  such  as  cases  of  partnership, 
and  the  great  range  and  variety  of  cases  which  come  under  the 
denomination  of  trust.  ^The  recent  reforms  in  this  Court  have 
abated  the  mischief,  but  are  still  far  from  having  removed  it. 

Fortunately  for  the  prosperity  of  England,  the  greater  part  of  the 
mercantile  law  is  comparatively  modern,  and  was  made  by  the 
tribunals  by  the  simple  process  of  recognising  and  giving  force  of 
law  to  the  usages  which,  from  motives  of  convenience,  had  grown 
up  among  merchants  themselves : so  that  this  part  of  the  law,  at 
» lAdded  in  4th  ed.  (1857).] 


886 


BOOK  V.  CHAPTER  VIII.  § 3 


least,  was  substantially  made  by  those  who  were  most  interested 
in  its  goodness  : while  the  defects  of  the  tribunals  have  been  the 
less  practically  pernicious  in  reference  to  commercial  transactions, 
because  the  importance  of  credit,  which  depends  on  character, 
renders  the  restraints  of  opinion  (though,  as  daily  experience 
proves,  an  insufficient)  yet  a very  powerful,  protection  against 
those  forms  of  mercantile  dishonesty  which  are  generally  recognised 
as  such. 

The  imperfections  of  the  law,  both  in  its  substance  and  in  its 
procedure,  fall  heaviest  upon  the  interests  connected  with  what  is 
technically  called  real  property ; in  the  general  language  of  European 
jurisprudence,  immoveable  property.  With  respect  to  all  this 
portion  of  the  wealth  of  the  community,  the  law  fails  egregiously 
in  the  protection  which  it  imdertakes  to  provide.  It  fails,  first, 
by  the  uncertainty,  and  the  maze  of  technicahties,  which  make  it 
impossible  for  any  one,  at  however  great  an  expense,  to  possess  a 
title  to  land  which  he  can  positively  know  to  be  unassailable.  It 
fails,  secondly,  in  omitting  to  provide  due  evidence  of  transactions, 
by  a proper  registration  of  legal  documents.  It  fails,  thirdly,  by 
creating  a necessity  for  operose  and  expensive  instruments  and 
formalities  (independently  of  fiscal  burthens)  on  occasion  of  the 
purchase  and  sale,  or  even  the  lease  or  mortgage,  of  immoveable 
property.  And,  fourthly,  it  fails  by  the  intolerable  expense  and 
delay  of  law  proceedings  in  almost  all  cases  in  which  real  property 
is  concerned.  There  is  no  doubt  that  the  greatest  sufferers  by  the 
defects  of  the  higher  courts  of  civil  law  are  the  landowners.  Legal 
expenses,  either  those  of  actual  htigation,  or  of  the  preparation  of 
legal  instruments,  form,  I apprehend,  no  inconsiderable  item  in 
the  annual  expenditure  of  most  persons  of  large  landed  property, 
and  the  saleable  value  of  their  land  is  greatly  impaired  by  the 
difficulty  of  giving  to  the  buyer  complete  confidence  in  the  title ; 
independently  of  the  legal  expenses  which  accompany  the  transfer. 
Yet  the  landowners,  though  they  have  been  masters  of  the  legislation 
of  England,  to  say  the  least  since  1688,  have  never  made  a single 
move  in  the  direction  of  law  reform,  and  have  been  strenuous 
opponents  of  some  of  the  improvements  of  which  they  would  more 
particularly  reap  the  benefit ; especially  that  great  one  of  a registra- 
tion of  contracts  affecting  land,  which  when  proposed  by  a Commis- 
sion of  eminent  real  property  lawyers,  and  introduced  into  the 
House  of  Commons  by  Lord  Campbell,  was  so  offensive  to  the 
general  body  of  landlords,  and  was  rejected  by  so  large  a majority, 


ORDINARY  FUNCTIONS  OF  GOVERNMENT 


887 


as  to  have  long  discouraged  any  repetition  of  the  attempt.*  This 
irrational  hostility  to  improvement,  in  a case  in  which  their  own 
interest  would  be  the  most  benefited  by  it,  must  be  ascribed  to  an 
intense  timidity  on  the  subject  of  their  titles,  generated  by  the 
defects  of  the  very  law  which  they  refuse  to  alter  ; and  to  a conscious 
ignorance,  and  incapacity  of  judgment,  on  all  legal  subjects,  which 
makes  them  helplessly  defer  to  the  opinion  of  their  professional 
advisers,  heedless  of  the  fact  that  every  imperfection  of  the  law, 
in  proportion  as  it  is  burthensome  to  them,  brings  gain  to  the  lawyer. 

In  so  far  as  the  defects  of  legal  arrangements  are  a mere  burthen 
on  the  landowner,  they  do  not  much  affect  the  sources  of  production  ; 
but  the  uncertainty  of  the  title  under  which  land  is  held  must  often 
act  as  a great  discouragement  to  the  expenditure  of  capital  in  its 
improvement ; and  the  expense  of  making  transfers  operates  to 
prevent  land  from  coming  into  the  hands  of  those  who  would  use  it 
to  most  advantage  ; often  amounting,  in  the  case  of  small  purchases, 
to  more  than  the  price  of  the  land,  and  tantamount,  therefore,  to 
a prohibition  of  the  purchase  and  sale  of  land  in  small  portions, 
unless  in  exceptional  circumstances.  Such  purchases,  however,  are 
almost  everywhere  extremely  desirable,  there  being  hardly  any 
country  in  which"  landed  property  is  not  either  too  much  or  too  little 
subdivided,  requiring  either  that  great  estates  should  be  broken 
down,  or  that  small  ones  should  be  bought  up  and  consolidated. 
To  make  land  as  easily  transferable  as  stock  would  be  one  of 
the  greatest  economical  improvements  which  could  be  bestowed 
on  a country ; and  has  been  shown,  again  and  again,  to  have  no 
insuperable  difficulty  attending  it. 

Besides  the  excellences  or  defects  that  belong  to  the  law  and 
judicature  of  a country  as  a system  of  arrangements  for  attaining 
direct  practical  ends,  much  also  depends,  even  in  an  economical 
point  of  view,  upon  the  moral  influences  of  the  law.  Enough  has 
been  said  in  a former  place  t on  the  degree  in  which  both  the  industrial 
and  all  other  combined  operations  of  mankind  depend  for  efficiency 
on  their  being  able  to  rely  on  one  another  for  probity  and  fidelity  to 
engagements  ; from  which  we  see  how  greatly  even  the  economical 
prosperity  of  a country  is  liable  to  be  affected  by  anything  in  its 
institutions  by  which  either  integrity  and  trustworthiness,  or  the 
contrary  qualities,  are  encouraged.  The  law  everywhere  ostensibly 

♦ [1865]  Lord  Westbury’s  recent  Act  is  a material  mitigation  of  this  grievous 
defect  in  English  law,  and  will  probably  lead  to  further  improvements, 
f Supra,  pp.  110-2. 


888 


BOOK  V.  CHAPTER  VIII.  § 3 


favours  at  least  pecuniary  honesty  and  the  faith  of  contracts ; but 
if  it  affords  facilities  for  evading  those  obhgations,  by  trick  and 
chicanery,  or  by  the  unscrupulous  use  of  riches  in  instituting  unjust 
or  resisting  just  litigation ; if  there  are  ways  and  means  by  which 
persons  may  attain  the  ends  of  roguery,  under  the  apparent  sanction 
of  the  law ; to  that  extent  the  law  is  demorahzing,  even  in  regard 
to  pecuniary  integrity.  And  such  cases  are,  unfortunately,  frequent 
under  the  English  system.  If,  again,  the  law,  by  a misplaced 
indulgence,  protects  idleness  or  prodigality  against  their  natural 
consequences,  or  dismisses  crime  with  inadequate  penalties,  the 
effect,  both  on  the  prudential  and  on  the  social  virtues,  is  unfavour- 
able. When  the  law,  by  its  own  dispensations  and  injunctions, 
establishes  injustice  between  individual  and  individual ; as  all  laws 
do  which  recognise  any  form  of  slavery  ; as  the  laws  of  all  countries 
do,  though  not  all  in  the  same  degree,  in  respect  to  the  family 
relations ; and  as  the  laws  of  many  countries  do,  though  in  still 
more  unequal  degrees,  as  between  rich  and  poor ; the  effect  on  the 
moral  sentiments  of  the  people  is  still  more  disastrous.  But  these 
subjects  introduce  considerations  so  much  larger  and  deeper  than 
those  of  political  economy,  that  I only  advert  to  them  in  order  not 
to  pass  wholly  unnoticed  things  superior  in  importance  to  those  of 
which  I treat. 


CHAPTER  IX 


THE  SAME  SUBJECT  CONTINUED 

§ 1.  Having  spoken  thus  far  of  the  effects  produced  by  the 
excellences  or  defects  of  the  general  system  of  the  law,  I shall  now 
touch  upon  those  resulting  from  the  special  character  of  particular 
parts  of  it.  As  a selection  must  be  made,  I shall  confine  myself 
to  a few  leading  topics.  The  portions  of  the  civil  law  of  a country 
which  are  of  most  importance  economically  (next  to  those  which 
determine  the  status  of  the  labourer,  as  slave,  serf,  or  free)  are  those 
relating  to  the  two  subjects  of  Inheritance  and  Contract.  Of  the 
laws  relating  to  contract,  none  are  more  important  economically 
than  the  laws  of  partnership,  and  those  of  insolvency.  It  happens 
that  on  all  these  three  points  there  is  just  ground  for  condemning 
some  of  the  provisions  of  the  English  law. 

With  regard  to  Inheritance,  I have,  in  an  early  chapter,  considered 
the  general  principles  of  the  subject,  and  suggested  what  appear 
to  me  to  be,  putting  all  prejudices  apart,  the  best  dispositions 
which  the  law  could  adopt.  Freedom  of  bequest  as  the  general 
rule,  but  limited  by  two  things  : first,  that  if  there  are  descendants, 
who,  being  unable  to  provide  for  themselves,  would  become  burthen- 
some  to  the  state,  the  equivalent  of  whatever  the  state  would  accord 
to  them  should  be  reserved  from  the  property  for  their  benefit : and 
secondly,  that  no  one  person  should  be  permitted  to  acquire,  by 
inheritance,  more  than  the  amount  of  a moderate  independence. 
In  case  of  intestacy,  the  whole  property  to  escheat  to  the  state  ; 
which  shoidd  be  bound  to  make  a just  and  reasonable  provision  for 
descendants,  that  is,  such  a provision  as  the  parent  or  ancestor  ought 
to  have  made,  their  circumstances,  capacities,  and  mode  of  bringing 
up  being  considered. 

The  laws  of  inheritance,  however,  have  probably  several  phases 
of  improvement  to  go  through,  before  ideas  so  far  removed  from 
present  modes  of  thinking  will  be  taken  into  serious  consideration  : 


890 


BOOK  V.  CHAPTER  IX.  § 1 


and  as,  among  the  recognised  modes  of  determining  the  succession 
to  property,  some  must  be  better  and  others  worse,  it  is  necessary  to 
consider  which  of  them  deserves  the  preference.  As  an  intermediate 
course,  therefore,  I would  recommend  the  extension  to  all  property 
of  the  present  English  law  of  inheritance  afiecting  personal  property 
(freedom  of  bequest,  and  in  case  of  intestacy,  equal  division)  : except 
that  no  rights  should  be  acknowledged  in  collaterals,  and  that  the 
property  of  those  who  have  neither  descendants  nor  ascendants,  and 
make  no  will,  should  escheat  to  the  state. 

The  laws  of  existing  nations  deviate  from  these  maxims  in  two 
opposite  ways.  In  England,  and  in  most  of  the  countries  where  the 
influence  of  feudality  is  still  felt  in  the  laws,  one  of  the  objects  aimed 
at  in  respect  to  land  and  other  immoveable  property  is  to  keep 
it  together  in  large  masses : accordingly,  in  cases  of  intestacy,  it 
passes,  generally  speaking  (for  the  local  custom  of  a few  places  is 
different),  exclusively  to  the  eldest  son.  And  though  the  rule  of 
primogeniture  is  not  binding  on  testators,  who  in  England  have 
nominally  the  power  of  bequeathing  their  property  as  they  please, 
any  proprietor  may  so  exercise  this  power  as  to  deprive  his  immediate 
successor  of  it,  by  entailing  the  property  on  one  particular  line  of 
his  descendants : which,  besides  preventing  it  from  passing  by 
inheritance  in  any  other  than  the  prescribed  manner,  is  attended 
with  the  incidental  consequence  of  precluding  it  from  being  sold ; 
since  each  successive  possessor,  having  only  a life  interest  in  the 
property,  cannot  alienate  it  for  a longer  period  than  his  own  life. 
In  some  other  countries,  such  as  France,  the  law,  on  the  contrary, 
compels  division  of  inheritances ; not  only,  in  case  of  intestacy, 
sharing  the  property,  both  real  and  personal,  equally  among  all  the 
children,  or  (if  there  are  no  children)  among  all  relatives  in  the  same 
degree  of  propinquity ; but  also  not  recognising  any  power  of 
bequest,  or  recognising  it  over  only  a limited  portion  of  the  property, 
the  remainder  being  subjected  to  compulsory  equal  division. 

Neither  of  these  systems,  I apprehend,  was  introduced,  or  is 
perhaps  maintained,  in  the  countries  where  it  exists,  from  any 
general  considerations  of  justice,  or  any  foresight  of  economical 
consequences,  but  chiefly  from  political  motives ; in  the  one  case 
to  keep  up  large  hereditary  fortunes,  and  a landed  aristocracy ; 
in  the  other,  to  break  these  down,  and  prevent  their  resurrection. 
The  first  object,  as  an  aim  of  national  policy,  I conceive  to  be 
eminently  undesirable : with  regard  to  the  second,  I have  pointed 
out  what  seems  to  me  a better  mode  of  attaining  it.  The  merit,  or 


INHERITANCE 


891 


demerit,  however,  of  either  purpose,  belongs  to  the  general  science 
of  pohtics,  not  to  the  limited  department  of  that  science  which  is 
here  treated  of.  Each  of  the  two  systems  is  a real  and  efficient 
instrument  for  the  purpose  intended  by  it ; but  each,  as  it  appears 
to  me,  achieves  that  purpose  at  the  cost  of  much  mischief. 

§ 2.  There  are  two  arguments  of  an  economical  character 
which  are  urged  in  favour  of  primogeniture.  One  is,  the  stimulus 
apphed  to  the  industry  and  ambition  of  younger  children,  by  leaving 
them  to  be  the  architects  of  their  own  fortunes.  This  argument  was 
put  by  Dr.  Johnson  in  a manner  more  forcible  than  complimentary 
to  an  hereditary  aristocracy,  when  he  said,  by  way  of  recommendation 
of  primogeniture,  that  it  “ makes  but  one  fool  in  a family.”  It  is 
curious  that  a defender  of  aristocratic  institutions  should  be  the 
person  to  assert  that  to  inherit  such  a fortune  as  takes  away  any 
necessity  for  exertion  is  generally  fatal  to  activity  and  strength  of 
mind  : in  the  present  state  of  education,  however,  the  proposition, 
with  some  allowance  for  exaggeration,  may  be  admitted  to  be  true. 
But  whatever  force  there  is  in  the  argument  counts  in  favour  of 
limiting  the  eldest,  as  well  as  all  the  other  children,  to  a mere  pro- 
vision, and  dispensing  with  even  the  “ one  fool  ” whom  Dr.  Johnson 
was  wiUing  to  tolerate.  If  imearned  riches  are  so  pernicious  to  the 
character,  one  does  not  see  why,  in  order  to  withhold  the  poison 
from  the  junior  members  of  a family,  there  should  be  no  way  but  to 
unite  all  their  separate  potions,  and  administer  them  in  the  largest 
possible  dose  to  one  selected  victim.  It  cannot  be  necessary  to  inflict 
this  great  evil  on  the  eldest  son  for  want  of  knowing  what  else  to 
do  with  a large  fortune. 

Some  writers,  however,  look  upon  the  effect  of  primogeniture 
in  stimulating  industry,  as  depending,  not  so  much  on  the  poverty 
of  the  younger  children,  as  on  the  contrast  between  that  poverty 
and  the  riches  of  the  elder  ; thinking  it  indispensable  to  the  activity 
and  energy  of  the  hive  that  there  should  be  a huge  drone  here  and 
there,  to  impress  the  working  bees  with  a due  sense  of  the  advantages 
of  honey.  “ Their  inferiority  in  point  of  wealth,”  says  Mr. 
M‘Culloch,  speaking  of  the  younger  children,  “ and  their  desire  to 
escape  from  this  lower  station,  and  to  attain  to  the  same  level  with 
their  elder  brothers,  inspires  them  with  an  energy  and  vigour  they 
could  not  otherwise  feel.  But  the  advantage  of  preserving  large 
estates  from  being  frittered  down  by  a scheme  of  equal  division,  is 
not  limited  to  its  influence  over  the  younger  children  of  their  owners. 


892 


BOOK  V.  CHAPTER  IX.  § 2 


It  raises  imiversally  the  standard  of  competence,  and  gives  new  force 
to  the  springs  which  set  industry  in  motion.  The  manner  of  living 
among  the  great  landlords  is  that  in  which  every  one  is  ambitious 
of  being  able  to  indulge  ; and  their  habits  of  expense,  though  some- 
times injurious  to  themselves,  act  as  powerful  incentives  to  the 
ingenuity  and  enterprise  of  the  other  classes,  who  never  think  their 
fortunes  sufficiently  ample,  unless  they  will  enable  them  to  emulate  the 
splendour  of  the  richest  landlords  ; so  that  the  custom  of  primogeni- 
ture seems  to  render  ail  classes  more  industrious,  and  to  augment 
at  the  same  time,  the  mass  of  wealth  and  the  scale  of  enjoyment.”  * 

The  portion  of  truth,  I can  hardly  say  contained  in  these  observa- 
tions, but  recalled  by  them,  I apprehend  to  be,  that  a state  of 
complete  equality  of  fortunes  would  not  be  favourable  to  active 
exertion  for  the  increase  of  wealth.  Speaking  of  the  mass,  it  is  as 
true  of  wealth  as  of  most  other  distinctions — of  talent,  knowledge, 
virtue — that  those  who  already  have,  or  think  they  have,  as  much 
of  it  as  their  neighbours,  will  seldom  exert  themselves  to  acquire 
more.  But  it  is  not  therefore  necessary  that  society  should  provide 
a set  of  persons  with  large  fortunes,  to  fulfil  the  social  duty  of  standing 
to  be  looked  at,  with  envy  and  admiration,’ by  the  aspiring  poor. 
The  fortunes  which  people  have  acquired  for  themselves  answer  the 
purpose  quite  as  well,  indeed  much  better ; since  a person  is  more 
powerfully  stimulated  by  the  example  of  somebody  who  has  earned 
a fortune,  than  by  the  mere  sight  of  somebody  who  possesses  one  ; 
and  the  former  is  necessarily  an  example  of  prudence  and  frugality 
as  well  as  industry,  while  the  latter  much  oftener  sets  an  example 
of  profuse  expense,  which  spreads,  with  pernicious  effect,  to  the 
very  class  on  whom  the  sight  of  riches  is  supposed  to  have  so  bene- 
ficial an  influence,  namely,  those  whose  weakness  of  mind,  and  taste 
for  ostentation,  makes  “ the  splendour  of  the  richest  landlords  ” 
attract  them  with  the  most  potent  spell.  In  America  there  are  few 
or  no  hereditary  fortunes  yet  industrial  energy,  and  the  ardour  of 
accumulation,  are  not  supposed  to  be  particularly  backward  in  that 
part  of  the  world.  When  a country  has  once  fairly  entered  into  the 
industrial  career,  which  is  the  principal  occupation  of  the  modern, 
as  war  was  that  of  the  ancient  and  mediaeval  world,  the  desire  of 
acquisition  by  industry  needs  no  factitious  stimulus  : the  advan- 
tages naturally  inherent  in  riches,  and  the  character  they  assume 

♦ Principles  of  Political  Economy ^ ed.  1843,  p.  264.  There  is  much  more 
to  the  same  effect  in  the  more  recent  treatise  by  the  same  author.  On  the 
Succession  to  Property  vacarU  by  Death, 


INHERITANCE 


893 


of  a test  by  which  talent  and  success  in  life  are  habitually  measured, 
are  an  ample  security  for  their  being  pursued  with  sufficient  intensity 
and  zeal.  As  to  the  deeper  consideration,  that  the  diffusion  of  wealth, 
and  not  its  concentration,  is  desirable,  and  that  the  more  wholesome 
state  of  society  is  not  that  in  which  immense  fortunes  are  possessed 
by  a few  and  coveted  by  all,  but  that  in  which  the  greatest  possible 
numbers  possess  and  are  contented  with  a moderate  competency, 
which  all  may  hope  to  acquire  ; I refer  to  it  in  this  place  only  to 
show  how  widely  separated,  on  social  questions,  is  the  entire  mode 
of  thought  of  the  defenders  of  primogeniture,  from  that  which  is 
partially  promulgated  in  the  present  treatise. 

The  other  economical  argument  in  favour  of  primogeniture  has 
special  reference  to  landed  property.  It  is  contended  that  the  habit 
of  dividing  inheritances  equally,  or  with  an  approach  to  equality, 
among  children,  promotes  the  subdivision  of  land  into  portions  too 
small  to  admit  of  being  cultivated  in  an  advantageous  manner.  This 
argument,  eternally  reproduced,  has  again  and  again  been  refuted 
by  English  and  Continental  writers.  It  proceeds  on  a supposition 
entirely  at  variance  with  that  on  which  all  the  theorems  of  political 
economy  are  grounded.  It  assumes  that  mankind  in  general 
will  habitually  act  in  a manner  opposed  to  their  immediate  and 
obvious  pecuniary  interest.  For  the  division  of  the  inheritance 
does  not  necessarily  imply  division  of  the  land  ; which  may  be  held 
in  common,  as  is  not  unfrequently  the  case  in  France  and  Belgium  ; 
or  may  become  the  property  of  one  of  the  coheirs,  being  charged 
with  the  shares  of  the  others  by  way  of  mortgage  ; or  they  may  sell 
it  outright,  and  divide  the  proceeds.  When  the  division  of  the  land 
would  diminish  its  productive  power,  it  is  the  direct  interest  of  the 
heirs  to  adopt  some  one  of  these  arrangements.  Supposing,  how- 
ever, what  the  argument  assumes,  that  either  from  legal  difficulties, 
or  from  their  own  stupidity  and  barbarism,  they  would  not,  if  left 
to  themselves,  obey  the  dictates  of  this  obvious  interest,  but  would 
insist  upon  cutting  up  the  land  bodily  into  equal  parcels,  with  the 
effect  of  impoverishing  themselves ; this  would  be  an  objection  to 
a law  such  as  exists  in  France,  of  compulsory  division,  but  can  be  no 
reason  why  testators  should  be  discouraged  from  exercising  the 
right  of  bequest  in  general  conformity  to  the  rule  of  equality,  since 
it  would  always  be  in  their  power  to  provide  that  the  division  of  the 
inheritance  should  take  place  without  dividing  the  land  itself.  That 
the  attempts  of  the  advocates  of  primogeniture  to  make  out  a case 
by  facts  against  the  custom  of  equal  division  are  equally  abortive, 


894 


BOOK  V.  CHAPTER  IX.  § 3 


has  been  shown  in  a former  place.  In  all  countries,  or  parts  of 
countries,  in  which  the  division  of  inheritances  is  accompanied  by 
small  holdings,  it  is  because  small  holdings  are  the  general  system 
of  the  country,  even  on  the  estates  of  the  great  proprietors. 

Unless  a strong  case  of  social  utihty  can  be  made  out  for  primo- 
geniture, it  stands  sufficiently  condemned  by  the  general  principles 
of  justice  ; being  a broad  distinction  in  the  treatment  of  one  person 
and  of  another,  grounded  solely  on  an  accident.  There  is  no  need, 
therefore,  to  make  out  any  case  of  economical  evil  against  primo- 
geniture. Such  a case,  however,  and  a very  strong  one,  may  be 
made.  It  is  a natural  effect  of  primogeniture  to  make  the  landlords 
a needy  class.  The  object  of  the  institution,  or  custom,  is  to  keep 
the  land  together  in  large  masses,  and  this  it  commonly  accomplishes ; 
but  the  legal  proprietor  of  a large  domain  is  not  necessarily  the  bond 
fide  owner  of  the  whole  income  which  it  yields.  It  is  usually  charged, 
in  each  generation,  with  provisions  for  the  other  children.  It  is 
often  charged  still  more  heavily  by  the  imprudent  expenditure  of 
the  proprietor.  Great  landowners  are  generally  improvident  iu 
their  expenses  ; they  live  up  to  their  incomes  when  at  the  highest, 
and  if  any  change  of  circumstances  diminishes  their  resources,  some 
time  elapses  before  they  make  up  their  minds  to  retrench.  Spend- 
thrifts in  other  classes  are  ruined,  and  disappear  from  society ; but 
the  spendthrift  landlord  usually  holds  fast  to  his  land,  even  when 
he  has  become  a mere  receiver  of  its  rents  for  the  benefit  of  creditors. 
The  same  desire  to  keep  up  the  “ splendour  ” of  the  family,  which 
gives  rise  to  the  custom  of  primogeniture,  indisposes  the  owner  to 
sell  a part  in  order  to  set  free  the  remainder ; their  apparent  are 
therefore  habitually  greater  than  their  real  means,  and  they  are 
under  a perpetual  temptation  to  proportion  their  expenditure  to 
the  former  rather  than  to  the  latter.  From  such  causes  as  these,  in 
almost  all  countries  of  great  landowners,  the  majority  of  landed 
estates  are  deeply  mortgaged ; and  instead  of  having  capital  to 
spare  for  improvements,  it  requires  all  the  increased  value  of  land^ 
caused  by  the  rapid  increase  of  the  wealth  and  population  of  the 
country,  to  preserve  the  class  from  being  impoverished. 

§ 3.  To  avert  this  impoverishment,  recourse  was  had  to  the 
contrivance  of  entails,  whereby  the  order  of  succession  was  irre- 
vocably fixed,  and  each  holder,  having  only  a fife  interest,  was 
unable  to  burthen  his  successor.  The  land  thus  passing,  free  from 
debt,  into  the  possession  of  the  heir,  the  family  could  not  be  ruined 


INHERITANCE 


895 


by  the  improvidence  of  its  existing  representative.  The  economical 
evils  arising  from  this  disposition  of  property  were  partly  of  the 
same  kind,  partly  different,  but  on  the  whole  greater,  than  those 
arising  from  primogeniture  alone.  The  possessor  could  not  now 
ruin  his  successors,  but  he  could  still  ruin  himself  : he  was  not  at 
all  more  likely  than  in  the  former  case  to  have  the  means  necessary 
for  improving  the  property  : while,  even  if  he  had,  he  was  still  less 
likely  to  employ  them  for  that  purpose,  when  the  benefit  was  to 
accrue  to  a person  whom  the  entail  made  independent  of  him,  while 
he  had  probably  younger  children  to  provide  for,  in  whose  favour  he 
could  not  now  charge  the  estate.  While  thus  disabled  from  being 
himself  an  improver,  neither  could  he  sell  the  estate  to  somebody 
who  would ; since  entail  precludes  alienation.  In  general  he  has 
even  been  unable  to  grant  leases  beyond  the  term  of  his  own  life ; 
“ for,”  says  Blackstone,  “ if  such  leases  had  been  valid,  then, 
under  cover  of  long  leases,  the  issue  might  have  been  virtually  dis- 
inherited ; ” and  it  has  been  necessary  in  Great  Britain  to  relax,  by 
statute,  the  rigour  of  entails,  in  order  to  allow  either  of  long  leases, 
or  of  the  execution  of  improvements  at  the  expense  of  the  estate. 
It  may  be  added  that  the  heir  of  entail,  being  assured  of  succeeding 
to  the  family  property,  however  undeserving  of  it,  and  being  aware 
of  this  from  his  earliest  years,  has  much  more  than  the  ordinary 
chances  of  growing  up  idle,  dissipated,  and  profligate. 

In  England,  the  power  of  entail  is  more  limited  by  law  than  in 
Scotland  and  in  most  other  countries  where  it  exists.  A landowner  can 
settle  his  property  upon  any  number  of  persons  successively  who 
are  living  at  the  time,  and  upon  one  unborn  person,  on  whose  attain- 
ing the  age  of  twenty-one  the  entail  expires,  and  the  land  becomes 
his  absolute  property.  An  estate  may  in  this  manner  be  transmitted 
through  a son,  or  a son  and  grandson,  living  when  the  deed  is 
executed,  to  an  unborn  child  of  that  grandson.  It  has  been  main- 
tained that  this  power  of  entail  is  not  sufficiently  extensive  to  do 
any  mischief : in  truth,  however,  it  is  much  larger  than  it  seems. 
Entails  very  rarely  expire ; the  first  heir  of  entail,  when  of  age, 
joins  with  the  existing  possessor  in  resettling  the  estate,  so  as  to 
prolong  the  entail  for  a further  term.  Large  properties,  therefore, 
are  rarely  free,  for  any  considerable  period,  from  the  restraints  of  a 
strict  settlement ; ^ though  the  mischief  is  in  one  respect  mitigated, 

* [The  concluding  words  of  this  paragraph  took  the  place  in  the  6th  ed. 
(1862)  of  the  following  words  of  the  original  text : “ and  English  entails  are 
not,  in  point  of  fact,  much  less  injurious  than  those  of  other  countries.”] 


BOOK  V.  CHAPTER  IX.  § 4 


since  In  the  renewal  of  the  settlement  for  one  more  generation  the 
estate  is  usually  charged  with  a provision  for  younger  children. 

In  an  economical  point  of  view,  the  best  system  of  landed  pro- 
perty is  that  in  which  land  is  most  completely  an  object  of  com-  j 
merce ; passing  readily  from  hand  to  hand  when  a buyer  can  be  ; 
found  to  whom  it  is  worth  while  to  offer  a greater  sum  for  the  land  I 
than  the  value  of  the  income  drawn  from  it  by  its  existing  possessor.  I 
This  of  course  is  not  meant  of  ornamental  property,  which  is  a 
source  of  expense,  not  profit ; but  only  of  land  employed  for  ; 
industrial  uses,  and  held  for  the  sake  of  the  income  which  it  affords. 
Whatever  facilitates  the  sale  of  land,  tends  to  make  it  a more  pro-  I 
ductive  instrument  of  the  community  at  large  ; whatever  prevents 
or  restricts  its  sale,  subtracts  from  its  usefulness.  Now,  not  only 
has  entail  this  effect,  but  primogeniture  also.  The  desire  to  keep  i 
land  together  in  large  masses,  from  other  motives  than  that  of  pro-  j 
moting  its  productiveness,  often  prevents  changes  and  ahenation 
which  would  increase  its  efficiency  as  an  instrument. 

§ 4.  On  the  other  hand,  a law  which,  hke  the  French,  restricts  the 
power  of  bequest  to  a narrow  compass,  and  compels  the  equal* 
division  of  the  whole  or  the  greater  part  of  the  property  among  the 
children,  seems  to  me,  though  on  different  grounds,  also  very' 
seriously  objectionable.  The  only  reason  for  recognising  in  the 
children  any  claim  at  all  to  more  than  a provision,  sufficient  to 
launch  them  in  hfe,  and  enable  them  to  find  a livehhood,  is  grounded  \ 
on  the  expressed  or  presumed  wish  of  the  parent ; whose  claim  to  | 
dispose  of  what  is  actually  his  own  cannot  be  set  aside  by  any  pre-  ‘ 
tensions  of  others  to  receive  what  is  not  theirs.  To  control  the 
rightful  owner’s  liberty  of  gift,  by  creating  in  the  children  a legal 
right  superior  to  it,  is  to  postpone  a real  claim  to  an  imaginary  one. 
To  this  great  and  paramount  objection  to  the  law,  numerous  secondary 
ones  may  be  added.  Desirable  as  it  is  that  the  parent  should  treat  ’ 
the  children  with  impartiahty,  and  not  make  an  eldest  son  or  a 
favourite,  impartial  division  is  not  alway  synonymous  with  equal  | 
division.  Some  of  the  children  may,  without  fault  of  their  own,  be  V 
less  capable  than  others  of  providing  for  themselves  : some  may, 
by  other  means  than  their  own  exertions,  be  already  provided  for ; 
and  impartiahty  may  therefore  require  that  the  rule  observed  should  ! 
not  be  one  of  equahty,  but  of  compensation.  Even  when  equahty 
is  the  object,  there  are  sometimes  better  means  of  attaining  it 
than  the  mflexible  rules  by  which  law  must  necessarily  proceed.* 


PARTNERSHIP 


897 


[f  one  of  the  coheirs,  being  of  a quarrelsome  or  litigious  disposition, 
stands  upon  his  utmost  rights,  the  law  cannot  make  equitable  adjust- 
ments ; it  cannot  apportion  the  property  as  seems  best  for  the 
collective  interest  of  all  concerned  ; if  there  are  several  parcels  of 
land,  and  the  heirs  cannot  agree  about  their  value,  the  law  cannot 
give  a parcel  to  each,  but  every  separate  parcel  must  be  either  put 
up  to  sale  or  divided  : if  there  is  a residence,  or  a park  or  pleasure- 
ground,  which  would  be  destroyed,  as  such,  by  subdivision,  it  must 
be  sold,  perhaps  at  a great  sacrifice  both  of  money  and  of  feeling. 
But  what  the  law  could  not  do,  the  parent  could.  By  means  of 
the  liberty  of  bequest,  all  these  points  might  be  determined  according 
to  reason  and  the  general  interest  of  the  persons  concerned ; and 
the  spirit  of  the  principle  of  equal  division  might  be  the  better 
observed,  because  the  testator  was  emancipated  from  its  letter. 
Finally,  it  would  not  then  be  necessary,  as  under  the  compulsory 
system  it  is,  that  the  law  should  interfere  authoritatively  in  the 
concerns  of  individuals,  not  only  on  the  occurrence  of  a death,  but 
throughout  life,  in  order  to  guard  against  the  attempts  of  parents 
to  frustrate  the  legal  claims  of  their  heirs,  under  colour  of  gifts  and 
other  alienations  inter  vivos.. 

In  conclusion ; all  owners  of  property  should,  I conceive,  have 
power  to  dispose  by  will  of  every  part  of  it,  but  not  to  determine 
the  person  who  should  succeed  to  it  after  the  death  of  all  who  were 
living  when  the  will  was  made.  Under  what  restrictions  it  should 
be  allowable  to  bequeath  property  to  one  person  for  life,  with 
remainder  to  another  person  already  in  existence,  is  a question 
belonging  to  general  legislation,  not  to  political  economy.  Such 
settlements  would  be  no  greater  hindrance  to  alienation  than  any 
case  of  joint  ownership,  since  the  consent  of  persons  actually  in 
existence  is  all  that  would  be  necessary  for  any  new  arrangement 
respecting  the  property. 

§ 5.  From  the  subject  of  Inheritance  I now  pass  to  that  of 
Contracts,  and  among  these,  to  the  important  subject  of  the  Laws 
of  Partnership.  How  much  of  good  or  evil  depends  upon  these  laws, 
and  how  important  it  is  that  they  should  be  the  best  possible,  is  evident 
to  all  who  recognise  in  the  extension  of  the  co-operative  principle,  in 
the  larger  sense  of  the  term,  the  great  economical  necessity  of  modern 
industry.  The  progress  of  the  productive  arts  requiring  that  many 
sorts  of  industrial  occupation  should  be  carried  on  by  larger  and 
larger  capitals,  the  productive  power  of  industry  must  suffer  by 


898 


BOOK  V.  CHAPTER  IX.  § 6 


whatever  impedes  the  formation  of  large  capitals  through  the  aggrega- 
tion of  smaller  ones.  Capitals  of  the  requisite  magnitude  belonging 
to  single  owners,  do  not,  in  most  countries,  exist  in  the  needful 
abundance,  and  would  be  still  less  numerous  if  the  laws  favoured  the 
diffusion  instead  of  the  concentration  of  property  : while  it  is  most 
undesirable  that  all  those  improved  processes,  and  those  means  of 
efficiency  and  economy  in  production,  which  depend  on  the  posses- 
sion of  large  funds,  should  be  monopolies  in  the  hands  of  a few 
rich  individuals,  through  the  difficulties  experienced  by  persons  of 
moderate  or  small  means  in  associating  their  capital.  Finally,  I 
must  repeat  my  conviction,  that  the  industrial  economy  which 
divides  society  absolutely  into  two  portions,  the  payers  of  wages 
and  the  receivers  of  them,  the  first  counted  by  thousands  and  the 
last  by  millions,  is  neither  fit  for,  nor  capable  of,  indefinite  duration  : 
and  the  possibility  of  changing  this  system  for  one  of  combination 
without  dependence,  and  unity  of  interest  instead  of  organized 
hostility,  depends  altogether  upon  the  future  developments  of  the 
Partnership  principle. 

Yet  there  is  scarcely  any  country  whose  laws  do  not  throw  great, 
and  in  most  cases  intentional,  obstacles  in  the  way  of  the  formation 
of  any  numerous  partnership.  In  England  it  is  already  a serious 
discouragement,  that  differences  among  partners  are,  practically 
speaking,  only  capable  of  adjudication  by  the  Court  of  Chancery  : 
which  is  often  worse  than  placing  such  questions  out  of  the  pale  of 
all  law ; since  any  one  of  the  disputant  parties,  who  is  either 
dishonest  or  litigious,  can  involve  the  others  at  his  pleasure  in  the 
expense,  trouble,  and  anxiety,  which  are  the  unavoidable  accom- 
paniments of  a Chancery  suit,  without  their  having  the  power  of 
freeing  themselves  from  the  infliction  even  by  breaking  up  the 
association.*  Besides  this,  it  required,  until  lately,  a separate  Act 

♦ [1852]  Mr.  Cecil  Fane,  the  Commissioner  of  the  Bankruptcy  Court,  in 
his  evidence  before  the  Committee  on  the  Law  of  Partnership,  says  : “ I re- 
member a short  time  ago  reading  a written  statement  by  two  eminent  solicitors, 
who  said  that  they  had  known  many  partnership  accounts  go  into  Chancery, 
but  that  they  never  knew  one  come  out.  . . . Very  few  of  the  persons  who 
would  be  disposed  to  engage  in  partnerships  of  this  kind  ” (co-operative  associa- 
tions  of  working  men)  “ have  any  idea  of  the  truth,  namely,  that  the  decision 
of  questions  arising  amongst  partners  is  really  impracticable. 

“ Do  they  not  know  that  one  partner  may  rob  the  other  without  any  possi- 
bility of  his  obtaining  redress  ? — The  fact  is  so  ; but  whether  they  know  it  or 
not,  I cannot  undertake  to  say.” 

This  flagrant  injustice  is,  in  Mr.  Fane’s  opinion,  wholly  attributable  to  the 
defects  of  the  tribunal.  “ My  opinion  is,  that  if  there  is  one  thing  more  easy 
than  another,  it  is  the  settlement  of  partnership  questions,  and  for  the  simple 


PARTNERSHIP 


899 


of  the  legislature  before  any  joint-stock  association  could  legally 
constitute  itself,  and  be  empowered  to  act  as  one  body.  By  a 
statute  passed  a few  years  ago,  this  necessity  is  done  away ; but  the 
statute  in  question  is  described  by  competent  authorities  as  a “ mass 
of  confusion,”  of  which  they  say  that  there  “ never  was  such  an  in- 
fliction ” on  persons  entering  into  partnership.*  i When  a number 
of  persons,  whether  few  or  many,  freely  desire  to  unite  their  funds 
for  a common  undertaking,  not  asking  any  peculiar  privilege,  nor 
the  power  to  dispossess  any  one  of  property,  the  law  can  have  no 
good  reason  for  throwing  difficulties  in  the  way  of  the  realization 
of  the  project.  On  compliance  with  a few  simple  conditions  of 
publicity,  any  body  of  persons  ought  to  have  the  power  of  constitut- 
ing themselves  into  a joint-stock  company,  or  societe  en  nom  collectif, 
without  asking  leave  either  of  any  public  officer  or  of  parliament.^ 
As  an  association  of  many  partners  must  practically  be  under  the 
management  of  a few,  every  facility  ought  to  be  afforded  to  the 
body  for  exercising  the  necessary  control  and  check  over  those  few, 
whether  they  be  themselves  members  of  the  association,  or  merely 
its  hired  servants  : and  in  this  point  the  English  system  is  still  at  a 
lamentable  distance  from  the  standard  of  perfection.^ 

§ 6.  Whatever  facilities,  however,  English  law  might  give  to 
associations  formed  on  the  principles  of  ordinary  partnership,  there 
is  one  sort  of  joint-stock  association  which  until  the  year  1855  it 
absolutely  disallowed,  and  which  could  only  be  called  into  existence 
by  a special  act  either  of  the  legislature  or  of  the  crown.^  I mean, 
associations  with  limited  liability. 

Associations  with  limited  liability  are  of  two  kinds  : in  one,  the 

reason,  that  everything  which  is  done  in  a partnership  is  entered  in  the  books  ; 
the  evidence  therefore  is  at  hand ; if  therefore  a rational  mode  of  proceeding 
were  once  adopted,  the  difficulty  would  altogether  vanish.” — Minutes  of  Evi- 
dence annexed  to  the  Report  of  the  Select  Committee  on  the  Law  of  Partnership 
(1851),  pp.  85-7. 

* Reporty  ut  supra,  p.  167. 

^ [So  since  the  3rd  ed.  (1852).  In  the  original : “ this  necessity  is  done 
away,  and  the  formalities  which  have  been  substituted  for  it  are  not  sufficiently 
onerous  to  be  very  much  of  an  impediment  to  such  undertakings.”] 

* [The  comment : “ and  this  liberty,  in  England,  they  cannot  now  be  fairly 
said  not  to  have,”  (“  though  they  have  had  it  bub  for  a little  more  than  three 
years,”  omitted  in  2nd  ed.  1849 ),  was  dropt  out  of  the  3rd  ed.] 

* [“  Though  less,  I believe,  owing  to  the  defects  of  the  law  than  to  those 
of  the  courts  of^judicature  ” ; omitted  in  3rd  ed.] 

^ [So  since  4th  ed.  (1857).  In  the  original : “ which  it  absolutely  dis- 
allows, and  which  can  still  be  only  ” &o.  “ Until  lately  ” was  inserted  in  tha 

3rd  ed.  m the  next  paragraph] 


900 


BOOK  V.  CHAPTER  IX.  § 6 


liability  of  all  the  partners  is  limited,  in  the  other  that  of  some  of 
them  only.  The  first  is  the  societe  anonyme  of  the  French  law,  which 
in  England  had  until  lately  no  other  name  than  that  of  “ chartered 
company  : ” meaning  thereby  a joint-stock  company  whose  share- 
holders, by  a charter  from  the  crown  or  a special  enactment  of  the 
legislature,  stood  exempted  from  any  liability  for  the  debts  of  the 
concern,  beyond  the  amount  of  their  subscriptions.  The  other 
species  of  limited  partnership  is  that  known  to  the  French  law 
under  the  name  of  commandite  ; of  this,  which  in  England  is  still 
unrecognised  and  illegal,  I shall  speak  presently. 

If  a number  of  persons  choose  to  associate  for  carrying  on  any 
operation  of  commerce  or  industry,  agreeing  among  themselves 
and  announcing  to  those  with  whom  they  deal  that  the  members 
of  the  association  do  not  undertake  to  be  responsible  beyond  the 
amount  of  the  subscribed  capital ; is  there  any  reason  that  the  law 
should  raise  objections  to  this  proceeding,  and  should  impose  on 
them  the  unlimited  responsibility  which  they  disclaim  ? For  whose 
lake  ? Not  for  that  of  the  partners  themselves  ; for  it  is  they  whom 
the  limitation  of  responsibility  benefits  and  protects.  It  must 
therefore  be  for  the  sake  of  third  parties ; namely,  those  who 
may  have  transactions  with  the  association,  and  to  whom  it  may 
run  in  debt  beyond  what  the  subscribed  capital  suffices  to  pay. 
But  nobody  is  obliged  to  deal  with  the  association  : still  less  is  any 
?ne  obliged  to  give  it  unlimited  credit.  The  class  of  persons  with 
whom  such  associations  have  dealings  are  in  general  perfectly 
capable  of  taking  care  of  themselves,  and  there  seems  no  reason  that 
the  law  should  be  more  careful  of  their  interests  than  they  will 
themselves  be ; provided  no  false  representation  is  held  out,  and 
they  are  aware  from  the  first  what  they  have  to  trust  to.  The  law  is 
warranted  in  requiring  from  all  joint-stock  associations  with  limited 
responsibility,  not  only  that  the  amount  of  capital  on  which  they 
profess  to  carry  on  business  should  either  be  actually  paid  up  or 
security  given  for  it  (if,  indeed,  with  complete  publicity,  such  a 
requirement  would  be  necessary),  but  also  that  such  accounts  should 
be  kept,  accessible  to  individuals,  and  if  needful,  published  to  the 
world,  as  shall  render  it  possible  to  ascertain  at  any  time  the  existing 
state  of  the  company’s  affairs,  and  to  learn  whether  the  capital  which 
is  the  sole  security  for  the  engagements  into  which  they  enter,  still 
subsists  unimpaired : the  fidelity  of  such  accounts  being  guarded 
by  sufficient  penalties.  When  the  law  has  thus  afforded  to  in- 
dividuals all  practicable  means  of  knowing  the  circumstances  which 


PARTNERSHIP 


901 


ought  to  enter  into  their  prudential  calculations  in  dealing  with  the 
company,  there  seems  no  more  need  for  interfering  with  individual 
judgment  in  this  sort  of  transactions,  than  in  any  other  part  of  the 
private  business  of  life. 

The  reason  usually  urged  for  such  interference  is,  that  the 
managers  of  an  association  with  limited  responsibility,  not  risking 
their  whole  fortunes  in  the  event  of  loss,  while  in  case  of  gain  they 
might  profit  largely,  are  not  sufficiently  interested  in  exercising  due 
circumspection,  and  are  under  the  temptation  of  exposing  the  funds 
of  the  association  to  improper  hazards.  It  is,  however,  well  ascer- 
tained that  associations  with  unlimited  responsibility,  if  they  have 
rich  shareholders,  can  obtain,  even  when  known  to  be  reckless  in 
their  transactions,  improper  credit  to  an  extent  far  exceeding  what 
would  be  given  to  companies  equally  ill-conducted  whose  creditors 
had  only  the  subscribed  capital  to  rely  on.*  ^ To  whichever  side 
the  balance  of  evil  inclines,  it  is  a consideration  of  more  importance 
to  the  shareholders  themselves  than  to  third  parties ; since,  with 
proper  securities  for  publicity,  the  capital  of  an  association  with 
limited  liability  could  not  be  engaged  in  hazards  beyond  those 
ordinarily  incident  to  the  business  it  carries  on,  without  the  facts 
being  known,  and  becoming  the  subject  of  comments  by  which  the 
credit  of  the  body  would  be  likely  to  be  afiected  in  quite  as  great  a 
degree  as  the  circumstances  would  justify.  If,  under  securities  for 
publicity,  it  were  found  in  practice  that  companies,  formed  on  the 
principle  of  unlimited  responsibility,  were  more  skilfully  and  more 
cautiously  managed,  companies  with  limited  liability  would  be  unable 
to  maintain  an  equal  competition  with  them ; and  would  therefore 
rarely  be  formed,  unless  when  such  limitation  was  the  only  condition 
on  which  the  necessary  amount  of  capital  could  be  raised : and  in 
that  case  it  would  be  very  unreasonable  to  say  that  their  formation 
ought  to  be  prevented. 

It  may  further  be  remarked,  that  although,  with  equality  of 
capital,  a company  of  limited  liability  offers  a somewhat  less  security 
to  those  who  deal  with  it,  than  one  in  which  every  shareholder  is 
responsible  with  his  whole  fortune,  yet  even  the  weaker  of  these 

♦ See  the  Report  already  referred  to,  pp.  145-158. 

^ [So  since  the  5th  ed.  (1862).  The  addition,  as  made  in  the  3rd  ed.  (1852), 
began  ; “ It  has  however  been  proved  by  the  evidence  of  several  experienced 
witnesses  before  a late  committee  of  the  House  of  Commons  that  associations” 
&c.  The  original  text,  after  “ improper  hazards  ” went  on ; “ Admitting  that 
this  is  one  of  the  disadvantages  of  such  associations,  it  is  a consideration  of 
more  importance  ” &c.] 


902 


BOOR  V.  CHAPTER  IX.  § 6 


two  securities  is  in  some  respects  stronger  than  that  which  an 
individual  capitahst  can  afford.  In  the  case  of  an  individual,  there 
is  such  security  as  can  be  founded  on  his  unlimited  liability,  but  not 
that  derived  from  publicity  of  transactions,  or  from  a known  and 
large  amount  of  paid-up  capital.  This  topic  is  well  treated  in  an 
able  paper  by  M.  Coquehn,  published  in  the  Revue  des  Deux 
Mondes  for  July  1843.* 

“ While  third  parties  who  trade  with  individuals,’*  says  this 
writer,  “scarcely  ever  know,  except  by  approximation,  and  even 
that  most  vague  and  uncertain,  what  is  the  amount  of  capital 
responsible  for  the  performance  of  contracts  made  with  them, 
those  who  trade  with  a societe  anonyme  can  obtain  full  informa- 
tion if  they  seek  it,  and  perform  their  operations  with  a feehng  of 
confidence  that  cannot  exist  in  the  other  case.  Again,  nothing  is 
easier  than  for  an  individual  trader  to  conceal  the  extent  of  his 
engagements,  as  no  one  can  know  it  certainly  but  himself.  Even 
his  confidential  clerk  may  be  ignorant  of  it,  as  the  loans  he  finds 
himself  compelled  to  make  may  not  all  be  of  a character  to  require 
that  they  be  entered  in  his  day-book.  It  is  a secret  confined  to 
himself ; one  w^hich  transpires  rarely,  and  always  slowly ; one 
which  is  unveiled  only  when  the  catastrophe  has  occurred.  On  the 
contrary,  the  societe  anonyme  neither  can  nor  ought  to  borrow, 
without  the  fact  becoming  known  to  all  the  world — directors,  clerks, 
shareholders,  and  the  public.  Its  operations  partake,  in  some 
respects,  of  the  nature  of  those  of  governments.  The  light  of  day 
penetrates  in  every  direction,  and  there  can  be  no  secrets  from 
those  who  seek  for  information.  Thus  all  is  fixed,  recorded,  known, 
of  the  capital  and  debts  in  the  case  of  the  societe  anonyme,  while  all 
is  uncertain  and  unknown  in  the  case  of  the  individual  trader. 
Which  of  the  two,  we  would  ask  the  reader,  presents  the  most 
favourable  aspect,  or  the  surest  guarantee,  to  the  view  of  those  who 
trade  with  them  ? 

“ Again,  availing  himself  of  the  obscurity  in  which  his  affairs 
are  shrouded,  and  which  he  desires  to  increase,  the  private  trader  is 
enabled,  so  long  as  his  business  appears  prosperous,  to  produce 
impressions  in  regard  to  his  means  far  exceeding  the  reahty,  and 
thus  to  establish  a credit  not  justified  by  those  means.  When 
losses  occur,  and  he  sees  himself  threatened  with  bankruptcy,  the 
world  is  still  ignorant  of  his  condition,  and  he  finds  himself  enabled  to 

* The  quotation  is  from  a translation  published  by  Mr.  H.  C.  Carey,  in  an 
American  periodical,  Hnitfs  Merchants  Magazine,  for  May  and  June  1^5. 


PARTNERSHIP 


903 


contract  debts  far  beyond  the  possibility  of  payment.  The  fatal 
day  arrives,  and  the  creditors  find  a debt  much  greater  than  had 
been  anticipated,  while  the  means  of  payment  are  as  much  less. 
Even  this  is  not  all.  The  same  obscurity  which  has  served  him  so 
well  thus  far,  when  desiring  to  magnify  his  capital  and  increase  his 
credit,  now  affords  him  the  opportunity  of  placing  a part  of  that 
capital  beyond  the  reach  of  his  creditors.  It  becomes  diminished, 
if  not  annihilated.  It  hides  itself,  and  not  even  legal  remedies, 
nor  the  activity  of  creditors,  can  bring  it  forth  from  the  dark  corners 
in  which  it  is  placed.  . . . Our  readers  can  readily  determine  for 
themselves  if  practices  of  this  kind  are  equally  easy  in  the  case  of 
the  societe  anonym e.  We  do  not  doubt  that  such  things  are  possible, 
but  we  think  that  they  will  agree  with  us  that  from  its  nature,  its 
organization,  and  the  necessary  publicity  that  attends  all  its  actions, 
the  liability  to  such  occurrences  is  very  greatly  diminished.” 

The  laws  of  most  countries,  England  included,  have  erred  in  a 
two-fold  manner  with  regard  to  joint-stock  companies.  While  they 
have  been  most  unreasonably  jealous  of  allowing  such  associations 
to  exist,  especially  with  limited  responsibility,  they  have  generally 
neglected  the  enforcement  of  publicity ; the  best  security  to  the 
public  against  any  danger  which  might  arise  from  this  description 
of  partnerships  ; and  a security  quite  as  much  required  in  the  case 
of  those  associations  of  the  kind  in  question,  which,  by  an  exception 
from  their  general  practice,  they  suffered  to  exist.  Even  in  the 
instance  of  the  Bank  of  England,  which  holds  a monopoly  from  the 
legislature,  and  has  had  partial  control  over  a matter  of  so  much 
public  interest  as  the  state  of  the  circulating  medium,  it  is  only 
within  these  few  years  that  any  publicity  has  been  enforced ; and 
the  publicity  was  at  first  of  an  extremely  incomplete  character, 
though  now,  for  most  practical  purposes,  probably  at  length  sufficient. 

§ 7.  The  other  kind  of  limited  partnership  which  demands 
our  attention  is  that  in  which  the  managing  partner  or  partners 
are  responsible  with  their  whole  fortunes  for  the  engagements  of 
the  concern,  but  have  others  associated  with  them  who  contribute 
only  definite  sums,  and  are  not  liable  for  anything  beyond,  though 
they  participate  in  the  profits  according  to  any  rule  which  may  be 
agreed  on.  This  is  called  partnership  cn  commandite : and  the 
partners  with  limited  liability  (to  whom,  by  the  French  law,  all 
interference  in  the  management  of  the  concern  is  interdicted)  are 
known  by  the  name  commanditaires.  Such  partnerships  are  not 


904 


BOOK  V.  CHAPTER  IX.  § 7 


allowed  by  English  law  : ^ in  all  private  partnerships,  whoever 
shares  in  the  profits  is  liable  for  the  debts  to  as  plenary  an  extent 
as  the  managing  partner. 

For  such  prohibition  no  satisfactory  defence  has  ever,  so  far  as  I 
am  aware,  been  mcide.  Even  the  insufficient  reason  given  against 
limiting  the  responsibility  of  shareholders  in  a joint-stock  company 
does  not  apply  here ; there  being  no  diminution  of  the  motives  to 
circumspect  management,  since  all  who  take  any  part  in  the  direction 
of  the  concern  are  liable  with  their  whole  forties.  To  third  parties, 
again,  the  security  is  improved  by  the  existence  of  commandite ; 
oince  the  amount  subscribed  by  commanditaires  is  all  of  it  available 
to  creditors,  the  commanditaires  losing  their  whole  investment  before 
any  creditor  can  lose  anything ; while,  if  instead  of  becoming 
partners  to  that  amount,  they  had  lent  the  sum  at  an  interest  equal 
to  the  profit  they  derived  from  it,  they  would  have  shared  with  the 
other  creditors  in  the  residue  of  the  estate,  diminishing  pro  rata  the 
dividend  obtained  by  all.  While  the  practice  of  commandite  thus 
conduces  to  the  interest  of  creditors,  it  is  often  highly  desirable  for 
the  contracting  parties  themselves.  The  managers  are  enabled 
to  obtain  the  aid  of  a much  greater  amount  of  capital  than  they 
could  borrow  on  their  own  security ; and  persons  are  induced  to  aid 
useful  undertakings,  by  embarking  limited  portions  of  capital  in 
them,  when  they  would  not,  and  often  could  not  prudently,  have 
risked  their  whole  fortunes  on  the  chances  of  the  enterprise. 

It  may  perhaps  be  thought  that  where  due  facilities  are  afforded 
to  joint-stock  companies,  commandite  partnerships  are  not  required. 
But  there  are  classes  of  cases  to  which  the  commandite  principle 
must  always  be  better  adapted  than  the  joint-stock  principle. 
“ Suppose,”  says  M.  Coquelin,  “ an  inventor  seeking  for  a capital 
to  carry  his  invention  into  practice.  To  obtain  the  aid  of  capitalists, 
he  must  offer  them  a share  of  the  anticipated  benefit ; they  must 
associate  themselves  with  him  in  the  chances  of  its  success.  In  such 
a case,  which  of  the  forms  would  he  select  ? Not  a common  partner- 
ship, certainly ; ” for  various  reasons,  and  especially  the  extreme 
difficulty  of  finding  a partner  with  capital,  willing  to  risk  his  whole 
fortune  on  the  success  of  the  invention.*  “ Neither  would  he 

^ [They  nave  been  allowed  sine©  1908.  See  Appendix  HH.  Company 
and  Partnership  Law.} 

* [1852]  “ There  has  been  a great  deal  of  commiseration  professed,”  says 
Mr.  Duncan,  solicitor,  ” towards  the  poor  inventor ; he  has  been  oppressed  by 
the  high  cost  of  patents ; but  his  chief  oppression  has  been  the  partnership 
law,  which  prevents  his  getting  aav  one  to  help  him  to  develop  his  invention. 


PARTNERSHIP 


906 


select  the  societe  anonyme,''  or  any  other  form  of  joint-stock  company, 
“ in  which  he  might  be  superseded  as  manager.  He  would  stand, 
in  such  an  association,  on  no  better  footing  than  any  other  share- 
holder, and  he  might  be  lost  in  the  crowd  ; whereas,  the  association 
existing,  as  it  were,  by  and  for  him,  the  management  would  appear 
to  belong  to  him  as  a matter  of  right.  Cases  occur  in  which  a 
merchant  or  a manufacturer,  without  being  precisely  an  inventor, 
has  undeniable  claims  to  the  management  of  an  undertaking,  from 
the  possession  of  quahties  peculiarly  calculated  to  promote  its 
success.  So  great,  indeed,”  continues  M.  Coquelin,  “ is  the  necessity, 
in  many  cases,  for  the  limited  partnership,  that  it  is  difficult  to 
conceive  how  we  could  dispense  with  or  replace  it : ” and  in  reference 
to  his  own  country  he  is  probably  in  the  right. 

Where  there  is  so  great  a readiness  as  in  England,  on  the 
part  of  the  public,  to  form  joint-stock  associations,  even  without 
the  encouragement  of  a limitation  of  responsibility ; commandite 
partnership,  though  its  prohibition  is  in  principle  quite  indefensible, 
cannot  be  deemed  to  be,  in  a merely  economical  point  of  view,  of  the 
imperative  necessity  which  M.  Coquelin  ascribes  to  it.  Yet  the 
inconveniences  are  not  small  which  arise  indirectly  from  provisions 
of  law  by  which  every  one  who  shares  in  the  profits  of  a concern  is 
subject  to  the  full  liabilities  of  an  unlimited  partnership.  It  is 
impossible  to  say  how  many  or  what  useful  modes  of  combination  are 
rendered  impracticable  by  such  a state  of  the  law.  It  is  sufficient 
for  its  condemnation  that,  unless  in  some  way  relaxed,  it  is 
inconsistent  vdth  the  payment  of  wages  in  part  by  a percentage  on 

He  is  a poor  man,  and  therefore  cannot  give  security  to  a creditor ; no  one 
will  lend  him  money ; the  rate  of  interest  offered,  however  high  it  may  be,  is 
not  an  attraction.  But  if  by  the  alteration  of  the  law  he  could  allow  capitalists 
to  take  an  interest  with  him  and  share  the  profits,  while  the  risk  should  be 
confined  to  the  capital  they  embarked,  there  is  very  little  doubt  at  «/.ll  that  he 
would  frequently  get  assistance  from  capitalists  ; whereas  at  the  present 
moment,  with  the  law  as  it  stands,  he  is  completely  destroyed,  and  his  inven- 
tion is  useless  to  him  ; he  struggles  month  after  month  ; hr  applies  again  and 
again  to  the  capitalists  without  avail.  I know  it  practically  in  two  or  three 
cases  of  patented  inventions ; especially  one  where  parties  with  capital  were 
desirous  of  entering  into  an  undertaking  of  great  moment  in  Liverpool,  but 
five  or  six  different  gentlemen  were  deterred  from  doing  so,  all  feeling  the 
strongest  objection  to  what  each  one  called  the  cursed  partnership  law.” 
— Report,  p.  155. 

Fane  says,  “ In  the  course  of  my  professional  life,  as  a Commissioner 
of  the  Court  of  Bankruptcy,  I have  learned  that  the  most  unfortunate  man  in 
the  world  is  an  inventor.  The  difficulty  which  an  inventor  finds  in  getting 
at  capital  involves  him  in  all  sorts  of  embarrassments,  and  he  ultimately  is 
for  the  most  part  a ruined  man,  and  somebody  else  gets  possession  of  bis 
invention.” — Ib.  p.  82. 


906 


BOOK  V.  CHAPTER  IX.  § 7 


profits ; in  other  words,  the  association  of  the  operatives  as  virtual 
partners  with  the  capitalist.* 

It  is,  above  all,  with  reference  to  the  improvement  and  elevation 
of  the  working  classes  that  complete  freedom  in  the  conditions  of 
partnership  is  indispensable.  Combinations  such  as  the  associations 
of  workpeople,  described  in  a former  chapter,  are  the  most  powerful 
means  of  efiecting  the  social  emancipation  of  the  labourers  through 
their  own  moral  qualities.  Nor  is  the  liberty  of  association  impor- 
tant solely  for  its  examples  of  success,  but  fully  as  much  so  for  the 
sake  of  attempts  which  would  not  succeed ; but  by  their  failure 
would  give  instruction  more  impressive  than  can  be  afforded  by 
anything  short  of  actual  experience.  Every  theory  of  social  im- 
provement, the  worth  of  which  is  capable  of  being  brought  to  an 
experimental  test,  should  be  permitted,  and  even  encouraged,  to 
submit  itself  to  that  test.  From  such  experiments  the  active  portion 
of  the  working  classes  would  derive  lessons,  which  they  would  be 
slow  to  isarn  from  the  teaching  of  persons  supposed  to  have  interests 
and  prejudices  adverse  to  their  good ; would  obtain  the  means  of 
correcting,  at  no  cost  to  society,  whatever  is  now  erroneous  in  their 
notions  of  the  means  of  establishing  their  independence ; and  of 
discovering  the  conditions,  moral,  intellectual,  and  industrial,  which 
are  indispensably  necessary  for  effecting  without  injustice,  or  for 
effecting  at  all,  the  social  regeneration  they  aspire  to.f 

The  French  law  of  partnership  is  superior  to  the  English  in  per- 
mitting commandite  ; and  superior,  in  having  no  such  unmanageable 
instrument  as  the  Court  of  Chancery,  all  cases  arising  from  com- 
mercial transactions  being  adjudicated  in  a comparatively  cheap 
and  expeditious  manner  by  a tribunal  of  merchants.  In  other 
respects  the  French  system  was,  and  I believe  still  is,  far  worse  than 
the  English.  A joint-stock  company  with  limited  responsibility 
cannot  be  formed  without  the  express  authorization  of  the  depart- 

* [1865]  It  has  been  found  possible  to  effect  this  through  the  Limited 
Liability  Act,  by  erecting  the  capitalist  and  his  workpeople  into  a Limited 
Company  ; as  proposed  by  Messrs.  Briggs  (supra,  p.  771). 

t [1862]  By  an  Act  of  the  year  1852,  called  the  Industrial  and  Provident 
Societies  Act,  for  which  the  nation  is  indebted  to  the  public-spirited  exertions 
of  Mr.  Slaney,  industrial  associations  of  working  people  are  admitted  to  the 
statutory  privileges  of  Friendly  Societies.  This  not  only  exempts  them  from 
the  formalities  applicable  to  joint-stock  companies,  but  provides  for  the 
settlement  of  disputes  among  the  partners  without  recourse  to  the  Court  of 
Chancery.  There  are  still  some  defects  in  the  provisions  of  this  Act,  which 
hamper  the  proceedings  of  the  Societies  in  several  respects ; as  is  pointed  out 
in  the  Almanack  of  the  Eoehdale  Equitable  Pioneers  for  1861. 


PARTNERSHIP 


907 


ment  of  government  called  the  Conseil  d^Etat,  a body  of  adminis- 
trators, generally  entire  strangers  to  industrial  transactions,  who 
have  no  interest  in  promoting  enterprises,  and  are  apt  to  think 
that  the  purpose  of  their  institution  is  to  restrain  them ; whose 
consent  cannot  in  any  case  be  obtained  without  an  amount  of  time 
and  labour  which  is  a very  serious  hindrance  to  the  commencement 
of  an  enterprise,  while  the  extreme  uncertainty  of  obtaining  that 
consent  at  all  is  a great  discouragement  to  capitalists  who  would 
be  willing  to  subscribe.  In  regard  to  joint-stock  companies  without 
limitation  of  responsibility,  which  in  England  exist  in  such  numbers 
and  are  formed  with  such  facility,  these  associations  cannot,  in 
France,  exist  at  aU ; for,  in  cases  of  unlimited  partnership,  the 
French  law  does  not  permit  the  division  of  the  capital  into  transferable 
shares. 

The  best  existing  [1848]  laws  of  partnership  appear  to  be  those 
of  the  New  England  States.  According  to  Mr.  Carey, “ nowhere 
is  association  so  little  trammelled  by  regulations  as  in  New  England  ; 
the  consequence  of  which  is,  that  it  is  carried  to  a greater  extent 
there,  and  particularly  in  Massachusetts  and  Khode  Island,  than 
in  any  other  part  of  the  world. ' In  these  states,  the  soil  is  covered 
with  compagnies  anonymes — chartered  companies — for  almost  every 
conceivable  purpose.  Every  town  is  a corporation  for  the  manage- 
ment of  its  roads,  bridges,  and  schools : which  are,  therefore,  under 
the  direct  control  of  those  who  pay  for  them,  and  are  consequently 
well  managed-  Academies  and  churches,  lyceums  and  libraries, 
saving  fund  societies,  and  trust  companies,  exist  in  numbers  pro- 
portioned to  the  wants  of  the  people,  and  all  are  corporations. 
Every  district  has  its  local  bank,  of  a size  to  suit  its  wants,  the 
stock  of  which  is  owned  by  the  small  capitalists  of  the  neighbour- 
hood, and  managed  by  themselves ; the  consequence  of  which  is, 
that  in  no  part  of  the  world  is  the  system  of  banking  so  perfect — 
so  little  liable  to  vibration  in  the  amount  of  loans — the  necessary 
efiect  of  which  is,  that  in  none  is  the  value  of  property  so  little  affected 
by  changes  in  the  amount  or  value  of  the  currency  resulting  from 
the  movements  of  their  own  banking  institutions.  In  the  two  states 
to  which  we  have  particularly  referred,  they  are  almost  two  hundred 
in  number.  Massachusetts,  alone,  offers  to  our  view  fifty-three 
insurance  offices,  of  various  forms,  scattered  through  the  state,  and 
all  incorporated.  Factories  are  incorporated,  and  are  owned  in 


In  a note  appended  to  hia  translation  of  M.  Coquelin’s  paper. 


908 


BOOK  V.  CHAPTER  IX.  § 7 


shares ; and  every  one  that  has  any  part  in  the  management  of 
their  concerns,  from  the  purchase  of  the  raw  material  to  the  sale 
of  the  manufactured  article,  is  a part  owner ; while  every  one 
employed  in  them  has  a prospect  of  becoming  one,  by  the  use  of 
prudence,  exertion,  and  economy.  Charitable  associations  exist  in 
large  numbers,  and  all  are  incorporated.  Fishing  vessels  are  owned 
in  shares  by  those  who  navigate  them ; and  the  sailors  of  a whaling 
ship  depend  in  a great  degree,  if  not  altogether,  upon  the  success 
of  the  voyage  for  their  compensation.  Every  master  of  a vessel 
trading  in  the  Southern  Ocean  is  a part  owner,  and  the  interest 
he  possesses  is  a strong  inducement  to  exertion  and  economy,  by 
aid  of  which  the  people  of  New  England  are  rapidly  driving  out 
the  competition  of  other  nations  for  the  trade  of  that  part  of  the 
world.  Wherever  settled,  they  exhibit  the  same  tendency  to  com- 
bination of  action.  In  New  York  they  are  the  chief  owners  of 
the  lines  of  packet  ships,  which  are  divided  into  shares,  owned 
by  the  shipbuilders,  the  merchants,  the  master,  and  the  mates ; 
which  last  generally  acquire  the  means  of  becoming  themselves 
masters,  and  to  this  is  due  their  great  success.  The  system  is  the 
most  perfectly  democratic  of  any  in  the  world.  It  affords  to  every 
labourer,  every  sailor,  every  operative,  male  or  female,  the  prospect 
of  advancement ; and  its  results  are  precisely  such  as  we  should 
have  reason  to  expect.  In  no  part  of  the  world  are  talent,  industry, 
and  prudence,  so  certain  to  be  largely  rewarded.” 

The  cases  of  insolvency  and  fraud  on  the  part  of  chartered 
companies  in  America,  which  have  caused  so  much  loss  and  so 
much  scandal  in  Europe,  did  not  occur  in  the  part  of  the  Union  to 
which  this  extract  refers,  but  in  other  States,  in  which  the  right 
of  association  is  much  more  fettered  by  legal  restrictions,  and  in 
which,  accordingly,  joint-stock  associations  are  not  comparable  in 
number  or  variety  to  those  of  New  England.  Mr.  Carey  adds, 
“ A careful  examination  of  the  systems  of  the  several  states,  can 
scarcely,  we  think,  fail  to  convince  the  reader  of  the  advantage 
resulting  from  permitting  men  to  determine  among  themselves  the 
terms  upon  which  they  will  associate,  and  allowing  the  associations 
that  may  be  formed  to  contract  with  the  public  as  to  the  terms 
upon  which  they  will  trade  together,  whether  of  the  limited  or 
unlimited  liability  of  the  partners.”  ^ This  principle  has  been 

' [This  sentence  replaced  in  the  6th  ed.  (1865)  the  comment  of  the  original : 
“ and  I concur  in  thinking  that  to  this  conclusion  science  and  legislation  must 
ultimately  come.”] 


INSOLVENCY 


909 


adopted  as  the  foundation  of  all  recent  English  legislation  on  the 
subject. 

§ 8.  I proceed  to  the  subject  of  Insolvency  Laws. 

Good  laws  on  this  subject  are  important,  first  and  principally, 
on  the  score  of  public  morals ; which  are  on  no  point  more  under 
the  infiuence  of  the  law,  for  good  and  evil,  than  in  a matter  belonging 
so  pre-eminently  to  the  province  of  law  as  the  preservation  of 
pecuniary  integrity.  But  the  subject  is  also,  in  a merely  economical 
point  of  view,  of  great  importance.  First,  because  the  economical 
well-being  of  a people,  and  of  mankind,  depends  in  an  especial 
manner  upon  their  being  able  to  trust  each  other’s  engagements. 
Secondly,  because  one  of  the  risks,  or  expenses,  of  industrial  opera- 
tions is  the  risk  or  expense  of  what  are  commonly  called  bad  debts, 
and  every  saving  which  can  be  effected  in  this  liability  is  a diminution 
of  cost  of  production  ; by  dispensing  with  an  item  of  outlay  which 
in  no  way  conduces  to  the  desired  end,  and  which  must  be  paid 
for  either  by  the  consumer  of  the  commodity,  or  from  the  general 
profits  of  capital,  according  as  the  burthen  is  peculiar  or  general. 

The  laws  and  practice  of  nations  on  this  subject  have  almost 
always  been  in  extremes.  The  ancient  laws  of  most  countries  were 
all  severity  to  the  debtor.  They  invested  the  creditor  with  a power 
of  coercion,  more  or  less  tyrannical,  which  he  might  use  against  his 
insolvent  debtor,  either  to  extort  the  surrender  of  hidden  property, 
or  to  obtain  satisfaction  of  a vindictive  character,  which  might 
console  him  for  the  non-payment  of  the  debt.  This  arbitrary  power 
has  extended,  in  some  countries,  to  making  the  insolvent  debtor 
serve  the  creditor  as  his  slave  : in  which  plan  there  were  at  least 
some  grains  of  common  sense,  since  it  might  possibly  be  regarded 
as  a scheme  for  making  him  work  out  the  debt  by  his  labour.  In 
England  the  coercion  assumed  the  milder  form  of  ordinary  imprison- 
ment. The  one  and  the  other  were  the  barbarous  expedients  of  a 
rude  age,  repugnant  to  justice,  as  well  as  to  humanity.  Unfortu- 
nately the  reform  of  them,  like  that  of  the  criminal  law  generally, 
has  been  taken  in  hand  as  an  affair  of  humanity  only,  not  of  justice  : 
and  the  modish  humanity  of  the  present  time,  which  is  essentially 
a thing  of  one  idea,^  has  in  this,  as  in  other  cases,  gone  into  a violent 

* [The  original  parenthesis  “ (and  is  indeed  little  better  than  a timid 
ihrinking  from  the  infliction  of  anything  like  pain,  next  neighbour  to  the 
cowardice  which  shrinks  from  unnecessary  endurance  of  it)  ” was  omitted 
from  the  3rd  ed.  (1852).] 


910 


BOOK  V.  CHAPTER  IX.  § 8 


reaction  against  tlie  ancient  severity,  and  might  almost  be  supposed 
to  see  in  the  fact  of  having  lost  or  squandered  other  people’s  property, 
a peculiar  title  to  indulgence.  Everything  in  the  law  which  attached 
disagreeable  consequences  to  that  fact  was  gradually  relaxed,  or 
entirely  got  rid  of : until  the  demorahzmg  effects  of  this  laxity 
became  so  evident  as  to  determine,  by  more  recent  legislation,  a 
salutary  though  very  insufficient  movement  in  the  reverse  direction.^ 
The  indulgence  of  the  laws  to  those  who  have  made  themselves 
unable  to  pay  their  just  debts  is  usually  defended  on  the  plea  that 
the  sole  object  of  the  law  should  be,  in  case  of  insolvency,  not  to 
coerce  the  person  of  the  debtor,  but  to  get  at  his  property,  and 
distribute  it  fairly  among  the  creditors.  Assuming  that  this  is  and 
ought  to  be  the  sole  object,  the  mitigation  of  the  law  was  in  the  first 
instance  carried  so  far  as  to  sacrifice  that  object.  Imprisonment 
at  the  discretion  of  a creditor  was  really  a powerful  engine  for 
extracting  from  the  debtor  any  property  which  he  had  concealed 
or  otherwise  made  away  with ; and  it  remains  to  be  shown  by 
experience  whether,  in  depriving  creditors  of  this  instrument,  the 
law,  even  as  last  amended,  has  furnished  them  with  a sufficient 
equivalent.*  But  the  doctrine,  that  the  law  has  done  all  that  ought 
to  be  expected  from  it,  when  it  has  put  the  creditors  in  possession 
of  the  property  of  an  insolvent,  is  in  itself  a totally  inadmissible 
piece  of  spurious  humanity.  It  is  the  business  of  law  to  prevent 
wrong-doing,  and  not  simply  to  patch  up  the  consequences  of  it 
when  it  has  been  committed.  The  law  is  bound  to  take  care  that 
insolvency  shall  not  be  a good  pecuniary  speculation ; that  men 
shall  not  have  the  privilege  of  hazarding  other  people’s  property 
without  their  knowledge  or  consent,  taking  the  profits  of  the  enter- 
prise if  it  is  successful,  and  if  it  fails  throwing  the  loss  upon  the 

* [So  since  the  5th  ed.  (1862).  The  original  ran : “ Everything  . . . haa 
been  gradually  relaxed  and  much  of  it  entirely  got  rid  of.  Because  insolvency 
was  formerly  treated  as  if  it  were  necessarily  a crime,  everything  is  now  done 
to  make  it,  if  possible,  not  even  a misfortune.”  The  present  reference  to  an 
opposite  movement  “ by  a recent  enactment  ” was  introduced  in  the  3rd  ed 
(1852),  and  spoken  of  as  “partial  but  very  salutary.”] 

* [So  since  the  3rd  ed.  (1852).  The  original  ran  : “ In  depriving  creditors 
of  this  instrument,  the  law  has  not  furnished  them  with  a sufBcient  equivalent  ” : 
and  went  on  as  follows  : “ And  it  is  seldom  difficult  for  a dishonest  debtor, 
by  an  understanding  with  one  or  more  of  his  creditors,  or  by  means  of  pretended 
creditors  set  up  for  the  purpose,  to  abstract  a part,  perhaps  the  greatest  part, 
of  his  assets,  from  the  general  fund,  through  the  forms  of  the  law  itself.  The 
facility  and  frequency  of  such  frauds  are  a subject  of  much  complaint,  and 
their  prevention  demands  a vigorous  effort  of  the  legislature,  under  the  guidance 
q{  judicious  persons  practically  conversant  with  the  subject.”] 


INSOLVENCY 


911 


rightful  owners ; and  that  they  shall  not  find  it  answer  to  make 
themselves  unable  to  pay  their  just  debts,  by  spending  the  money 
of  their  creditors  in  personal  indulgence.  It  is  admitted  that  what 
is  technically  called  fraudulent  bankruptcy,  the  false  pretence  of 
inability  to  pay,  is,  when  detected,  properly  subject  to  punishment.^ 
But  does  it  follow  that  insolvency  is  not  the  consequence  of  mis- 
conduct because  the  inability  to  pay  may  be  real  ? If  a man  has 
been  a spendthrift,  or  a gambler,  with  property  on  which  his  creditors 
had  a prior  claim,  shall  he  pass  scot-free  because  the  mischief  is 
consummated  and  the  money  gone  ? Is  there  any  very  material 
difference  in  point  of  morality  between  this  conduct,  and  those 
other  kinds  of  dishonesty  which  go  by  the  names  of  fraud  and 
embezzlement  ? 

Such  cases  are  not  a minority,  but  a large  majority  among 
insolvencies.  The  statistics  of  bankruptcy  prove  the  fact.  “ By 
far  the  greater  part  of  all  insplvencies  arise  from  notorious  miscon- 
duct ; the  proceedings  of  the  Insolvent  Debtors  Court  and  of  the 
Bankruptcy  Court  will  prove  it.  Excessive  and  unjustifiable  over- 
trading, or  most  absurd  speculation  in  commodities,  merely  because 
the  poor  speculator  ‘ thought  they  would  get  up,’  but  why  ho 
thought  so  he  cannot  tell ; speculation  in  hops,  in  tea,  in  silk,  in 
com — things  with  which  he  is  altogether  unacquainted ; wild  and 
absurd  investments  in  foreign  funds,  or  in  joint  stocks ; these  are 
among  the  most  innocent  causes  of  bankruptcy.”  * The  experienced 
and  intelligent  writer  from  whom  I quote  corroborates  his  assertion 
by  the  testimony  of  several  of  the  official  assignees  of  the  Bank- 
ruptcy Court.  One  of  them  says,  “ As  far  as  I can  collect  from  the 
books  and  documents  furnished  by  the  bankrupts,  it  seems  to  me 
that,”  in  the  whole  number  of  cases  which  occurred  during  a given 
time  in  the  court  to  which  he  was  attached,  “ fourteen  have  been 
ruined  by  speculations  in  things  with  which  they  were  unacquainted  ; 
three  by  neglecting  book-keeping ; ten  by  trading  beyond  their 
capital  and  means,  and  the  consequent  loss  and  expense  of  accom- 
modation-bills ; forty-nine  by  expending  more  than  they  could 
reasonably  hope  their  profits  would  be,  though  their  business 
yielded  a fair  return ; none  by  any  general  distress,  or  the  falling 
off  of  any  particular  branch  of  trade.”  Another  of  these  officers 

^ [So  since  the  3rd  ed.  The  original  ran  : “ The  humanitarians  do  not  deny 
that  what  is  technically  . . . pay,  may  reasonably,  when  detected,  be  ” «&c.] 

* From  a volume  published  in  1845,  entitled.  Credit  the  Life  of  Commerce 
by  J.  H.  Elliott. 


912 


BOOK  V.  CHAPTER  IX.  § 8 


says  that,  during  a period  of  eighteen  months,  “ fifty-two  cases  of 
bankruptcy  have  come  under  my  care.  It  is  my  opinion  that 
thirty-two  of  these  have  arisen  from  an  imprudent  expenditure, 
and  five  partly  from  that  cause,  and  partly  from  a pressure  on  the 
business  in  which  the  bankrupts  were  employed.  Fifteen  I attribute 
to  improvident  speculations,  combined  in  many  instances  with  an 
extravagant  mode  of  life.” 

To  these  citations  the  author  adds  the  following  statements 
from  his  personal  means  of  knowledge.  “ Many  insolvencies  are 
produced  by  tradesmen’s  indolence ; they  keep  no  books,  or  at 
least  imperfect  ones,  which  they  never  balance ; they  never  take 
stock;  they  employ  servants,  if  their  trade  be  extensive,  whom 
they  are  too  indolent  even  to  supervise,  and  then  become  insolvent. . 
It  is  not  too  much  to  say,  that  one-half  of  all  the  persons  engaged 
in  trade,  even  in  London,  never  take  stock  at  all : they  go  on  year 
after  year  without  knowing  how  their  affairs  stand,  and  at  last,  like 
the  child  at  school,  they  find  to  their  surprise,  but  one  halfpenny 
left  in  their  pocket.  I will  venture  to  say  that  not  one-fourth 
of  all  the  persons  in  the  provinces,  either  manufacturers,  trades- 
men, or  farmers,  ever  take  stock;  nor  in  fact  does  one-half  of 
them  ever  keep  account-books  deserving  any  other  name  than 
memorandum  books.  I know  sufficient  of  the  concerns  of  five 
hundred  small  tradesmen  in  the  provinces,  to  be  enabled  to  say, 
that  not  one-fifth  of  them  ever  take  stock,  or  keep  even  the  most 
ordinary  accounts.  I am  prepared  to  say  of  such  tradesmen,  from 
carefully  prepared  tables,  giving  every  advantage  where  there  has 
been  any  doubt  as  to  the  causes  of  their  insolvency,  that  where 
nine  happen  from  extravagance  or  dishonesty,  one  ” at  most  “ may 
be  referred  to  misfortune  alone.”  * 

Is  it  rational  to  expect  among  the  trading  classes  any  high  sense 
of  justice,  honour,  or  integrity,  if  the  law  enables  men  who  act  in 
this  manner  to  shuffle  off  the  consequences  of  their  misconduct 
upon  those  who  have  been  so  unfortunate  as  to  trust  them ; and 
practically  proclaims  that  it  looks  upon  insolvency  thus  produced 
as  a ** misfortune,”  not  an  offence? 

It  is,  of  course,  not  denied,  that  insolvencies  do  arise  from  causes 
beyond  the  control  of  the  debtor,  and  that,  in  many  more  cases, 
his  culpability  is  not  of  a high  order  ; and  the  law  ought  to  make  a 
distinction  in  favour  of  such  cases,  but  not  without  a searching 
investigation ; nor  should  the  case  ever  be  let  go  without  having 
* Pp.  50-1. 


INSOLVENCY 


913 


ascertained,  in  tlie  most  complete  manner  practicable,  not  the  fact 
of  insolvency  only,  but  the  cause  of  it.  To  have  been  trusted  with 
money  or  money’s  worth,  and  to  have  lost  or  spent  it,  is  'primd  facie 
evidence  of  something  wrong  : and  it  is  not  for  the  creditor  to  prove, 
which  he  cannot  do  in  one  case  out  of  ten,  that  there  has  been  crimi- 
nality, but  for  the  debtor  to  rebut  the  presumption,  by  laying  open  the 
whole  state  of  his  affairs,  and  showing  either  that  there  has  been  no 
misconduct,  or  that  the  misconduct  has  been  of  an  excusable  kind. 
If  he  fail  in  this,  he  ought  never  to  be  dismissed  without  a punishment 
proportioned  to  the  degree  of  blame  which  seems  justly  imputable 
to  him ; which  punishment,  however,  might  be  shortened  or  miti- 
gated in  proportion  as  he  appeared  likely  to  exert  himself  in  repairing 
the  injury  done. 

It  is  a common  argument  with  those  who  approve  a relaxed 
system  of  insolvency  laws,  that  credit,  except  in  the  great  operations 
of  commerce,  is  an  evil ; and  that  to  deprive  creditors  of  legal  redress 
is  a judicious  means  of  preventing  credit  from  being  given.  That 
which  is  given  by  retail  dealers  to  unproductive  consumers  is,  no 
doubt,  to  the  excess  to  which  it  is  carried,  a considerable  evil.  This, 
however,  is  only  true  of  large,  and  especially  of  long,  credits ; for 
there  is  credit  whenever  goods  are  not  paid  for  before  they  quit  the 
shop,  or,  at  least,  the  custody  of  the  seller ; and  there  would  be 
much  inconvenience  in  putting  an  end  to  this  sort  of  credit.  But 
a large  proportion  of  the  debts  on  which  insolvency  laws  take 
effect  are  those  due  by  small  tradesmen  to  the  dealers  who  supply 
them  : and  on  no  class  of  debts  does  the  demoralization  occasioned 
by  a bad  state  of  the  law  operate  more  perniciously.  These  are 
commercial  credits,  which  no  one  wishes  to  see  curtailed ; their 
existence  is  of  great  importance  to  the  general  industry  of  the 
country,  and  to  numbers  of  honest,  well-conducted  persons  of  small 
means,  to  whom  it  would  be  a great  injury  that  they  should  be 
prevented  from  obtaining  the  accommodation  they  need,  and 
would  not  abuse,  through  the  omission  of  the  law  to  provide  just 
remedies  against  dishonest  or  reckless  borrowers. 

But  though  it  were  granted  that  retail  transactions,  on  any 
footing  but  that  of  ready  money  payment,  are  an  evil,  and  their 
entire  suppression  a fit  subject  for  legislation  to  aim  at;  a worse 
mode  of  compassing  that  object  could  scarcely  be  invented,  than  to 
permit  those  who  have  been  trusted  by  others  to  cheat  and  rob 
them  with  impunity.  The  law  does  not  generally  select  the  vices  of 
mankind  as  the  appropriate  instrument  for  inflicting  chastisement 


914 


BOOK  V.  CHAPTER  IX.  § 8 


on  the  comparatively  innocent.  When  it  seeks  to  discourage  any 
course  of  action,  it  does  so  by  applying  inducements  of  its  own,  not 
by  outlawing  those  who  act  in  the  manner  it  deems  objectionable, 
and  letting  loose  the  predatory  instincts  of  the  worthless  part  of 
mankind  to  feed  upon  them.  If  a man  has  committed  murder,  the 
law  condemns  him  to  death  : but  it  does  not  promise  immunity  to 
anybody  who  may  kill  him  for  the  sake  of  taking  his  purse.  The 
offence  of  believing  another’s  word,  even  rashly,  is  not  so  heinous 
that,  for  the  sake  of  discouraging  it,  the  spectacle  should  be  brought 
home  to  every  door,  of  triumphant  rascality,  with  the  law  on  its 
side,  mocking  the  victims  it  has  made.  This  pestilent  example  has 
been  very  widely  exhibited  since  the  relaxation  of  the  insolvency 
laws.  It  is  idle  to  expect  that,  even  by  absolutely  depriving  creditors 
of  all  legal  redress,  the  kind  of  credit  which  is  considered  objectionable 
would  really  be  very  much  checked.  Rogues  and  swindlers  are 
still  an  exception  among  mankind,  and  people  will  go  on  trusting  each 
other’s  promises.  Large  dealers,  in  abundant  business,  would  refuse 
credit,  as  many  of  them  already  do  : but  in  the  eager  competition 
of  a great  town,  or  the  dependent  position  of  a village  shopkeeper, 
what  can  be  expected  from  the  tradesman  to  whom  a single  customer 
is  of  importance,  the  beginner,  perhaps,  who  is  striving  to  get  into 
business  ? He  will  take  the  risk,  even  if  it  were  still  greater  ; he  ia 
ruined  if  he  cannot  sell  his  goods,  and  he  can  but  be  ruined  if  he  is 
defrauded.  Nor  does  it  avail  to  say,  that  he  ought  to  make  proper 
inquiries,  and  ascertain  the  character  of  those  to  whom  he  supphes 
goods  on  trust.  In  some  of  the  most  flagrant  cases  of  profligate 
debtors  which  have  come  before  the  Bankruptcy  Court,  the  swindler 
had  been  able  to  give,  and  had  given,  excellent  references.* 

* The  following  extracts  from  the  French  Code  de  Commerce  (the  trans- 
lation is  that  of  Mr.  Fane)  show  the  great  extent  to  which  the  just  distinctions 
are  made,  and  the  proper  investigations  provided  for,  by  French  law.  The 
word  banqueroute,  which  can  only  be  translated  by  bankruptcy,  is,  however, 
confined  in  France  to  culpable  insolvency,  which  is  distinguished  into  simple 
bankruptcy  and  fraudulent  bankruptcy.  The  following  are  cases  of  simple 
bankruptcy  : — 

“ Every  insolvent  who,  in  the  investigation  of  his  affairs,  shall  appear 
chargeable  with  one  or  more  of  the  following  offences,  shall  be  proceeded  against 
as  a simple  bankrupt : — 

“ If  his  house  expenses,  which  he  is  bound  to  enter  regularly  in  a day-book, 
appear  excessive  ; 

“If  he  had  spent  considerable  sums  at  play,  or  in  operations  of  pure 
hazard  : 

“ If  it  shall  appear  that  he  has  borrowed  largely,  or  resold  merchandize  at 
a loss,  or  below  the  current  price,  after  it  appeared  by  his  last  account- taking 
that  his  debts  exceeded  his  assets  by  one-haif  : 


INSOLVENCY 


915 


" If  he  has  issued  negotiable  securities  to  throe  times  the  amount  of  his 
available  assets,  according  to  his  last  account- taking. 

“ The  following  may  also  be  proceeded  against  as  simple  bankrupts  : — 

“ He  who  has  not  declared  his  own  insolvency  in  the  manner  prescribed 
by  law ; 

“ He  who  has  not  come  in  and  surrendered  within  the  time  limited,  having 
no  legitimate  excuse  for  his  absence  : 

“ He  who  either  produces  no  books  at  all,  or  produces  such  as  have  been 
irregularly  kept,  and  this  although  the  irregularities  may  not  indicate  fraud.” 

The  penalty  for  “ simple  bankruptcy  ” is  imprisonment  for  a term  of  not 
less  than  one  month,  nor  more  than  two  years.  The  following  are  cases  of 
fraudulent  bankruptcy,  of  which  the  punishment  is  travaux  forcis  (the  galleys) 
for  a term  : — 

“ If  he  has  attempted  to  account  for  his  property  by  fictitious  expenses  and 
losses,  or  if  he  does  not  fully  account  for  all  his  receipts  ; 

“If  he  has  fraudulently  concealed  any  sum  of  money  or  any  debt  due  to 
him,  or  any  merchandize  or  other  movables  ; 

“ If  he  has  made  fraudulent  sales  or  gifts  of  his  property  : 

“ If  he  has  allowed  fictitious  debts  to  be  proved  against  his  estate  ; 

“ If  he  has  been  entrusted  with  property,  either  merely  to  keep,  or  with 
special  directions  as  to  its  use,  and  has  nevertheless  appropriated  it  to  his  own 
use  : 

“ If  he  has  purchased  real  property  in  a borrowed  name  : 

“ If  he  has  concealed  his  books. 

“ The  following  may  also  be  proceeded  against  in  a similar  way  : — 

“ He  who  has  not  kept  books,  or  whose  books  shall  not  exhibit  his  real 
situation  as  regards  his  debts  and  credits  : 

“ He  who,  having  obtained  a protection  {sauf -conduit),  shall  not  have  duly 
attended.” 

These  various  provisions  relate  only  to  commercial  insolvency.  The  laws 
in  regard  to  ordinary  debts  are  considerably  more  rigorous  to  the  debtor. 


CHAPTER  X 


07  INTERFERENCES  OF  GOVERNMENT  GROUNDED  ON 
ERRONEOUS  THEORIES 

§ 1.  From  the  necessary  functions  of  government,  and  the 
effects  produced  on  the  economical  interests  of  society  by  their  good 
or  ill  discharge,  we  proceed  to  the  functions  which  belong  to  what 
I have  termed,  for  want  of  a better  designation,  the  optional  class  ; 
those  which  are  sometimes  assumed  by  governments  and  sometimes 
not,  and  which  it  is  not  unanimously  admitted  that  they  ought  to 
exercise. 

Before  entering  on  the  general  principles  of  the  question,  it  will 
be  advisable  to  clear  from  our  path  aU  those  cases  in  which  govern- 
ment interference  works  ill  because  grounded  on  false  views  of  the 
subject  interfered  with.  Such  cases  have  no  connexion  with  any 
theory  respecting  the  proper  limits  of  interference.  There  are  some 
things  with  which  governments  ought  not  to  meddle,  and  other 
things  with  which  they  ought ; but  whether  right  or  wrong  in  itself, 
the  interference  must  work  for  ill,  if  government,  not  understanding 
the  subject  which  it  meddles  with,  meddles  to  bring  about  a result 
which  would  be  mischievous.  We  will  therefore  begin  by  passing 
in  review  various  false  theories,  which  have  from  time  to  time  formed 
the  ground  of  acts  of  government  more  or  less  economically 
injurious. 

Former  writers  on  political  economy  have  found  it  needful  to 
devote  much  trouble  and  space  to  this  department  of  their  subject. 
It  has  now  happily  become  possible,  at  least  in  our  own  country, 
greatly  to  abridge  this  purely  negative  part  of  our  discussions. 
The  false  theories  of  political  economy  which  have  done  so  much 
mischief  in  times  past,  are  entirely  discredited  among  aU  who 
have  not  lagged  behind  the  general  progress  of  opinion ; and  few 
of  the  enactments  which  were  once  grounded  on  those  theories  still 
help  to  deform  the  statute-book.  As  the  principles  on  which  their 


PROTECTIONISM 


917 


condemnation  rests  have  been  fully  set  forth  in  other  parts  of  this 
treatise,  we  may  here  content  ourselves  with  a few  brief  indications. 

Of  these  false  theories,  the  most  notable  is  the  doctrine  of 
Protection  to  Native  Industry  ; a phrase  meaning  the  prohibition, 
or  the  discouragement  by  heavy  duties,  of  such  foreign  commodities 
as  are  capable  of  being  produced  at  home.  If  the  theory  involved 
in  this  system  had  been  correct,  the  practical  conclusions  grounded 
on  it  would  not  have  been  unreasonable.  The  theory  was,  that  to 
buy  things  produced  at  home  was  a national  benefit,  and  the  intro- 
duction of  foreign  commodities  generally  a national  loss.  It  being 
at  the  same  time  evident  that  the  interest  of  the  consumer  is  to  buy 
foreign  commodities  in  preference  to  domestic  whenever  they  are 
either  cheaper  or  better,  the  interest  of  the  consumer  appeared  in 
this  respect  to  be  contrary  to  the  public  interest ; he  was  certain, 
if  left  to  his  own  inclinations,  to  do  what  according  to  the  theory  was 
injurious  to  the  public. 

It  was  shown,  however,  in  our  analysis  of  the  effects  of  inter- 
national trade,  as  it  had  been  often  shown  by  former  writers,  that 
the  importation  of  foreign  commodities,  in  the  common  course  of 
traffic,  never  takes  place,  except  when  it  is,  economically  speaking, 
a national  good,  by  causing  the  same  amount  of  commodities  to  ba 
obtained  at  a smaller  cost  of  labour  and  capital  to  the  country. 
To  prohibit,  therefore,  this  importation,  or  impose  duties  which 
prevent  it,  is  to  render  the  labour  and  capital  of  the  country  less 
ejficient  in  production  than  they  would  otherwise  be ; and  compel 
a waste  of  the  difference  between  the  labour  and  capital  necessary 
for  the  home  production  of  the  commodity  and  that  which  is  required 
for  producing  the  things  with  which  it  can  be  purchased  from  abroad. 
The  amount  of  national  loss  thus  occasioned  is  measured  by  the 
excess  of  the  price  at  which  the  commodity  is  produced,  over  that 
at  which  it  could  be  imported.  In  the  case  of  manufactured  goods, 
the  whole  difference  between  the  two  prices  is  absorbed  in  indemni- 
fying the  producers  for  waste  of  labour,  or  of  the  capital  which 
supports  that  labour.  Those  who  are  supposed  to  be  benefited, 
namely,  the  makers  of  the  protected  articles,  (unless  they  form  an 
exclusive  company,  and  have  a monopoly  against  their  own  country- 
men as  well  as  against  foreigners,)  do  not  obtain  higher  profits  than 
other  people.  All  is  sheer  loss,  to  the  country  as  well  as  to  the 
consumer.  When  the  protected  article  is  a product  of  agriculture 
—the  waste  of  labour  not  being  incurred  on  the  whole  produce, 
but  only  on  what  may  be  called  the  last  instalment  of  it — the  extra 


918 


BOOK  V.  CHAPTER  X.  § 1 


price  is  only  in  part  an  indemnity  for  waste,  the  remainder  being  a 
tax  paid  to  the  landlords. 

The  restrictive  and  prohibitory  policy  was  originally  grounded 
on  what  is  called  the  Mercantile  System,  which,  representing  the 
advantage  of  foreign  trade  to  consist  solely  in  bringing  money  into 
the  country,  gave  artificial  encouragement  to  exportation  of  goods, 
and  discountenanced  their  importation.  The  only  exceptions  to  the 
system  were  those  required  by  the  system  itself.  The  materials  and 
instruments  of  production  were  the  subjects  of  a contrary  pohcy, 
directed,  however,  to  the  same  end  ; they  were  freely  imported,  and 
not  permitted  to  be  exported,  in  order  that  manufacturers,  being 
more  cheaply  supplied  with  the  requisites  of  manufacture,  might 
be  able  to  sell  cheaper,  and  therefore  to  export  more  largely.  For  a 
similar  reason,  importation  was  allowed,  and  even  favoured,  when 
confined  to  the  productions  of  countries  which  were  supposed  to 
take  from  the  country  still  more  than  it  took  from  them,  thus 
enriching  it  by  a favourable  balance  of  trade.  As  part  of  the  same 
system,  colonies  were  founded  for  the  supposed  advantage  of 
compelling  them  to  buy  our  commodities,  or  at  all  events  not  to 
buy  those  of  any  other  country  : in  return  for  which  restriction 
we  were  generally  willing  to  come  under  an  equivalent  obhgation  with 
respect  to  the  staple  productions  of  the  colonists.  The  consequences 
of  the  theory  were  pushed  so  far,  that  it  was  not  unusual  even  to  give 
bounties  on  exportation,  and  induce  foreigners  to  buy  from  us  rather 
than  from  other  countries,  by  a cheapness  which  we  artificially 
produced,  by  paying  part  of  the  price  for  them  out  of  our  own 
taxes.  This  is  a stretch  beyond  the  point  yet  reached  by  any 
private  tradesman  in  his  competition  for  business.  No  shop- 
keeper, I should  think,  ever  made  a practice  of  bribing  customers 
by  selling  goods  to  them  a permanent  loss,  making  it  up  to  himself 
from  other  funds  in  his  possession. 

The  principle  of  the  Mercantile  Theory  is  now  given  up  even  by 
writers  and  governments  who  still  cling  to  the  restrictive  system. 
Whatever  hold  that  system  has  over  men’s  minds,  independently 
of  the  private  interests  exposed  to  real  or  apprehended  loss  by  its 
abandonment,  is  derived  from  fallacies  other  than  the  old  notion  of 
the  benefits  of  heaping  up  money  in  the  country.  The  most  effective 
of  these  is  the  specious  plea  of  employing  our  own  countrymen  and 
our  national  industry,  instead  of  feeding  and  supporting  the  industry 
of  foreigners.  The  answer  to  this,  from  the  principles  laid  down  in 
former  chapters,  is  evident.  Without  reverting  to  the  fundamental  ' 


PROTECTIONISM 


919 


theorem  discussed  in  an  early  part  of  the  present  treatise,*  respecting 
the  nature  and  sources  of  employment  for  labour,  it  is  sufficient  to 
say,  what  has  usually  been  said  by  the  advocates  of  free  trade,  that 
the  alternative  is  not  between  employing  our  own  people  and 
foreigners,  but  between  employing  one  class  and  another  of  our 
own  people.  The  imported  commodity  is  always  paid  for,  directly 
or  indirectly,  with  the  produce  of  our  own  industry  : that  industry 
being  at  the  same  time  rendered  more  productive,  since,  with  the 
same  labour  and  outlay,  we  are  enabled  to  possess  ourselves  of  a 
greater  quantity  of  the  article.  Those  who  have  not  well  considered 
the  subject  are  apt  to  suppose  that  our  exporting  an  equivalent  in 
our  own  produce  for  the  foreign  articles  we  consume  depends  on 
contingencies — on  the  consent  of  foreign  countries  to  make  some 
corresponding  relaxation  of  their  own  restrictions,  or  on  the  question 
whether  those  from  whom  we  buy  are  induced  by  that  circumstance 
to  buy  more  from  us  ; and  that,  if  these  things,  or  things  equivalent 
to  them,  do  not  happen,  the  payment  must  be  made  in  money. 
Now,  in  the  first  place,  there  is  nothing  more  objectionable  in  a money 
payment  than  in  payment  by  any  other  medium,  if  the  state  of  the 
market  makes  it  the  most  advantageous  remittance  ; and  the  money 
itself  was  first  acquired,  and  would  again  be  replenished,  by  the 
export  of  an  equivalent  value  of  our  own  products.  But,  in  the 
next  place,  a very  short  interval  of  paying  in  money  would  so  lower 
prices  as  either  to  stop  a part  of  the  importation  or  raise  up  a foreign 
demand  for  our  produce  sufficient  to  pay  for  the  imports.  I grant 
that  this  disturbance  of  the  equation  of  international  demand 
would  be  in  some  degree  to  our  disadvantage,  in  the  purchase  of  other 
imported  articles  ; and  that  a country  which  prohibits  some  foreign 
commodities,  does,  cceteris  parihuSy  obtain  those  which  it  does  not 
prohibit  at  a less  price  than  it  would  otherwise  have  to  pay.  To 
express  the  same  thing  in  other  words  ; a country  which  destroys 
or  prevents  altogether  certain  branches  of  foreign  trade,  thereby 
annihilating  a general  gain  to  the  world,  which  would  be  shared  in 
some  proportion  between  itself  and  other  countries — does,  in  some 
circumstances,  draw  to  itself,  at  the  expense  of  foreigners,  a larger 
share  than  would  else  belong  to  it  of  the  gain  arising  from  that 
portion  of  its  foreign  trade  which  it  suffers  to  subsist.  But  even  this 
it  can  only  be  enabled  to  do,  if  foreigners  do  not  maintain  equivalent 
prohibitions  or  restrictions  against  its  commodities.  In  any  case, 
the  justice  or  expediency  of  destroying  one  of  two  gains,  in  order 
* Supra,  pp.  79  et  seqq. 


920 


BOOK  V.  CHAPTER  X.  § 1 


to  engross  a rather  larger  share  of  the  other,  does  not  require  much 
discussion  : the  gain,  too,  which  is  destroyed,  being,  in  proportion 
to  the  magnitude  of  the  transactions,  the  larger  of  the  two,  since 
it  is  the  one  which  capital,  left  to  itself,  is  supposed  to  seek  by 
preference. 

Defeated  as  a general  theory,  the  Protectionist  doctrine  finds 
support  in  some  particular  cases,  from  considerations  which,  when 
really  in  point,  involve  greater  interests  than  mere  saving  of  labour  ; 
the  interests  of  national  subsistence  and  of  national  defence.  The 
discussions  on  the  Corn  Laws  have  familiarized  everybody  with  the 
plea,  that  we  ought  to  be  independent  of  foreigners  for  the  food  of 
the  people ; and  the  Navigation  Laws  were  grounded,  in  theory 
and  profession,  on  the  necessity  of  keeping  up  a “ nursery  of  sea- 
men ” for  the  navy.  On  this  last  subject  I at  once  admit,  that  the 
object  is  worth  the  sacrifice  ; and  that  a country  exposed  to  invasion 
by  sea,  if  it  cannot  otherwise  have  sufiicient  ships  and  sailors  of  its 
own  to  secure  the  means  of  manning  on  an  emergency  an  adequate 
fleet,  is  quite  right  in  obtaining  those  means,  even  at  an  economical 
sacrifice  in  point  of  cheapness  of  transport.  When  the  English 
Navigation  Laws  were  enacted,  the  Dutch,  from  their  maritime 
skill  and  their  low  rate  of  profit  at  home,  were  able  to  carry  for  other 
nations,  England  included,  at  cheaper  rates  than  those  nations  could 
carry  for  themselves  : which  placed  all  other  countries  at  a great 
comparative  disadvantage  in  obtaining  experienced  seamen  for 
their  ships  of  war.  The  Navigation  Laws,  by  which  this  deficiency 
*•  was  remedied,  and  at  the  same  time  a blow  struck  against  the 
maritime  power  of  a nation  with  which  England  was  then  frequently 
engaged  in  hostilities,  were  probably,  though  economically  disadvan- 
tageous, politically  expedient.  But  Enghsh  ships  and  sailors  can 
now  navigate  as  cheaply  as  those  of  any  other  country ; maintain- 
ing at  least  an  equal  competition  with  the  other  maritime  nations 
even  in  their  own  trade.  The  ends  which  may  once  have  justified 
Navigation  Laws  require  them  no  longer,  and 'afforded  no  reason 
for  maintaining  this  invidious  exception  to  the  general  rule  of  free 
trade. 

With  regard  to  subsistence,  the  plea  of  the  Protectionists  has  been 
so  often  and  so  triumphantly  met,  that  it  requires  httle  notice  here. 
That  country  is  the  most  steadily  as  well  as  the  most  abundantly 
supplied  with  food  which  draws  its  supplies  from  the  largest  surface. 
It  is  ridiculous  to  found  a general  system  of  poKcy  on  so  improbable 
a danger  as  that  of  being  at  war  with  all  the  nations  of  the  world 


PROTECTIONISM 


921 


at  once  ; or  to  suppose  that,  even  if  inferior  at  sea,  a whole  country 
could  be  blockaded  like  a town,  or  that  the  growers  of  food  in  other 
countries  would  not  be  as  anxious  not  to  lose  an  advantageous 
market,  as  we  should  be  not  to  be  deprived  of  their  corn.  On  the 
subject,  however,  of  subsistence,  there  is  one  point  which  deserves 
more  especial  consideration.  In  cases  of  actual  or  apprehended 
scarcity,  many  countries  of  Europe  are  accustomed  to  stop  the 
exportation  of  food.  Is  this,  or  not,  sound  policy  ? There  can  be  no 
doubt  that  in  the  present  state  of  international  morality,  a people 
cannot,  any  more  than  an  individual,  be  blamed  for  not  starving 
itself  to  feed  others.  But  if  the  greatest  amount  of  good  to  mankind 
on  the  whole  were  the  end  aimed  at  in  the  maxims  of  international 
conduct,  such  collective  churlishness  would  certainly  be  condemned 
by  them.  Suppose  that  in  ordinary  circumstances  the  trade  in  food 
were  perfectly  free,  so  that  the  price  in  one  country  could  not 
habitually  exceed  that  in  any  other  by  more  than  the  cost  of  carriage, 
together  with  a moderate  profit  to  the  importer.  A general  scarcity 
ensues,  affecting  all  countries,  but  in  unequal  degrees.  If  the  price 
rose  in  one  country  more  than  in  others,  it  would  be  a proof  that  in 
that  country  the  scarcity  was  severest,  and  that  by  permitting 
food  to  go  freely  thither  from  any  other  country,  it  would  be  spared 
from  a less  urgent  necessity  to  relieve  a greater.  When  the  interests, 
therefore,  of  all  countries  are  considered,  free  exportation  is  desirable. 
To  the  exporting  country  considered  separately,  it  may,  at  least  on 
the  particular  occasion,  be  an  inconvenience : but  taking  into  account 
that  the  country  which  is  now  the  giver  will  in  some  future  season 
be  the  receiver,  and  the  one  that  is  benefited  by  the  freedom,  I 
cannot  but  think  that  even  to  the  apprehension  of  food-rioters  it 
might  be  made  apparent,  that  in  such  cases  they  should  do  to  others 
what  they  would  wish  done  to  themselves. 

In  countries  in  which  the  Protection  theory  is  [1848]  declining, 
but  not  yet  given  up,  such  as  the  United  States,  a doctrine  has  come 
into  notice  which  is  a sort  of  compromise  between  free  trade  and 
restriction,  namely,  that  protection  for  protection’s  sake  is  improper, 
but  that  there  is  nothing  objectionable  in  having  as  much  protection 
as  may  incidentally  result  from  a tariff  framed  solely  for  revenue. 
Even  in  England,  regret  is  sometimes  expressed  that  a “ moderate 
fixed  duty  ” was  not  preserved  on  corn,  on  account  of  the  revenue 
it  would  yield.  Independently,  however,  of  the  general  impolicy 
of  taxes  on  the  necessaries  of  life,  this  doctrine  overlooks  the  fact, 
that  revenue  is  received  only  on  the  quantity  imported,  but  that  the 


922 


BOOK  V.  CHAPTER  X.  § 1 


tax  is  paid  on  the  entire  quantity  consumed.  To  make  the  public 
pay  much  that  the  treasury  may  receive  a little,  is  not  an  eligible 
mode  of  obtaining  a revenue.  In  the  case  of  manufactured  articles 
the  doctrine  involves  a palpable  inconsistency.  The  object  of  the 
duty,  as  a means  of  revenue,  is  inconsistent  with  its  affording,  even 
incidentally,  any  protection.  It  can  only  operate  as  protection  in 
so  far  as  it  prevents  importation  ; and  to  whatever  degree  it  prevents 
importation  it  afiords  no  revenue. 

The  only  case  in  which,  on  mere  principles  of  political  economy, 
protecting  duties  can  be  defensible,  is  when  they  are  imposed 
temporarily  (especially  in  a young  and  rising  nation)  in  hopes  of 
naturalizing  a foreign  industry,  in  itself  perfectly  suitable  to  the 
circumstances  of  the  country.  The  superiority  of  one  country  over 
another  in  a branch  of  production  often  arises  only  from  having 
begun  it  sooner.  There  may  be  no  inherent  advantage  on  one  part, 
or  disadvantage  on  the  other,  but  only  a present  superiority  of 
acquired  skill  and  experience.  A country  which  has  this  skill  and 
experience  yet  to  acquire,  may  in  other  respects  be  better  adapted 
to  the  production  than  those  which  were  earlier  in  the  field  : and 
besides,  it  is  a just  remark  of  Mr.  Rae,  that  nothing  has  a greater 
tendency  to  promote  improvements  in  any  branch  of  production 
than  its  trial  under  a new  set  of  conditions.  But  it  cannot 
be  expected  that  individuals  should,  at  their  own  risk,  or  rather 
to  their  certain  loss,  introduce  a new  manufacture,  and  bear  the 
burthen  of  carrying  it  on  until  the  producers  have  been  educated 
up  to  the  level  of  those  with  whom  the  processes  are  traditional.  A 
protecting  duty,  continued  for  a reasonable  time,  might  ^ sometimes 
be  the  least  inconvenient  mode  in  which  the  nation  can  tax  itself 
for  the  support  of  such  an  experiment.  But  it  is  essential  that  the 
protection  should  be  confined  to  cases  in  which  there  is  good  ground 
of  assurance  that  the  industry  which  it  fosters  will  after  a time  be 
able  to  dispense  with  it ; nor  should  the  domestic  producers  ever 
be  allowed  to  expect  that  it  will  be  continued  to  them  beyond 
the  time  necessary  for  a fair  trial  of  what  they  are  capable  ol 
accomplishing. 

2 The  only  writer,  of  any  reputation  as  a political  economist, 
who  now  [1865]  adheres  to  the  Protectionist  doctrine,  Mr.  H.  C. 
Carey,  rests  its  defence,  in  an  economic  point  of  view,  principally  on 

* [The  “ will  ” of  the  original  (1848)  text  was  changed  into  “ might  ” in  the 
7th  ed.  (1871),  and  “ it  is  essential  that  ” was  inserted  in  the  next  sentence.] 

^ [The  next  three  paragraphs  were  added  in  the  6th  ed.  (1865).] 


PROTECTIONISM 


023 


two  reasons.  One  is  the  great  saving  in  cost  of  carriage,  consequent 
on  producing  commodities  at  or  very  near  to  the  place  where  they 
are  to  be  consumed.  The  whole  of  the  cost  of  carriage,  both  on  the 
commodities  imported  and  on  those  exported  in  exchange  for  them, 
he  regards  as  a direct  burthen  on  the  producers,  and  not,  as  is 
obviously  the  truth,  on  the  consumers.  On  whomsoever  it  falls,  it 
is,  without  doubt,  a burthen  on  the  industry  of  the  world.  But  it  is 
obvious  (and  that  Mr.  Carey  does  not  see  it,  is  one  of  the  many 
surprising  things  in  his  book)  that  the  burthen  is  only  borne  for  a 
more  than  equivalent  advantage.  If  the  commodity  is  bought  in 
a foreign  country  with  domestic  produce  in  spite  of  the  double  cost 
of  carriage,  the  fact  proves  that,  heavy  as  that  cost  may  be,  the 
saving  in  cost  of  production  outweighs  it,  and  the  collective*  labour 
of  the  country  is  on  the  whole  better  remunerated  than  if  the  article 
were  produced  at  home.  Cost  of  carriage  is  a natural  protecting  duty, 
which  free  trade  has  no  power  to  abrogate : and  unless  America 
gained  more  by  obtaining  her  manufactures  through  the  medium  of 
her  corn  and  cotton  than  she  loses  in  cost  of  carriage,  the  capital 
employed  in  producing  corn  and  cotton  in  annually  increased  quan- 
tities for  the  foreign  market  would  turn  to  manufactures  instead. 
The  natural  advantages  attending  a mode  of  industry  in  which 
there  is  less  cost  of  carriage  to  pay,  can  at  most  be  only  a justification 
for  a temporary  and  merely  tentative  protection.  The  expenses  of 
production  being  always  greatest  at  first,  it  may  happen  that  the  home 
production,  though  really  the  most  advantageous,  may  not  become 
so  until  after  a certain  duration  of  pecuniary  loss,  which  it  is  not 
to  be  expected  that  private  speculators  should  incur  in  order  that 
their  successors  may  be  benefited  by  their  ruin.  I have  therefore 
conceded  that  in  a new  country  a temporary  protecting  duty  may 
sometimes  be  economically  defensible  ; on  condition,  however,  that 
it  be  strictly  limited  in  point  of  time,  and  provision  be  made  that 
during  the  latter  part  of  its  existence  it  be  on  a gradually  decreasing 
scale.  Such  temporary  protection  is  of  the  same  nature  as  a patent, 
and  should  be  governed  by  similar  conditions. 

The  remaining  argument  of  Mr.  Carey  in  support  of  the  economic 
benefits  of  Protectionism  applies  only  to  countries  whose  exports 
consist  of  agricultural  produce.  He  argues,  that  by  a trade  of  this 
description  they  actually  send  away  their  soil : the  distant  consumers 
not  giving  back  to  the  land  of  the  country,  as  home  consumers 
would  do,  the  fertilizing  elements  which  they  abstract  from  it.  This 
argument  deserves  attention  on  account  of  the  physical  truth  on 


924 


BOOK  V.  CHAPTER  X.  § 1 


which  it  is  founded ; a truth  which  has  only  lately  come  to  be 
understood,  but  which  is  henceforth  destined  to  be  a permanent 
element  in  the  thoughts  of  statesmen,  as  it  must  always  have  been 
in  the  destinies  of  nations.  To  the  question  of  Protectionism,  how- 
ever, it  is  irrelevant.  That  the  immense  growth  of  raw  produce 
in  America  to  be  consumed  in  Europe  is  progressively  exhausting 
the  soil  of  the  Eastern,  and  even  of  the  older  Western  States,  and 
that  both  are  already  far  less  productive  than  formerly,  is  credible 
in  itself,  even  if  no  one  bore  witness  to  it.  But  what  I have  already 
said  respecting  cost  of  carriage,  is  true  also  of  the  cost  of  manuring. 
Free  trade  does  not  compel  America  to  export  corn : she  would 
cease  to  do  so  if  it  ceased  to  be  to  her  advantage.  As,  then,  she 
would  hot  persist  in  exporting  raw  produce  and  importing  manu- 
factures any  longer  than  the  labour  she  saved  by  doing  so  exceeded 
what  the  carriage  cost  her,  so  when  it  became  necessary  for  her  to 
replace  in  the  soil  the  elements  of  fertility  which  she  had  sent  away, 
if  the  saving  in  cost  of  production  were  more  than  equivalent  to 
the  cost  of  carriage  and  of  manure  together,  manure  would  be 
imported  ; and  if  not,  the  export  of  corn  would  cease.  It  is  evident 
that  one  of  these  two  things  would  already  have  taken  place,  if 
there  had  not  been  near  at  hand  a constant  succession  of  new  soils, 
not  yet  exhausted  of  their  fertility,  the  cultivation  of  which  enables 
her,  whether  judiciously  or  not,  to  postpone  the  question  of  manure. 
As  soon  as  it  no  longer  answers  better  to  break  up  new  soils  than  to 
manure  the  old,  America  will  either  become  a regular  importer  of 
manure,  or  will,  without  protecting  duties,  grow  corn  for  herself 
only,  and  manufacturing  for  herself,  will  make  her  manure,  as  Mr. 
Carey  desires,  at  home.* 

For  these  obvious  reasons,  I hold  Mr.  Carey’s  economic  arguments 

♦ To  this  Mr.  Carey  would  reply  (indeed  he  has  already  so  replied  in  advance) 
that  of  all  commodities  manure  is  the  least  susceptible  of  being  conveyed  to  a 
distance.  This  is  true  of  sewage,  and  of  stable  manure,  but  not  true  of  the 
ingredients  to  which  those  manures  owe  their  efficiency.  These,  on  the  contrary, 
are  chiefly  substances  containing  great  fertilizing  power  in  small  bulk ; sub- 
stances of  which  the  human  body  requires  but  a small  quantity,  and  hence 
peculiarly  susceptible  of  being  imported ; the  mineral  alkalies  and  the  phos- 
phates. The  question  indeed  mainly  concerns  the  phosphates,  for  of  the 
alkalies,  soda  is  procurable  everywhere ; while  potass,  being  one  of  the  con- 
stituents of  granite  and  the  other  ieldspathic  rocks,  exists  in  many  subsoils, 
by  whose  progressive  decomposition  it  is  renewed,  a large  quantity  also  being 
brought  down  in  the  deposits  of  rivers.  As  for  the  phosphates,  they,  in  the 
very  convenient  form  of  pulverized  bones,  are  a regular  article  of  commerce, 
largely  imported  into  England  ; as  they  are  sure  to  be  into  any  country  where 
the  conditions  of  industry  make  it  worth  while  to  pay  the  price. 


PROTECTIONISM 


925 


for  Protectionism  to  be  totally  invalid.  The  economic,  however, 
is  far  from  being  the  strongest  point  of  his  case.  American  Protec- 
tionists often  reason  extremely  ill;  but  it  is  an  injustice  to  them  to 
suppose  that  their  protectionist  creed  rests  upon  nothing  superior 
to  an  economic  blunder.  Many  of  them  have  been  led  to  it  much 
more  by  consideration  for  the  higher  interests  of  humanity  than 
by  purely  economic  reasons.  They,  and  Mr.  Carey  at  their  head, 
deem  it  a necessary  condition  of  human  improvement  that  towns 
should  abound ; that  men  should  combine  their  labour,  by  means 
of  interchange — with  near  neighbours,  with  people  of  pursuits, 
capacities,  and  mental  cultivation  difierent  from  their  own,  suffi- 
ciently close  at  hand  for  mutual  sharpening  of  wits  and  enlarging  of 
ideas — rather  than  with  people  on  the  opposite  side  of  the  globe. 
They  believe  that  a nation  all  engaged  in  the  same,  or  nearly  the 
same,  pursuit — a nation  all  agricultural — cannot  attain  a high  state 
of  civilization  and  culture.  And  for  this  there  is  a great  foundation 
of  reason.  If  the  difficulty  can  be  overcome,  the  United  States, 
with  their  free  institutions,  their  universal  schooling,  and  their 
omnipresent  press,  are  the  people  to  do  it ; but  whether  this  is 
possible  or  not  is  still  a problem.  So  far,  however,  as  it  is  an  object 
to  check  the  excessive  dispersion  of  the  population,  Mr.  Wakefield 
has  pointed  out  a better  way ; to  modify  the  existing  method  of 
disposing  of  the  unoccupied  lands,  by  raising  the  price,  instead  of 
lowering  it,  or  giving  away  the  land  gratuitously,  as  is  largely  done 
since  the  passing  of  the  Homestead  Act.  To  cut  the  knot  in  Mr. 
Carey’s  fashion,  by  Protectionism,  it  would  be  necessary  that  Ohio 
and  Michigan  should  be  protected  against  Massachusetts  as  well  as 
against  England  : for  the  manufactories  of  New  England,  no  more 
than  those  of  the  old  country,  accomplish  his  desideratum  of  bringing 
a manufacturing  population  to  the  doors  of  the  Western  farmer. 
Boston  and  New  York  do  not  supply  the  want  of  local  towns  to  the 
Western  prairies,  any  better  than  Manchester  ; and  it  is  as  difficult 
to  get  back  the  manure  from  the  one  place  as  from  the  other. 

There  is  only  one  part  of  the  Protectionist  scheme  which  requires 
any  further  notice  : its  policy  towards  colonies,  and  foreign  depen- 
dencies ; that  of  compelling  them  to  trade  exclusively  with  the 
dominant  country.  A country  which  thus  secures  to  itself  an  extra 
foreign  demand  for  its  commodities,  undoubtedly  gives  itself  some 
advantage  in  the  distribution  of  the  general  gains  of  the  commercial 
world.  Since,  however,  it  causes  the  industry  and  capital  of  the 
colony  to  be  diverted  from  channels  which  are  proved  to  be  the  most 


926 


BOOK  V.  CHAPTER  X.  § 2 


productive,  inasmuch  as  they  are  those  into  which  industry  and 
capital  spontaneously  tend  to  flow ; there  is  a loss,  on  the  whole, 
to  the  productive  powers  of  the  world,  and  the  mother  country  does 
not  gain  so  much  as  she  makes  the  colony  lose.  If,  therefore,  the 
mother  country  refuses  to  acknowledge  any  reciprocity  of  obliga- 
tion, she  imposes  a tribute  on  the  colony  in  an  indirect’mode,  greatly 
more  oppressive  and  injurious  than  the  direct.  But  if,  with  a more 
equitable  spirit,  she  submits  herself  to  corresponding  restrictions  for 
the  benefit  of  the  colony,  the  result  of  the  whole  transaction  is  the 
ridiculous  one,  that  each  party  loses  much  in  order  that  the  other 
may  gain  a little.^ 

§ 2.  Next  to  the  system  of  Protection,  among  mischievous 
interferences  with  the  spontaneous  course  of  industrial  transactions, 
may  be  noticed  certain  interferences  with  contracts.  One  instance  is 
that  of  the  Usury  Laws.  These  originated  in  a religious  prejudice 
against  receiving  interest  on  money,  derived  from  that  fruitful 
source  of  mischief  in  modern  Europe,  the  attempted  adaptation  to 
Christianity  of  doctrines  and  precepts  drawn  from  the  Jewish  law. 
In  Mahomedan  nations  the  receiving  of  interest  is  formally  inter- 
dicted, and  rigidly  abstained  from  : and  Sismondi  has  noticed,  as 
jne  among  the  causes  of  the  industrial  inferiority  of  the  Catholic, 
compared  with  the  Protestant  parts  of  Europe,  that  the  Catholic 
Church  in  the  middle  ages  gave  its  sanction  to  the  same  prejudice  ; 
which  subsists,  impaired  but  not  destroyed,  wherever  that  religion  is 
acknowledged.  Where  law  or  conscientious  scruples  prevent  lend- 
ing at  interest,  the  capital  which  belongs  to  persons  not  in  business 
is  lost  to  productive  purposes,  or  can  be  applied  to  them  only  in 
peculiar  circumstances  of  personal  connexion,  or  by  a subterfuge. 
Industry  is  thus  limited  to  the  capital  of  the  undertakers,  and  to  what 
they  can  borrow  from  persons  not  bound  by  the  same  laws  or  religion 
as  themselves.  In  Mussulman  countries  the  bankers  and  money 
dealers  are  either  Hindoos,  Armenians,  or  Jews. 

In  more  improved  countries,  legislation  no  longer  discountenances 
the  receipt  of  an  equivalent  for  money  lent ; but  it  has  everywhere 
interfered  with  the  free  agency  of  the  lender  and  borrower,  by  fixing 
a legal  limit  to  the  rate  of  interest,  and  making  the  receipt  of  more 
than  the  appointed  maximum  a penal  offence.  This  restriction, 
though  approved  by  Adam  Smith,  has  been  condemned  by  all 


' [See  Appendix  II.  Protection.^ 


USURY  LAWS 


927 


enlightened  persons  since  the  triumphant  onslaught  made  upon  it  by 
Bentham  in  his  Letters  on  Usury,  which  may  still  be  referred  to  as 
the  best  extant  writing  on  the  subject. 

Legislators  may  enact  and  maintain  Usury  Laws  from  one 
of  two  motives  : ideas  of  public  policy,  or  concern  for  the  interest 
of  the  parties  in  the  contract ; in  this  case,  of  one  party  only,  the 
borrower.  As  a matter  of  policy  the  notion  may  possibly  be,  that 
it  is  for  the  general  good  that  interest  should  be  low.  It  is,  however, 
a misapprehension  of  the  causes  which  influence  commercial  trans- 
actions, to  suppose  that  the  rate  of  interest  is  really  made  lower  by 
law  than  it  would  be  made  by  the  spontaneous  play  of  supply  and 
demand.  If  the  competition  of  borrowers,  left  unrestrained,  would 
raise  the  rate  of  interest  to  six  per  cent,  this  proves  that  at  five  there 
would  be  a greater  demand  for  loans  than  there  is  capital  in  the 
market  to  supply.  If  the  law  in  these  circumstances  permits  no 
interest  beyond  five  per  cent,  there  wiU  be  some  lenders,  who  not 
choosing  to  disobey  the  law,  and  not  being  in  a condition  to  employ 
their  capital  otherwise,  will  content  themselves  with  the  legal  rate  : 
but  others,  finding  that  in  a season  of  pressing  demand  more  may  be 
made  of  their  capital  by  other  .means  than  they  are  permitted  to 
make  by  lending  it,  wiU  not  lend  it  at  aU  ; and  the  loanable  capital, 
already  too  small  for  the  demand,  will  be  still  further  diminished. 
Of  the  disappointed  candidates  there  will  be  many  at  such  periods 
who  must  have  their  necessities  supplied  at  any  price,  and  these  will 
readily  find  a third  section  of  lenders,  who  will  not  be  averse  to  join 
in  a violation  of  the  law,  either  by  circuitous  transactions  partaking 
of  the  nature  of  fraud  or  by  relying  on  the  honour  of  the  borrower. 
The  extra  expense  of  the  roundabout  mode  of  proceeding,  and  an 
equivalent  for  the  risk  of  non-payment  and  of  legal  penalties,  must 
be  paid  by  the  borrower,  over  and  above  the  extra  interest  which 
would  have  been  required  of  him  by  the  general  state  of  the  market. 
The  laws  which  were  intended  to  lower  the  price  paid  by  him  for 
pecuniary  accommodation  end  thus  in  greatly  increasing  it.  These 
laws  have  also  a directly  demoralizing  tendency.  Knowing  the 
difficulty  of  detecting  an  illegal  pecuniary  transaction  between  two 
persons,  in  which  no  third  person  is  involved,  so  long  as  it  is  the 
interest  of  both  to  keep  the  secret,  legislators  have  adopted  the 
expedient  of  tempting  the  borrower  to  become  the  informer,  by 
making  the  annulment  of  the  debt  a part  of  the  penalty  for  the 
offence ; thus  rewarding  men  for  first  obtaining  the  property  of 
others  by  false  promises,  and  then  not  only  refusing  payment,  but 


928 


BOOR  V.  CHAPTER  X.  § 2 


invoking  legal  penalties  on  tliose  wlio  have  helped  them  in  their 
need.  The  moral  sense  of  mankind  very  rightly  infamizes  those 
who  resist  an  otherwise  just  claim  on  the  ground  of  usury,  and 
tolerates  such  a plea  only  when  resorted  to  as  the  best  legal  defence 
available  against  an  attempt  really  considered  as  partaking  of  fraud 
or  extortion.  But  this  very  severity  of  public  opinion  renders  the 
enforcement  of  the  laws  so  difficult,  and  the  infliction  of  the  penalties 
so  rare,  that  when  it  does  occur  it  merely  victimizes  an  individual, 
and  has  no  efiect  on  general  practice. 

In  so  far  as  the  motive  of  the  restriction  may  be  supposed  to  be, 
not  public  policy,  but  regard  for  the  interest  of  the  borrower,  it 
would  be  difficult  to  point  out  any  case  in  which  such  tenderness 
on  the  legislator’s  part  is  more  misplaced.  A person  of  sane  mind, 
and  of  the  age  at  which  persons  are  legally  competent  to  conduct 
their  own  concerns,  must  be  presumed  to  be  a sufficient  guardian  of 
his  pecuniary  interests.  If  he  may  sell  an  estate,  or  grant  a release, 
or  assign  away  all  his  property,  without  control  from  the  law,  it 
seems  very  unnecessary  that  the  only  bargain  which  he  cannot 
make  without  its  intermeddling,  should  be  a loan  of  money.  The 
law  seems  to  presume  that  the  money-lender,  dealing  with  necessitouf 
persons,  can  take  advantage  of  their  necessities,  and  exact  condi 
tions  limited  only  by  his  own  pleasure.  It  might  be  so  if  there  were 
only  one  money-lender  within  reach.  But  when  there  is  the  whole 
monied  capital  of  a wealthy  community  to  resort  to,  no  borrower  is 
placed  under  any  disadvantage  in  the  market  merely  by  the  urgency 
of  his  need.  If  he  cannot  borrow  at  the  interest  paid  by  other 
people,  it  must  be  because  he  cannot  give  such  good  security  : and 
competition  will  limit  the  extra  demand  to  a fair  equivalent  for  the 
risk  of  his  proving  insolvent.  Though  the  law  intends  favour  to 
the  borrower,  it  is  to  him  above  aU  that  injustice  is,  in  this  case, 
done  by  it.  What  can  be  more  unjust  than  that  a person  who  cannot 
give  perfectly  good  security  should  be  prevented  from  borrowing  of 
persons  who  are  willing  to  lend  money  to  him,  by  their  not  being 
permitted  to  receive  the  rate  of  interest  which  would  be  a just 
equivalent  for  their  risk  ? Through  the  mistaken  kindness  of  the 
law,  he  must  either  go  without  the  money  which  is  perhaps  necessary 
to  save  him  from  much  greater  losses,  or  be  driven  to  expedients  of 
a far  more  ruinous  description,  which  the  law  either  has  not  found 
it  possible,  or  has  not  happened,  to  interdict. 

Adam  Smith  rather  hastily  expressed  the  opinion,  that  only 
two  kinds  of  persons,  “ prodigals  and  projectors,”  could  require 


USURY  LAWS 


929 


to  borrow  money  at  more  than  the  market  rate  of  interest.  He 
should  have  included  all  persons  who  are  in  any  pecuniary  difficulties, 
however  temporary  their  necessities  may  be.  It  may  happen  to  any 
person  in  business,  to  be  disappointed  of  the  resources  on  which  he 
had  calculated  for  meeting  some  engagement,  the  non-fulfilment  of 
which  on  a fixed  day  would  be  bankruptcy.  In  periods  of  com- 
mercial difficulty,  this  is  the  condition  of  many  prosperous  mercantile 
firms,  who  become  competitors  for  the  small  amount  of  disposable 
capital  which,  in  a time  of  general  distrust,  the  owners  are  willing  to 
part  with.  Under  the  Enghsh  usury  laws,  now  happily  abohshed, 
the  limitations  imposed  by  those,  laws  were  felt  as  a most  serious 
aggravation  of  every  commercial  crisis.  Merchants  who  could 
have  obtained  the  aid  they  required  at  an  interest  of  seven  or  eight 
per  cent  for  short  periods,  were  obliged  to  give  20  or  30  per  cent 
or  to  resort  to  forced  sales  of  goods  at  a still  greater  loss.  Experience 
having  obtruded  these  evils  on  the  notice  of  Parliament,  the  sort 
of  compromise  took  place  of  which  English  legislation  affords  so 
many  instances,  and  which  helps  to  make  our  laws  and  policy  the  mass 
of  inconsistency  that  they  are.  The  law  was  reformed  as  a person 
reforms  a tight  shoe,  who  cuts  a hole  in  it  where  it  pinches  hardest, 
and  continues  to  wear  it.  Retaining  the  erroneous  principle  as  a 
general  rule,  Parliament  allowed  an  exception  in  the  case  in  which  the 
practical  mischief  was  most  flagrant.  It  left  the  usury  laws  unre- 
pealed, but  exempted  bills  of  exchange,  of  not  more  than  three 
months’  date,  from  their  operation.  Some  years  afterwards  the 
laws  were  repealed  in  regard  to  all  other  contracts,  but  left  in  force 
as  to  all  those  which  relate  to  land.  Not  a particle  of  reason  could 
be  given  for  making  this  extraordinary  distinction : but  the 
“ agricultural  mind  ” was  of  opinion  that  the  interest  on  mortgages, 
though  it  hardly  ever  came  up  to  the  permitted  point,  would  come 
up  to  a still  higher  point ; and  the  usury  laws  were  maintained  that 
the  landlords  might,  as  they  thought,  be  enabled  to  borrow  below 
the  market  rate,  as  the  corn-laws  were  kept  up  that  the  same  class 
might  be  able  to  sell  corn  above  the  market  rate.  The  modesty  of  the 
pretension  was  quite  worthy  of  the  intelligence  which  could  think 
that  the  end  aimed  at  was  in  any  way  forwarded  by  the  means  used. 

With  regard  to  the  “ prodigals  and  projectors  ” spoken  of  by 
Adam  Smith ; no  law  can  prevent  a prodigal  from  ruining  himself, 
unless  it  lays  him  or  his  property  under  actual  restraint,  according 
to  the  unjustifiable  practice  of  the  Roman  Law  and  some  of  the 
Continental  systems  founded  on  it.  The  only  effect  of  usury  laws 

2 H 


BOOK  V.  CHAPTER  X.  § 3 


upon  a prodigal  is  to  make  his  ruin  rather  more  expeditious,  by 
driving  him  to  a disreputable  class  of  money-dealers,  and  rendering 
the  conditions  more  onerous  by  the  extra  risk  created  by  the  law. 
As  for  projectors  (a  term,  in  its  unfavourable  sense,  rather  unfairly 
applied  to  every  person  who  has  a project),  such  laws  may  put 
a veto  upon  the  prosecution  of  the  most  promising  enterprise,  when 
planned,  as  it  generally  is,  by  a person  who  does  not  possess  capital 
adequate  to  its  successful  completion.  Many  of  the  greatest 
improvements  were  at  first  looked  shyly  on  by  capitalists,  and  had  to 
wait  long  before  they  found  one  sufficiently  adventurous  to  be  the 
first  in  a new  path  : many  years  elapsed  before  Stephenson  could 
convince  even  the  enterprising  mercantile  public  of  Liverpool  and 
Manchester  of  the  advantage  of  substituting  railways  for  turnpike 
roads  ; and  plans  on  which  great  labour  and  large  sums  have  been 
expended  with  little  visible  result,  (the  epoch  in  their  progress  when 
predictions  of  failure  are  most  rife,)  may  be  indefinitely  suspended, 
or  altogether  dropped,  and  the  outlay  all  lost,  if,  when  the  original 
funds  are  exhausted,  the  law  will  not  allow  more  to  be  raised  on 
the  terms  on  which  people  are  willing  to  expose  it  to  the  chances 
of  an  enterprise  not  yet  secure  of  success.^ 

§ 3.  Loans  are  not  the  only  kind  of  contract  of  which  govern- 
ments have  thought  themselves  qualified  to  regulate  the  conditions 
better  than  the  persons  interested.  There  is  scarcely  any  commodity 
which  they  have  not,  at  some  place  or  time,  endeavoured  to  make 
either  dearer  or  cheaper  than  it  would  be  if  left  to  itself.  The 
most  plausible  case  for  artificially  cheapening  a commodity  is  that 
of  food.  The  desirableness  of  the  object  is  in  this  case  undeniable. 
But  since  the  average  price  of  food,  like  that  of  other  things,  conforms 
to  the  cost  of  production,  with  the  addition  of  the  usual  profit ; 
if  this  price  is  not  expected  by  the  farmer,  he  will,  unless  compelled 
by  law,  produce  no  more  than  he  requires  for  his  own  consumption  : 
and  the  law,  therefore,  if  absolutely  determined  to  have  food 
cheaper,  must  substitute,  for  the  ordinary  motives  to  cultivation, 
a system  of  penalties.  If  it  shrinks  from  doing  this,  it  has  no 
resource  but  that  of  taxing  the  whole  nation,  to  give  a bounty  or 
premium  to  the  grower  or  importer  of  com,  thus  giving  everybody 
cheap  bread  at  the  expense  of  all : in  reality  a largess  to  those 
who  do  not  pay  taxes,  at  the  expense  of  those  who  do  ; one  of  the 


• [See  Appendix  JJ.  Usury  Laws."] 


REGULATION  OF  THE  PRICE  OF  FOOD 


031 


forms  of  a practice  essentially  bad,  that  of  converting  the  working 
classes  into  unworking  classes  by  making  them  a present  of  sub- 
sistence. 

It  is  not,  however,  so  much  the  general  or  average  price  of  food, 
as  its  occasional  high  price  in  times  of  emergency,  which  governments 
have  studied  to  reduce.  In  some  cases,  as  for  example  the  famous 
“ maximum  ” of  the  revolutionary  government  of  1793,  the  com- 
pulsory regulation  was  an  attempt  by  the  ruUng  powers  to  counteract 
the  necessary  consequences  of  their  own  acts  ; to  scatter  an  indefinite 
abundance  of  the  circulating  medium  with  one  hand,  and  keep 
down  prices  with  the  other ; a thing  manifestly  impossible  under 
any  regime  except  one  of  unmitigated  terror.  In  case  of  actual 
scarcity,  governments  are  often  urged,  as  they  were  in  the  Irish 
emergency  of  1847,  to  take  measures  of  some  sort  for  moderating 
the  price  of  food.  But  the  price  of  a thing  cannot  be  raised  by 
deficiency  of  supply  beyond  what  is  sufficient  to  make  a corres- 
ponding reduction  of  the  consumption ; and  if  a government 
prevents  this  reduction  from  being  brought  about  by  a rise  of  price, 
there  remains  no  mode  of  effecting  it  unless  by  taking  possession 
of  all  the  food,  and  serving  it  out  in  rations  ; as  in  a besieged  town. 
In  a real  scarcity,  nothing  can  afford  general  relief,  except  a deter- 
mination by  the  richer  classes  to  diminish  their  own  consumption. 
If  they  buy  and  consume  their  usual  quantity  of  food,  and  content 
themselves  with  giving  money,  they  do  no  good.  The  price  is 
forced  up  until  the  poorest  competitors  have  no  longer  the  means 
of  competing,  and  the  privation  of  food  is  thrown  exclusively  upon 
the  indigent,  the  other  classes  being  only  affected  pecuniarily. 
When  the  supply  is  insufficient,  somebody  must  consume  less, 
and  if  every  rich  person  is  determined  not  to  be  that  somebody, 
all  they  do  by  subsidizing  their  poorer  competitors  is  to  force  up 
the  price  so  much  the  higher,  with  no  effect  but  to  enrich  the  corn- 
dealers,  the  very  reverse  of  what  is  desired  by  those  who  recommend 
such  measures.  All  that  governments  can  do  in  these  emergencies 
is  to  counsel  a general  moderation  in  consumption,  and  to  interdict 
such  kinds  of  it  as  are  not  of  primary  importance.  Direct  measures 
at  the  cost  of  the  state,  to  procure  food  from  a distance,  are  expedient 
when  from  peculiar  reasons  the  thing  is  not  likely  to  be  done  by 
private  speculation.  In  any  other  case  they  are  a great  error. 
Private  speculators  will  not,  in  such  cases,  venture  to  compete  with 
the  government ; and  though  a government  can  do  more  than  any 
one  merchant,  it  cannot  do  nearly  so  much  as  all  merchants. 


932 


BOOK  V.  CHAPTER  X.  § 4 


§ 4:.  Governments,  however,  are  oftener  chargeable  with  having 
attempted,  too  successfully,  to  make  things  dear,  than  with  having 
aimed  by  wrong  means  at  making  them  cheap.  The  usual  instru- 
ment for  producing  artificial  dearness  is  monopoly.  To  confer  a 
monopoly  upon  a producer  or  dealer,  or  upon  a set  of  producers 
or  dealers  not  too  numerous  to  combine,  is  to  give  them  the  power 
of  levying  any  amount  of  taxation  on  the  public,  for  their  individual 
benefit,  which  will  not  make  the  public  forego  the  use  of  the  com- 
modity. When  the  sharers  in  the  monopoly  are  so  numerous  and 
so  widely  scattered  that  they  are  prevented  from  combining,  the 
evil  is  considerably  less  : but  even  then  the  competition  is  not 
so  active  among  a limited  as  among  an  unlimited  number.  Those 
who  feel  assured  of  a fair  average  proportion  in  the  general  business 
ai  e seldom  eager  to  get  a larger  share  by  foregoing  a portion  of  their 
profits.  A limitation  of  competition,  however  partial,  may  have 
mischievous  effects  quite  disproportioned  to  the  apparent  cause. 
The  mere  exclusion  of  foreigners,  from  a branch  of  industry  open  to 
the  free  competition  of  every  native,  has  been  known,  even  in 
England,  to  render  that  branch  a conspicuous  exception  to  the 
general  industrial  energy  of  the  country.  The  silk  manufacture  of 
England  remained  far  behind  that  of  other  countries  of  Europe, 
so  long  as  the  foreign  fabrics  were  prohibited.  In  addition  to  the 
tax  levied  for  the  profit,  real  or  imaginary,  of  the  monopolists,  the 
consumer  thus  pays  an  additional  tax  for  their  laziness  and  incapacity. 
When  relieved  from  the  immediate  stimulus  of  competition,  producers 
and  dealers  grow  indifferent  to  the  dictates  of  their  ultimate 
pecuniary  interest ; preferring  to  the  most  hopeful  prospects  the 
present  case  of  adhering  to  routine.  A person  who  is  already 
thriving,  seldom  puts  himself  out  of  his  way  to  commence  even  a 
lucrative  improvement,  unless  urged  by  the  additional  motive 
of  fear  lest  some  rival  should  supplant  him  by  getting  possession  of  it 
before  him. 

The  condemnation  of  monopolies  ought  not  to  extend  to  patents, 
by  which  the  originator  of  an  improved  process  is  allowed  to  enjoy, 
for  a limited  period,  the  exclusive  privilege  of  using  his  own  improve- 
ment. This  is  not  making  the  commodity  dear  for  his  benefit,  but 
merely  postponing  a part  of  the  increased  cheapness  which  the 
public  owe  to  the  inventor  in  order  to  compensate  and  reward  him 
for  the  service.  That  he  ought  to  be  both  compensated  and  rewarded 
for  it,  will  not  be  denied,  and  also  that  if  all  were  at  once  allowed 
to  avail  themselves  of  his  ingenuity,  without  having  shared  th€ 


MONOPOLIES 


d33 


labours  or  the  expenses  which  he  had  to  incur  in  bringing  his  idea 
into  a practical  shape,  either  such  expenses  and  labours  would  be 
undergone  by  nobody  except  very  opulent  and  very  public-spirited 
persons,  or  the  state  must  put  a value  on  the  service  rendered  by  an 
inventor,  and  make  him  a pecuniary  grant.  This  has  been  done  in 
some  instances,  and  may  be  done  without  inconvenience  in  cases 
of  very  conspicuous  public  benefit ; but  in  general  an  exclusive 
privilege,  of  temporary  duration,  is  preferable ; because  it  leaves 
nothing  to  any  one’s  discretion ; because  the  reward  conferred  by 
it  depends  upon  the  invention’s  being  found  useful,  and  the  greater 
tlie  usefulness  the  greater  the  reward  ; and  because  it  is  paid  by  the 
very  persons  to  whom  the  service  is  rendered,  the  consumers  of  the 
commodity.  So  decisive,  indeed,  are  these  considerations,  that  if 
the  system  of  patents  were  abandoned  for  that  of  rewards  by  the 
state,  the  best  shape  which  these  could  assume  would  be  that  of  a 
small  temporary  tax,  imposed  for  the  inventor’s  benefit,  on  all 
persons  making  use  of  the  invention.  ^ To  this,  however,  or  to  any 
other  system  which  would  vest  in  the  state  the  power  of  deciding 
w'hether  an  inventor  should  derive  any  pecuniary  advantage  from 
the  public  benefit  which  he  confers,  the  objections  are  evidently 
stronger  and  more  fundamental  than  the  strongest  which  can 
possibly  be  urged  against  patents.  It  is  generally  admitted  that 
the  present  Patent  Laws  need  much  improvement ; but  in  this 
case,  as  well  as  in  the  closely  analogous  one  of  Copyright,  it  would 
be  a gross  immorality  in  the  law  to  set  everybody  free  to  use  a 
person’s  wx)rk  without  his  consent,  and  without  giving  him  an 
equivalent.  I have  seen  with  real  alarm  several  recent  attempts, 
in  quarters  carrying  some  authority,  to  impugn  the  principle  of 
patents  altogether  ; attempts  which,  if  practically  successful,  would 
enthrone  free  stealing  under  the  prostituted  name  of  free  trade, 
and  make  the  men  of  brains,  still  more  than  at  present,  the  needy 
retainers  and  dependents  of  the  men  of  money-bags. 

§ 5.  I pass  to  another  kind  of  government  interference,  in  which 
the  end  and  the  means  are  alike  odious,  but  which  existed  in  England 
until  not  more  than  a generation  ago,  and  in  France  up  to  the  year 
1864.2  I mean  the  laws  against  combinations  of  workmen  to  raise 
wages ; laws  enacted  and  maintained  for  the  declared  purpose  of 

' [The  remainder  of  this  paragraph  was  added  in  the  5th  ed.  (1862).] 

* [So  since  7th  ed.  (1871).  Originally  (1848)  “ not  much  more  than  twenty 
/ears  ago,  and  is  in  full  vigour  at  this  day  in  some  other  countries.”] 


934 


BOOK  V.  CHAPTER  X.  § 5 


keeping  wages  low,  as  the  famous  Statute  of  Labourers  was  passed 
by  a legislature  of  employers,  to  prevent  the  labouring  class,  when 
its  numbers  had  been  thinned  by  a pestilence,  from  taking  advantage 
of  the  diminished  competition  to  obtain  higher  wages.  Such  laws 
exhibit  the  infernal  spirit  of  the  slave  master,  when  to  retain  the 
working  classes  in  avowed  slavery  has  ceased  to  be  practicable. 

If  it  were  possible  for  the  working  classes,  by  combining  among 
themselves,  to  raise  or  keep  up  the  general  rate  of  wages,  it  needs 
hardly  be  said  that  this  would  be  a thing  not  to  be  punished,  but  to 
be  welcomed  and  rejoiced  at.  Unfortunately  the  efiect  is  quite 
beyond  attainment  by  such  means.  The  multitudes  who  compose 
the  working  class  are  too  numerous  and  too  widely  scattered  to 
combine  at  all,  much  more  to  combine  efiectually.  If  they  could 
do  so,  they  might  doubtless  succeed  in  diminishing  the  hours  of 
labour,  and  obtaining  the  same  wages  for  less  work.  They  would 
also  have  a limited  power  of  obtaining,  by  combination,  an  increase 
of  general  wages  at  the  expense  of  profits.  But  the  limits  of  this 
power  are  narrow ; and  were  they  to  attempt  to  strain  it  beyond 
those  limits,  this  could  only  be  accomplished  by  keeping  a part  of 
their  number  permanently  out  of  employment.^  As  support  from 
public  charity  would  of  course  be  refused  to  those  who  could  get 
work  and  would  not  accept  it,  they  would  be  thrown  for  support 
upon  the  trade  union  of  which  they  were  members  ; and  the  work- 
people collectively  would  be  no  better  off  than  before,  having  to 
support  the  same  numbers  out  of  the  same  aggregate  wages.  In 
this  way,  however,  the  class  would  have  its  attention  forcibly 
drawn  to  the  fact  of  a superfluity  of  numbers,  and  to  the  necessity, 
if  they  would  have  high  wages,  of  proportioning  the  supply  of 
labour  to  the  demand. 

Combinations  to  keep  up  wages  are  sometimes  successful,  in 
trades  where  the  workpeople  are  few  in  number,  and  collected  in  a 
small  number  of  local  centres.  It  is  questionable  if  combinations 
ever  had  the  smallest  effect  on  the  permanent  remuneration  of 
spinners  or  weavers ; but  the  journeymen  type-founders,  by  a 
close  combination,  are  able,  it  is  said,  to  keep  up  a rate  of  wages 
much  beyond  that  which  is  usual  in  employments  of  equal  hardness 

* [This  and  the  preceding  sentence  replaced,  but  not  until  the  7th  ed. 
(1871),  the  following  sentence  of  the  original  (1848)  text : “ But  if  they  aimed 
at  obtaining  actually  higher  wages  than  the  rate  fixed  by  demand  and  supply 
— the  rate  which  distributes  the  whole  circulating  capital  of  the  country  among 
the  entire  working  population — this  could  only  be  accomplished  by  keeping 
a part  of  their  number  permanently  out  of  employment.’*] 


COMBINATION  LAWS 


936 


and  sMll ; and  even  the  tailors,  a much  more  numerous  class,  are 
understood  to  have  had,  to  some  extent,  a similar  success.  A rise 
of  wages,  thus  confined  to  particular  employments,  is  not  (like  a 
rise  of  general  wages)  defrayed  from  profits,  but  raises  the  value  and 
price  of  the  particular  article,  and  falls  on  the  consumer ; the 
capitalist  who  produces  the  commodity  being  only  injured  in  so 
far  as  the  high  price  tends  to  narrow  the  market ; and  not  even 
then,  unless  it  does  so  in  a greater  ratio  than  that  of  the  rise  of 
price  : for  though,  at  higher  wages,  he  employs,  with  a given  capital, 
fewer  workpeople,  and  obtains  less  of  the  commodity,  yet  if  he  can 
sell  the  whole  of  this  diminished  quantity  at  the  higher  price,  his 
profits  are  as  great  as  before. 

This  partial  rise  of  wages,  if  not  gained  at  the  expense  of  the 
remainder  of  the  working  class,  ought  not  to  be  regarded  as  an 
evil.^  The  consumer,  indeed,  must  pay  for  it ; but  cheapness  of 
goods  is  desirable  only  when  the  cause  of  it  is  that  their  production 
costs  httle  labour,  and  not  when  occasioned  by  that  labour’s  being 
ill  remunerated.  It  may  appear,  indeed,  at  first  sight,  that  the 
nigh  wages  of  the  type-founders  (for  example)  are  obtained  at  the 
general  cost  of  the  labouring  class.  This  high  remuneration  either 
causes  fewer  persons  to  find  employment  in  the  trade,  or  if  not, 
must  lead  to  the  investment  of  more  capital  in  it,  at  the  expense 
of  other  trades  : in  the  first  case,  it  throws  an  additional  number  of 
labourers  on  the  general  market ; in  the  second,  it  withdraws  from  that 
market  a portion  of  the  demand  : effects,  both  of  which  are  injurious 
to  the  working  classes.  Such,  indeed,  would  really  be  the  result  of  a 
successful  combination  in  a particular  trade  or  trades,  for  some 
time  after  its  formation ; but  when  it  is  a permanent  thing,  the 
principles  so  often  insisted  upon  in  this  treatise,  show  that  it  can 
have  no  such  effect.  The  habitual  earnings  of  the  working  classes 
at  large  can  be  effected  by  nothing  but  the  habitual  requirements  of 
the  labouring  people  : these  indeed  may  be  altered,  but  while  they 
remain  the  same,  wages  never  fall  permanently  below  the  standard 
of  these  requirements,  and  do  not  long  remain  above  that  standard. 
If  there  had  been  no  combinations  in  particular  trades,  and  the 
wages  of  those  trades  had  never  been  kept  above  the  common  level, 
there  is  no  reason  to  suppose  that  the  common  level  would  have  been 
at  all  higher  than  it  now  is.  There  would  merely  have  been  a greater 
number  of  people  altogether,  and  a smaller  number  of  exceptions  to 
the  ordinary  low  rate  of  wages. 

* [So  since  3rd  ed.  (1852).  Originally : “ ought  to  be  regarded  as  a benefit,’  I 


936 


BOOK  V.  CHAPTER  X.  § 5 


therefore,  no  improvement  were  to  be  hoped  for  in  the 
general  circumstances  of  the  working  classes,  the  success  of  a portion 
of  them,  however  small,  in  keeping  their  wages  by  combination 
above  the  market  rate,  would  be  wholly  a matter  of  satisfaction. 
But  when  the  elevation  of  the  character  and  condition  of  the  entire 
body  has  at  last  become  a thing  not  beyond  the  reach  of  rational 
effort,  it  is  time  that  the  better  paid  classes  of  skilled  artisans  should 
seek  their  own  advantage  in  common  with,  and  not  by  the  exclusion 
of,  their  fellow-labourers.  While  they  continue  to  fix  their  hopes  on 
hedging  themselves  in  against  competition,  and  protecting  their  own 
wages  by  shutting  out  others  from  access  to  their  employment, 
nothing  better  can  be  expected  from  them  than  that  total  absence 
of  any  large  and  generous  aims,  that  almost  open  disregard  of  all 
other  objects  than  high  wages  and  httle  work  for  their  own  small 
body,  which  were  so  deplorably  evident  in  the  proceedings  and 
manifestoes  of  the  Amalgamated  Society  of  Engineers  during  their 
quarrel  with  their  employers.  Success,  even  if  attainable,  in  raising 
up  a protected  class  of  working  people,  would  now  be  a hindrance, 
instead  of  a help,  to  the  emancipation  of  the  working  classes  at  large. 

But  though  combinations  to  keep  up  wages  are  seldom  effectual, 
and  when  effectual,  are,  for  the  reasons  which  I have  assigned, 
seldom  desirable,  the  right  of  making  the  attempt  is  one  which 
cannot  be  refused  to  any  portion  of  the  working  population  without 
great  injustice,  or  without  the  probability  of  fatally  misleading 
them  respecting  the  circumstances  which  determine  their  condition. 
So  long  as  combinations  to  raise  wages  were  prohibited  by  law, 
the  law  appeared  to  the  operatives  to  be  the  real  cause  of  the  low 
wages  which  there  was  no  denying  that  it  had  done  its  best  to 
produce.  Experience  of  strikes  has  been  the  best  teacher  of  the 
labouring  classes  on  the  subject  of  the  relation  between  wages  and 
the  demand  and  supply  of  labour : and  it  is  most  important  that 
this  course  of  instruction  should  not  be  disturbed. 

2 It  is  a great  error  to  condenm,  per  se  and  absolutely,  either  trade 
unions  or  the  collective  action  of  strikes.  Even  assuming  that  a 

' [Tliis  and  the  following  paragraph  were  added  in  the  3rd  ed.  (1852) ; and 
the  sentence  of  the  original  text,  “ Combinations  to  keep  up  wages  are  there- 
fore not  only  permissible  but  useful,  wherever  really  calculated  to  have  that 
effect,”  was  removed  at  this  point.] 

2 [This  paragraph  was  added  in  the  6th  cd.  (1862).  The  second  sentence, 
however,  then  ran : “ I grant  that  a strike  is  wrong  whenever  it  is  foolish, 
and  it  is  foolish  whenever  it  attempts  to  raise  wages  above  that  market  rate 
which  is  rendered  possible  by  supply  and  demand.  But  demand  and  supply 
are  not  physical  agencies,”  &o.  The  present  text  dates  from  the  7th  ed.  (18^).] 


COMBINATION  LAWS 


937 


strike  must  inevitably  fail  whenever  it  attempts  to  raise  wages  above 
that  market  rate  which  is  fixed  by  the  demand  and  supply  ; demand 
and  supply  are  not  physical  agencies,  which  thrust  a given  amount 
of  wages  into  a labourer’s  hand  without  the  participation  of  his  own 
will  and  actions.  The  market  rate  is  not  fixed  for  him  by  some 
self-acting  instrument,  but  is  the  result  of  bargaining  between  human 
beings — of  what  Adam  Smith  calls  “ the  higgling  of  the  market’;  ” 
and  those  who  do  not  “ higgle  ” will  long  continue  to  pay,  even  over 
a counter,  more  than  the  market  price  for  their  purchases.  Still 
more  might  poor  labourers  who  have  to  do  with  rich  employers 
remain  long  without  the  amount  of  wages  which  the  demand  for 
their  labour  would  justify,  unless,  in  vernacular  phrase,  they  stood 
out  for  it : and  how  can  they  stand  out  for  terms  without  organized 
concert  ? What  chance  would  any  labourer  have  who  struck  singly 
for  an  advance  of  wages  ? How  could  he  even  know  whether  the 
state  of  the  market  admitted  of  a rise,  except  by  consultation  with 
his  fellows,  naturally  leading  to  concerted  action  ? I do  not  hesitate 
to  say  that  associations  of  labourers,  of  a nature  similar  to  trade 
unions,  far  from  being  a hindrance  to  a free  market  for  labour,  are 
the  necessary  instrumentality  of  that  free  market ; the  indispensable 
means  of  enabling  the  sellers  of  labour  to  take  due  care  of  their 
own  interests  under  a system  of  competition.  There  is  an  ulterior 
consideration  of  much  importance,  to  which  attention  was  for  the 
first  time  drawn  by  Professor  Fawcett,  in  an  article  in  the  Westminster 
Review.  Experience  has  at  length  enabled  the  more  intelligent  trades 
to  take  a tolerably  correct  measure  of  the  circumstances  on  which 
the  success  of  a strike  for  an  advance  of  wages  depends.  The 
workmen  are  now  nearly  as  well  informed  as  the  master  of  the  state 
of  the  market  for  his  commodities  ; they  can  calculate  his  gains  and 
his  expenses,  they  know  when  his  trade  is  or  is  not  prosperous, 
and  only  when  it  is,  are  they  ever  again  likely  to  strike  for  higher 
wages ; which  wages  their  known  readiness  to  strike  makes  their 
employers  for  the  most  part  willing,  in  that  case,  to  concede.  The 
tendency,  therefore,  of  this  state  of  things  is  to  make  a rise  of  wages 
in  any  particular  trade  usually  consequent  upon  a rise  of  profits, 
which,  as  Mr.  Fawcett  observes,  is  a commencement  of  that  regular 
participation  of  the  labourers  in  the  profits  derived  from  their  labour, 
every  tendency  to  which,  for  the  reasons  stated  in  a previous  chapter,* 
it  is  so  important  to  encourage,  since  to  it  we  have  chiefly  to  look 
for  any  radical  improvement  in  the  social  and  economical  relations 
* Supra,  book  v.  chap.  vii. 


938 


BOOK  V.  CHAPTER  X.  § 6 


between  labour  and  capital.  Strikes,  therefore,  and  the  trade 
societies  which  render  strikes  possible,  are  for  these  various  reasons 
not  a mischievous,  but  on  the  contrary,  a valuable  part  of  the 
existing  machinery  of  society. 

It  is,  however,  an  indispensable  condition  of  tolerating  combina- 
tions, that  they  should  be  voluntary.  No  severity,  necessary  to  the 
purpose,  is  too  great  to  be  employed  against  attempts  to  compel 
workmen  to  join  a union,  or  take  part  in  a strike  by  threats  or 
violence.  Mere  moral  compulsion,  by  the  expression  of  opinion, 
the  law  ought  not  to  interfere  with  ; it  belongs  to  more  enlightened 
opinion  to  restrain  it,  by  rectifying  the  moral  sentiments  of  the 
people.  Other  questions  arise  when  the  combination,  being  volun- 
tary, proposes  to  itself  objects  really  contrary  to  the  public  good. 
High  wages  and  short  hours  are  generally  good  objects,  or,  at  all 
events,  may  be  so  : ^ but  in  many  trade  unions,  it  is  among  the 
rules  that  there  shall  be  no  task  work,  or  no  difference  of  pay 
between  the  most  expert  workmen  and  the  most  unskilful,  or  that 
no  member  of  the  union  shall  earn  more  than  a certain  sum  per 
week,  in  order  that  there  may  be  more  employment  for  the  rest ; 
2 and  the  abolition  of  piece  work,  under  more  or  less  of  modification, 
held  a conspicuous  place  among  the  demands  of  the  Amalgamated 
Society.  These  are  combinations  to  effect  objects  which  are  per- 
nicious. Their  success,  even  when  only  partial,  is  a public  mischief; 
and  were  it  complete,  would  be  equal  in  magnitude  to  almost  any  of 
the  evils  arising  from  bad  economical  legislation.  Hardly  anything 
worse  can  be  said  of  the  worst  laws  on  the  subject  of  industry  and 
its  remuneration,  consistent  with  the  personal  freedom  of  the  labourer, 
than  that  they  place  the  energetic  and  the  idle,  the  skilful  and  the 
incompetent,  on  a level : and  this,  in  so  far  as  it  is  in  itself  possible, 
it  is  the  direct  tendency  ^ of  the  regulations  of  these  unions  to  do. 
* It  does  not,  however,  follow  as  a consequence  that  the  law  would 

* [At  this  point  the  following  passage  of  the  original  text  was  omitted 
from  the  3rd  ed.  (1852) ; “ and  a limitation  of  the  number  of  persons  in  employ- 
ment may  be  a necessary  condition  of  these.  Combinations,  therefore,  not  to 
work  for  less  than  certain  wages,  or  for  more  than  a certain  number  of  hours, 
or  even  not  to  work  for  a master  who  employs  more  than  a certain  number 
of  apprentices,  are,  when  voluntary  on  the  part  of  all  who  engage  in  them,  not 
only  unexceptionable,  but  would  be  desirable,  were  it  not  that  they  almost 
always  fail  of  their  effect.”] 

* [This  sentence  was  inserted  in  the  3rd  ed.] 

* [So  since  the  5th  ed.  (1862).  In  the  earlier  editions:  *■*  avowed  object.”] 

* [The  rest  of  this  paragraph  dates  from  the  3rd  ed.  The  first  edition 
(1848)  read:  “Every  society  which  exacts  from  its  members  obediences  to  rules 
of  this  description  and  endeavours  to  enforce  compliance  with  them  on 


COMBINATION  LAWS 


939 


be  warranted  in  making  the  formation  of  such  associations  illegal 
and  punishable.  Independently  of  all  considerations  of  consti- 
tutional liberty,  the  best  interests  of  the  human  race  imperatively 
require  that  all  economical  experiments,  voluntarily  undertaken, 
should  have  the  fullest  licence,  and  that  force  and  fraud  should  be 
the  only  means  of  attempting  to  benefit  themselves  which  are 
interdicted  to  the  less  fortunate  classes  of  the  community.* 

§ 6.  Among  the  modes  of  undue  exercise  of  the  power  of  govern- 
ment on  which  I have  commented  in  this  chapter,  I have  included 
only  such  as  rest  on  theories  which  have  still  more  or  less  of  footing 
in  the  most  enhghtened  countries.  I have  not  spoken  of  some  which 
have  done  still  greater  mischief  in  times  not  long  past,  but  which 
are  now  generally  given  up,  at  least  in  theory,  though  enough  of 
them  still  remains  in  practice  to  make  it  impossible  as  yet  to  class 
them  among  exploded  errors. 

The  notion,  for  example,  that  a government  should  choose 

the  part  of  employers  by  refusal  to  work,  is  a public  nuisance.  Whether 
the  law  would  be  warranted  in  making  the  formation  of  such  associations  illegal 
and  punishable,  depends  upon  the  difficult  question  of  the  legitimate  bounds 
of  constitutional  liberty.  What  are  the  proper  limits  to  the  right  of  asso- 
ciation ? To  associate  for  the  purpose  of  violating  the  law  could  not  of 
course  be  tolerated  under  any  government.  But  among  the  numerous  acts 
which,  although  mischievous  in  themselves,  the  law  ought  not  to  prohibit 
from  being  done  by  individuals,  are  there  not  some  which  are  rendered  so 
much  more  mischievous  when  people  combine  to  do  them,  that  the  legislature 
ought  to  prohibit  the  combination,  though  not  the  act  itself  ? When  these 
questions  have  been  philosophically  answered,  which  belongs  to  a different 
branch  of  social  philosophy  from  the  present,  it  may  be  determined  whether  the 
kind  of  associations  here  treated  of  can  be  a proper  subject  of  any  other  than 
merely  moral  repression.” 

But  in  the  2nd  ed.  (1849)  this  had  already  been  replaced  by  : “ Any  society 
which  exacts  from  its  members  obedience  to  rules  of  this  description,  and 
endeavours  to  enforce  compliance  with  them  on  the  part  of  employers  by 
refusal  to  work,  incurs  the  inconveniences  of  Communism,  without  getting 
rid  of  any  of  those  of  individual  property.  It  does  not  follow,  however,  that 
the  law  would  be  warranted  ” &c.,  as  at  present.] 

♦ [1862]  Whoever  desires  to  understand  the  question  of  Trade  Combinations 
as  seen  from  the  point  of  view  of  the  working  people,  should  make  himself 
acquainted  with  a pamphlet  published  in  1860,  under  the  title  Trades  Unions 
and  Strikes^  their  Philosophy  and  Intention,  by  T.  J.  Dunning,  Secretary  to 
the  London  Consolidated  Society  of  Bookbinders.  There  are  many  opinions 
in  this  able  tract  in  which  I only  paitially,  and  some  in  which  I do  not  at  all, 
coincide.  But  there  are  also  many  sound  arguments,  and  an  instructive  expo- 
sure of  the  common  fallacies  of  opponents.  Readers  of  other  classes  will  see 
with  surprise,  not  only  how  great  a portion  of  truth  the  Unions  have  on  their 
side,  but  how  much  less  flagrant  and  condemnable  even  their  errors  appear, 
when  seen  under  the  aspect  in  which  it  is  only  natural  that  the  working  classes 
should  themselves  regard  them. 


940 


BOOK  V.  CHAPTER  X.  § 6 


opinions  for  the  people,  and  should  not  suffer  any  doctrines  in 
politics,  morals,  law,  or  religion,  but  such  as  it  approves,  to  be 
printed  or  publicly  professed,  may  be  said  to  be  altogether  abandoned 
as  a general  thesis.  It  is  now  well  imderstood  that  a regime  of  this 
sort  is  fatal  to  all  prosperity,  even  of  an  economical  kind  : that  the 
human  mind  when  prevented  either  by  fear  of  the  law  or  by  fear  of 
opinion  from  exercising  its  faculties  freely  on  the  most  important 
subjects,  acquires  a general  torpidity  and  imbecility,  by  which,  when 
they  reach  a certain  point,  it  is  disqualified  from  making  any 
considerable  advances  even  in  the  common  affairs  of  life,  and  which, 
when  greater  still,  make  it  gradually  lose  even  its  previous  attain- 
ments. There  cannot  be  a more  decisive  example  than  Spain  and 
Portugal,  for  two  centuries  after  the  Reformation.  The  decline  of 
those  countries  in  national  greatness,  and  even  in  material  civilization, 
while  almost  all  the  other  nations  of  Europe  were  uninterruptedly 
advancing,  has  been  ascribed  to  various  causes,  but  there  is  one 
which  lies  at  the  foundation  of  them  all : the  Holy  Inquisition,  and 
the  system  of  mental  slavery  of  which  it  is  the  symbol. 

Yet  although  these  truths  are  very  widely  recognized,  and 
freedom  both  of  opinion  and  of  discussion  is  admitted  as  an  axiom 
in  aU  free  countries,  this  apparent  liberahty  and  tolerance  has 
acquired  so  little  of  the  authority  of  a principle,  that  it  is  always 
ready  to  give  way  to  the  dread  or  horror  inspired  by  some  particular 
sort  of  opinions.  Within  the  last  fifteen  or  twenty  years,^  several 
individuals  have  suffered  imprisonment,  for  the  public  profession, 
sometimes  in  a very  temperate  manner,  of  disbelief  in  religion  ; and 
it  is  probable  that  both  the  public  and  the  government,  at  the  first 
panic  which  arises  on  the  subject  of  Chartism  or  Communism,  will 
fly  to  similar  means  for  checking  the  propagation  of  democratic  or 
anti-property  doctrines.  In  this  country,  however,  the  effective 
restraints  on  mental  freedom  proceed  much  less  from  the  law  or  the 
government,  than  from  the  intolerant  temper  of  the  national  mind  ; 
arising  no  longer  from  even  as  respectable  a source  as  bigotry  or 
fanaticism,  but  rather  from  the  general  habit,  both  in  opinion  and 
conduct,  of  making  adherence  to  custom  the  rule  of  life,  and 
enforcing  it,  by  social  penalties,  against  all  persons  who,  without  a 
party  to  back  them,  assert  their  individual  independence. 

> [So  in  7th  ed.  (1871).  In  1st  (1848) ; “ two  or  three.”) 


CHAPTER  XI 


OT  THE  GROUNDS  AND  LIMITS  OF  THE  LAISSER-FAIRE 
OR  NON-INTERFERENCE  PRINCIPLE 

§ 1.  We  have  now  reached  the  last  part  of  our  undertaking  ; 
the  discussion,  so  far  as  suited  to  this  treatise  (that  is,  so  far  as  it  is  a 
question  of  principle,  not  detail),  of  the  limits  of  the  province  of 
government : the  question,  to  what  objects  governmental  inter- 
vention in  the  affairs  of  society  may  or  should  extend,  over  and 
above  those  which  necessarily  appertain  to  it.  No  subject  has 
been  more  keenly  contested  in  the  present  age  : the  contest,  however, 
has  chiefly  taken  place  round- certain  select  points,  with  only  flying 
excursions  into  the  rest  of  the  field.  Those  indeed  who  have  discussed 
any  particular  question  of  government  interference,  such  as  state 
education  (spiritual  or  secular),  regulation  of  hours  of  labour,  a 
pubhc  provision  for  the  poor,  &c.,  have  often  dealt  largely  in  general 
arguments,  far  outstretching  the  special  application  made  of  them, 
and  have  shown  a sufficiently  strong  bias  either  in  favour  of  letting 
things  alone,  or  in  favour  of  meddling ; but  have  seldom  declared, 
or  apparently  decided  in  their  own  minds,  how  far  they  would 
carry  either  principle.  The  supporters  of  interference  have  been 
content  with  asserting  a general  right  and  duty  on  the  part  of 
government  to  intervene,  wherever  its  intervention  would  be  useful : 
and  when  those  who  have  been  called  the  laisser-faire  school  have 
attempted  any  definite  limitation  of  the  province  of  government, 
they  have  usually  restricted  it  to  the  protection  of  person  and  property 
against  force  and  fraud  ; a definition  to  which  neither  they  nor 
any  one  else  can  deliberately  adhere,  since  it  excludes,  as  has  been 
shown  in  a preceding  chapter,*  some  of  the  most  indispensable  and 
unanimously  recognized  of  the  duties  of  government. 

Without  professing  entirely  to  supply  this  deficiency  of  a general 
theory,  on  a question  which  does  not,  as  I conceive,  admit  of  any 
* Supra,  book  t.  ch.  1. 


942 


BOOK  V.  CHAPTER  XL  § 2 


universal  solution,  I shall  attempt  to  afford  some  little  aid  towards 
the  resolution  of  this  class  of  questions  as  they  arise,  by  examining, 
in  the  most  general  point  of  view  in  which  the  subject  can  be 
considered,  what  are  the  advantages,  and  what  the  evils  or  incon- 
veniences, of  government  interference. 

We  must  set  out  by  distinguishing  between  two  kinds  of  inter- 
vention by  the  government,  which,  though  they  may  relate  to  the 
same  subject,  differ  widely  in  their  nature  and  effects,  and  require, 
for  their  justification,  motives  of  a very  different  degree  of  urgency. 
The  intervention  may  extend  to  controlling  the  free  agency  of  indi- 
viduals. Government  may  interdict  all  persons  from  doing  certain 
things ; or  from  doing  them  without  its  authorization ; or  may 
prescribe  to  them  certain  things  to  be  done,  or  a certain  manner  of 
doing  things  which  it  is  left  optional  with  them  to  do  or  to  abstain 
from.  This  is  the  authoritative  interference  of  government.  There 
is  another  kind  of  intervention  which  is  not  authoritative  : when 
a government,  instead  of  issuing  a command  and  enforcing  it  by 
penalties,  adopts  the  course  so  seldom  resorted  to  by  governments, 
and  of  which  such  important  use  might  be  made,  that  of  giving 
advice,  and  promulgating  information  ; or  when,  leaving  individuals 
free  to  use  their  own  means  of  pursuing  any  object  of  general  interest, 
the  government,  not  meddling  with  them,  but  not  trusting  the  object 
solely  to  their  care,  establishes,  side  by  side  with  their  arrangements, 
an  agency  of  its  own  for  a like  purpose.  Thus,  it  is  one  thing  to 
maintain  a Church  Establishment,  and  another  to  refuse  toleration 
to  other  religions,  or  to  persons  professing  no  religion.  It  is  one  thing 
to  provide  schools  or  colleges,  and  another  to  require  that  no  person 
shall  act  as  an  instructor  of  youth  without  a government  licence. 
There  might  be  a national  bank,  or  a government  manufactory, 
without  any  monopoly  against  private  banks  and  manufactories. 
There  might  be  a post-office,  without  penalties  against  the  con- 
veyance of  letters  by  other  means.  There  may  be  a corps  of  govern- 
ment engineers  for  civil  purposes,  while  the  profession  of  a civil 
engineer  is  free  to  be  adopted  by  every  one.  There  may  be  public 
hospitals,  without  any  restriction  upon  private  medical  or  surgical 
practice. 

§ 2.  It  is  evident,  even  at  first  sight,  that  the  authoritative 
torm  of  government  intervention  has  a much  more  limited  sphere 
of  legitimate  action  than  the  other.  It  requires  a much  stronger 
necessity  to  justify  it  in  any  case  ; while  there  are  large  departments 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


943 


of  human  life  from  which  it  must  be  unreservedly  and  imperiously 
excluded.  Whatever  theory  we  adopt  respecting  the  foundation  of 
the  social  union,  and  under  whatever  political  institutions  we  live, 
there  is  a circle  around  every  individual  human  being  which  no 
government,  be  it  that  of  one,  of  a few,  or  of  the  many,  ought  to 
be  permitted  to  overstep  : there  is  a part  of  the  life  of  every  person 
who  has  come  to  years  of  discretion,  within  which  the  individuality 
of  that  person  ought  to  reign  uncontrolled  either  by  any  other 
individual  or  by  the  public  collectively.  That  there  is,  or  ought  to 
be,  some  space  in  human  existence  thus  entrenched  around,  and 
sacred  from  authoritative  intrusion,  no  one  who  professes  the  smallest 
regard  to  human  freedom  or  dignity  will  call  in  question : the  point 
to  be  determined  is,  where  the  limit  should  be  placed  ; how  large  a 
province  of  human  life  this  reserved  territory  should  include.  I 
apprehend  that  it  ought  to  include  all  that  part  which  concerns 
only  the  life,  whether  inward  or  outward,  of  the  individual,  and 
does  not  affect  the  interests  of  others,  or  affects  them  only  through 
the  moral  influence  of  example.  With  respect  to  the  domain  of  the 
inward  consciousness,  the  thoughts  and  feelings,  and  as  much  of 
external  conduct  as  is  personal  only,  involving  no  consequences, 
none  at  least  of  a painful  or  injurious  kind,  to  other  people  ; I hold 
that  it  is  allowable  in  all,  and  in  the  more  thoughtful  and  cultivated 
often  a duty,  to  assert  and  promulgate,  with  all  the  force  they  are 
capable  of,  their  opinion  of  what  is  good  or  bad,  admirable  or  con 
temptible,  but  not  to  compel  others  to  conform  to  that  opinion; 
whether  the  force  used  is  that  of  extra-legal  coercion,  or  exerts  itself 
by  means  of  the  law. 

Even  in  those  portions  of  conduct  which  do  affect  the  interest  of 
others,  the  onus  of  making  out  a case  always  lies  on  the  defenders 
oi  legal  prohibitions.  It  is  not  a merely  constructive  or  presumptive 
injury  to  others  which  will  justify  the  interference  of  law  with  indi- 
vidual freedom.  To  be  prevented  from  doing  what  one  is  inclined 
to,  or  from  acting  according  to  one’s  own  judgment  of  what  is 
desirable,  is  not  only  always  irksome,  but  always  tends,  pro  tantOy 
to  starve  the  development  of  some  portion  of  the  bodily  or  mental 
faculties,  either  sensitive  or  active  ; and  unless  the  conscience  of  the 
individual  goes  freely  with  the  legal  restraint,  it  partakes,  either  in  a 
great  or  in  a small  degree,  of  the  degradation  of  slavery.  Scarcely 
any  degree  of  utility,  short  of  absolute  necessity,  will  justify  a 
prohibitory  regulation,  imless  it  can  also  be  made  to  recommend 
itself  to  the  general  conscience;  unless  persons  of  ordinary  good 


944 


BOOK  V.  CHAPTER  XL  § 3 


intentions  either  believe  already,  or  can  be  induced  to  believe,  that 
the  thing  prohibited  is  a thing  which  they  ought  not  to  wish  to  do. 

It  is  otherwise  with  governmental  interferences  which  do  not 
restrain  individual  free  agency.  When  a government  provides 
means  for  fulfilling  a certain  end,  leaving  individuals  free  to  avail 
themselves  of  different  means  if  in  their  opinion  preferable,  there 
is  no  infringement  of  liberty,  no  irksome  or  degrading  restraint. 
One  of  the  principal  objections  to  government  interference  is  then 
absent.  There  is,  however,  in  almost  all  forms  of  government 
agency,  one  thing  which  is  compulsory ; the  provision  of  the 
pecuniary  means.  These  are  derived  from  taxation  ; or,  if  existing 
in  the  form  of  an  endowment  derived  from  public  property,  they 
are  still  the  cause  of  as  much  compulsory  taxation  as  the  sale  or 
the  annual  proceeds  of  the  property  would  enable  to  be  dispensed 
with.*  And  the  objection  necessarily  attaching  to  compulsory 
contributions,  is  almost  always  greatly  aggravated  by  the  expensive 
precautions  and  onerous  restrictions  which  are  indispensable  to 
prevent  evasion  of  a compulsory  tax. 

§ 3.  A second  general  objection  to  government  agency  is  that 
every  increase  of  the  functions  devolving  on  the  government  is  an 
increase  of  its  power,  both  in  the  form  of  authority,  and  still  more, 
in  the  indirect  form  of  influence.  The  importance  of  this  considera- 
tion, in  respect  to  political  freedom,  has  in  general  been  quite  suffi- 
ciently recognized,  at  least  in  England  ; but  many,  in  latter  times, 
have  been  prone  to  think  that  limitation  of  the  powers  of  the 
government  is  only  essential  when  the  government  itself  is  badly  con- 
stituted ; when  it  does  not  represent  the  people,  but  is  the  organ  of  a 
class,  or  coalition  of  classes : and  that  a government  of  sufficiently 
popular  constitution  might  be  trusted  with  any  amount  of  power 
over  the  nation,  since  its  power  would  be  only  that  of  the  nation  over 
itself.  This  might  be  true,  if  the  nation,  in  such  cases,  did  not 
practically  mean  a mere  majority  of  the  nation,  and  if  minorities 
were  only  capable  of  oppressing,  but  not  of  being  oppressed. 
Experience,  however,  proves  that  the  depositaries  of  power  who 

♦ The  only  cases  in  which  government  agency  involves  nothing  of  a com- 
pulsory nature,  are  the  rare  cases  in  which,  without  any  artificial  monopoly,  it 
pays  its  own  expenses.  A bridge  built  with  public  money,  on  which  tolls  are 
collected  sufficient  to  pay  not  only  all  current  expenses,  but  the  interest  of  the 
original  outlay,  is  one  case  in  point.  The  government  railways  in  Belgium  and 
Germany  are  another  example.  The  Post  Office,  if  its  monopoly  were  abolished^ 
and  it  still  paid  its  expenses,  would  be  another. 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


945 


ftre  mere  delegates  of  the  people,  that  is  of  a majority,  are  quite  as 
ready  (when  they  think  they  can  count  on  popular  support)  as  any 
organs  of  oligarchy  to  assume  arbitrary  power,  and  encroach  unduly 
on  the  liberty  of  private  life.  The  public  collectively  is  abundantly 
ready  to  impose,  not  only  its  generally  narrow  views  of  its  interests, 
but  its  abstract  opinions,  and  even  its  tastes,  as  laws  binding  upon 
individuals.  And  the  present  civilization  tends  so  strongly  to  make 
the  power  of  persons  acting  in  masses  the  only  substantial  power 
in  society,  that  there  never  was  more  necessity  for  surrounding 
individual  independence  of  thought,  speech,  and  conduct,  with  the 
most  powerful  defences,  in  order  to  maintain  that  originality  of  mind 
and  individuality  of  character,  which  are  the  only  sourge  of  any  real 
progress,  and  of  most  of  the  qualities  which  make  the  human  race 
much  superior  to  any  herd  of  animals.  Hence  it  is  no  less  important 
in  a democratic  than  in  any  other  government,  that  all  tendency 
on  the  part  of  public  authorities  to  stretch  their  interference,  and 
assume  a power  of  any  sort  which  can  easily  be  dispensed  with, 
should  be  regarded  with  unremitting  jealousy.  Perhaps  this  is 
even  more  important  in  a democracy  than  in  any  other  form  of 
political  society ; because,  where  public  opinion  is  sovereign,  an 
individual  who  is  oppressed  by  the  sovereign  does  not,  as  in  most 
other  states  of  things,  find  a rival  power  to  which  he  can  appeal  for 
relief,  or,  at  all  events,  for  sympathy. 

§ 4.  A third  general  objection  to  government  agency  rests  on 
the  principle  of  the  division  of  labour.  Every  additional  fimction 
undertaken  by  the  government  is  a fresh  occupation  imposed  upon 
a body  already  overcharged  with  duties.  A natural  consequence  is 
that  most  things  are  ill  done ; much  not  done  at  all,  because  the 
government  is  not  able  to  do  it  without  delays  which  are  fatal  to 
its  purpose ; that  the  more  troublesome,  and  less  showy,  of  the 
functions  undertaken,  are  postponed  or  neglected,  and  an  excuse  is 
always  ready  for  the  neglect ; while  the  heads  of  the  administration 
have  their  minds  so  fully  taken  up  with  official  details,  in  however 
perfunctory  a manner  superintended,  that  they  have  no  time  or 
thought  to  spare  for  the  great  interests  of  the  state,  and  the  prepara- 
tion of  enlarged  measures  of  social  improvement. 

But  these  inconveniences,  though  real  and  serious,  result  much 
more  from  the  bad  organization  of  governments,  than  from  the 
extent  and  variety  of  the  duties  undertaken  by  them.  Government 
is  not  a name  for  some  one  functionary,  or  definite  number  of 


946 


BOOH  V.  CHAPTER  XL  § 4 


functionaries  : there  may  be  almost  any  amount  of  division  of  labour 
within  the  administrative  body  itself.  The  evil  in  question  is  felt 
in  great  magnitude  under  some  of  the  governments  of  the  Continent, 
where  six  or  eight  men,  living  at  the  capital  and  known  by  the  name 
of  ministers,  demand  that  the  whole  public  business  of  the  country 
shall  pass,  or  be  supposed  to  pass,  under  their  individual  eye.  But 
the  inconvenience  would  be  reduced  to  a very  manageable  compass, 
in  a country  in  which  there  was  a proper  distribution  of  functions 
between  the  central  and  local  officers  of  government,  and  in  which 
the  central  body  was  divided  into  a sufficient  number  of  departments. 
When  Parliament  thought  it  expedient  to  confer  on  the  government 
an  inspecting  and  partially  controlling  authority  over  railways, 
it  did  not  add  railways  to  the  department  of  the  Home  Minister,  but 
created  a Railway  Board.  When  it  determined  to  have  a central 
superintending  authority  for  pauper  administration,  it  established 
the  Poor  Law  Commission.  There  are  few  countries  in  which  a 
greater  number  of  functions  are  discharged  by  public  officers,  than 
in  some  states  of  the  American  Union,  particularly  the  New  England 
States  : but  the  division  of  labour  in  public  business  is  extreme ; 
most  of  these  officers  being  not  even  amenable  to  any  common 
superior,  but  performing  their  duties  freely,  under  the  double  check  of 
election  by  their  townsmen,  and  civil  as  well  as  criminal  responsi- 
bility to  the  tribunals. 

It  is,  no  doubt,  indispensable  to  good  government  that  the  chiefs 
of  the  administration,  whether  permanent  or  temporary,  should 
extend  a commanding,  though  general,  view  over  the  ensemble  of 
all  the  interests  confided,  in  any  degree,  to  the  responsibility  of  the 
central  power.  But  with  a skilful  internal  organization  of  the 
administrative  machine,  leaving  to  subordinates,  and  as  far  as 
possible,  to  local  subordinates,  not  only  the  execution,  but  to  a 
great  degree  the  control,  of  details ; holding  them  accountable  for 
the  results  of  their  acts  rather  than  for  the  acts  themselves,  except 
where  these  come  within  the  cognizance  of  the  tribunals ; taking 
the  most  effectual  securities  for  honest  and  capable  appointments ; 
opening  a broad  path  to  promotion  from  the  inferior  degrees  of 
the  administrative  scale  to  the  superior ; leaving,  at  each  step, 
to  the  functionary,  a wider  range  in  the  origination  of  measures,  so 
that,  in  the  highest  grade  of  all,  deliberation  might  be  concentrated 
on  the  great  collective  interests  of  the  country  in  each  department ; 
if  all  this  were  done,  the  government  would  not  probably  be  over- 
burthened  by  any  business,  in  other  respects  fit  to  be  undertaken  by 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


947 


it;  though  the  overburthening  would  remain  as  a serious  addition 
to  the  inconveniences  incurred  by  its  undertaking  any  which  was 
unfit. 

§ 5.  But  though  a better  organization  of  governments  would 
greatly  diminish  the  force  of  the  objection  to  the  mere  multiplication 
of  their  duties,  it  would  still  remain  true  that  in  all  the  more  advanced 
communities  the  great  majority  of  things  are  worse  done  by  the 
intervention  of  government,  than  the  individuals  most  interested 
in  the  matter  would  do  them,  or  cause  them  to  be  done,  if  left  to 
themselves.  The  grounds  of  this  truth  are  expressed  with  tolerable 
exactness  in  the  popular  dictum,  that  people  understand  their  own 
business  and  their  own  interests  better,  and  care  for  them  more, 
than  the  government  does,  or  can  be  expected  to  do.  This  maxim 
holds  true  throughout  the  greatest  part  of  the  business  of  life,  and 
wherever  it  is  true  we  ought  to  condemn  every  kind  of  government 
intervention  that  conflicts  with  it.  The  inferiority  of  government 
agency,  for  example,  in  any  of  the  common  operations  of  industry  or 
commerce,  is  proved  by  the  fact,  that  it  is  hardly  ever  able  to 
maintain  itself  in  equal  competition  with  individual  agency,  where 
the  individuals  possess  the  requisite  degree  of  industrial  enterprise, 
and  can  command  the  necessary  assemblage  of  means.  All  the 
facilities  which  a government  enjoys  of  access  to  information ; all 
the  means  which  it  possesses  of  remunerating,  and  therefore  of 
commanding,  the  best  available  talent  in  the  market — are  not  an 
equivalent  for  the  one  great  disadvantage  of  an  inferior  interest 
in  the  result. 

It  must  be  remembered,  besides,  that  even  if  a government  were 
superior  in  intelligence  and  knowledge  to  any  single  individual  in 
the  nation,  it  must  be  inferior  to  all  the  individuals  of  the  nation 
taken  together.  It  can  neither  possess  in  itself,  nor  enlist  in  its 
service,  more  than  a portion  of  the  acquirements  and  capacities 
which  the  country  contains,  applicable  to  any  given  purpose. 
There  must  be  many  persons  equally  qualifled  for  the  work  with 
those  whom  the  government  employs,  even  if  it  selects  its  instru- 
ments with  no  reference  to  any  consideration  but  their  fitness. 
Now  these  are  the  very  persons  into  whose  hands,  in  the  cases  of 
most  common  occurrence,  a system  of  individual  agency  naturally 
tends  to  throw  the  work,  because  they  are  capable  of  doing  it  better  or^ 


^ [So  since  6th  ed.  (1862).  Originally  : “ and.”] 


948 


BOOK  V.  CHAPTER  XI.  § 6 


on  clieaper  terms  than  any  other  persons.  So  far  as  this  is  the 
case,  it  is  evident  that  government,  by  excluding  or  even  by  super- 
seding individual  agency,  either  substitutes  a less  quahfied  instru- 
mentahty  for  one  better  qualified,  or  at  any  rate  substitutes  its 
own  mode  of  accomplishing  the  work,  for  all  the  variety  of  modes 
which  would  be  tried  by  a number  of  equally  qualified  persons 
aiming  at  the  same  end ; a competition  by  many  degrees  more 
propitious  to  the  progress  of  improvement  than  any  uniformity  of 
system, 

§ 6.  I have  reserved  for  the  last  place  one  of  the  strongest  of 
the  reasons  against  the  extension  of  government  agency.  Even  if 
the  government  could  comprehend  within  itself,  in  each  department, 
all  the  most  eminent  intellectual  capacity  and  active  talent  of  the 
nation,  it  would  not  be  the  less  desirable  that  the  conduct  of  a large 
portion  of  the  affairs  of  the  society  should  be  left  in  the  hands  of 
the  persons  immediately  interested  in  them.  The  business  of  fife  is 
an  essential  part  of  the  practical  education  of  a people ; without 
which,  ^ book  and  school  instruction,  though  most  necessary  and 
salutary,  does  not  suffice  to  qualify  them  for  conduct,  and  for 
the  adaptation  of  means  to  ends.  Instruction  is  only  one  of  the 
desiderata  of  mental  improvement ; another,  almost  as  indispensable, 
is  a vigorous  exercise  of  the  active  energies ; labour,  contrivance, 
judgment,  self-control : and  the  natural  stimulus  to  these  is  the 
difficulties  of  life.  This  doctrine  is  not  to  be  confounded  with  the 
complacent  optimism,  which  represents  the  evils  of  life  as  desirable 
things,  because  they  call  forth  quahties  adapted  to  combat  with 
evils.  It  is  only  because  the  difficulties  exist,  that  the  qualities 
which  combat  with  them  are  of  any  value.  As  practical  beings  it 
is  our  business  to  free  human  life  from  as  many  as  possible  of  its 
difficulties,  and  not  to  keep  up  a stock  of  them  as  hunters  preserve 
game  for  the  exercise  of  pursuing  it.  But  since  the  need  of  active 
talent  and  practical  judgment  in  the  affairs  of  fife  can  only  be 
diminished,  and  not,  even  on  the  most  favourable  supposition,  done 
away  with,  it  is  important  that  those  endowments  should  be  culti- 
vated not  merely  in  a select  few,  but  in  all,  and  that  the  cultivation 
should  be  more  varied  and  complete  than  most  persons  are  able  to 
find  in  the  narrow  sphere  of  their  merely  individual  interests.  A 
people  among  whom  there  is  no  habit  of  spontaneous  action  for  a 
collective  interest — who  look  habitually  to  their  government  to 
command  or  prompt  them  in  all  matters  of  joint  concern  -who 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


949 


expect  to  have  everything  done  for  them,  except  what  can  he  made 
an  affair  of  mere  habit  and  routine — have  their  faculties  only  half 
developed  ; their  education  is  defective  in  one  of  its  most  important 
branches. 

Not  only  is  the  cultivation  of  the  active  faculties  by  exercise, 
diffused  through  the  whole  community,  in  itself  one  of  the  most 
valuable  of  national  possessions  : it  is  rendered,  not  less,  but  more 
necessary,  when  a high  degree  of  that  indispensable  culture  is 
systematically  kept  up  in  the  chiefs  and  functionaries  of  the  state. 
There  cannot  be  a combination  of  circumstances  more  dangerous 
to  human  welfare,  than  that  in  which  intelligence  and  talent  are 
maintained  at  a high  standard  within  a governing  corporation, 
but  starved  and  discouraged  outside  the  pale.  Such  a system, 
more  completely  than  any  other,  embodies  the  idea  of  despotism, 
by  arming  with  intellectual  superiority  as  an  additional  weapon 
those  who  have  already  the  legal  power.  It  approaches  as  nearly 
as  the  organic  difference  between  human  beings  and  other  animals 
admits,  to  the  government  of  sheep  by  their  shepherd  without 
anything  hke  so  strong  an  interest  as  the  shepherd  has  in  the  thriving 
condition  of  the  flock.  The  only  security  against  poHtical  slavery 
is  the  check  maintained  over  governors  by  the  diffusion  of  intelli- 
gence, activity,  and  public  spirit  among  the  governed.  Experience 
proves  the  extreme  difficulty  of  permanently  keeping  up  a suffi- 
ciently high  standard  of  those  qualities  ; a difficulty  which  increases, 
as  the  advance  of  civilization  and  security  removes  one  after  another 
of  the  hardships,  embarrassments,  and  dangers  against  which 
individuals  had  formerly  no  resource  but  in  their  own  strength, 
skill,  and  courage.  It  is  therefore  of  supreme  importance  that  all 
classes  of  the  community,  down  to  the  lowest,  should  have  much  to 
do  for  themselves ; that  as  great  a demand  should  be  made  upon 
their  intelligence  and  virtue  as  it  is  in  any  respect  equal  to ; that 
the  government  should  not  only  leave  as  far  as  possible  to  their 
own  faculties  the  conduct  of  whatever  concerns  themselves  alone,  but 
should  suffer  them,  or  rather  encourage  them,  to  manage  as  many 
as  possible  of  their  joint  concerns  by  voluntary  co-operation  ; since 
this  discussion  and  management  of  collective  interests  is  the  great 
school  of  that  pubhc  spirit,  and  the  great  source  of  that  intelligence 
of  public  affairs,  which  are  always  regarded  as  the  distinctive 
character  of  the  public  of  free  countries. 

A democratic  constitution,  not  supported  by  democratic  institu- 
tions in  detail,  but  confined  to  the  central  government,  not  only 


950 


BOOK  V.  CHAPTER  XL  § 7 


is  not  political  freedom,  but  often  creates  a spirit  precisely  the 
reverse,  carrying  down  to  the  lowest  grade  in  society  the  desire  and 
ambition  of  political  domination.  In  some  countries  the  desire  of 
the  people  is  for  not  being  tyrannized  over,  but  in  others  it  is  merely 
for  an  equal  chance  to  everybody  of  tyrannizing.  Unhappily  this 
last  state  of  the  desires  is  fully  as  natural  to  mankind  as  the  former, 
and  in  many  of  the  conditions  even  of  civilized  humanity  is  far 
more  largely  exemplified.  In  proportion  as  the  people  are  accus- 
tomed to  manage  their  affairs  by  their  own  active  intervention, 
instead  of  leaving  them  to  the  government,  their  desires  will  turn 
to  repelling  tyranny,  rather  than  to  tyrannizing : while  in  proportion 
as  all  real  initiative  and  direction  resides  in  the  government,  and 
individuals  habitually  feel  and  act  as  under  its  perpetual  tutelage, 
popular  institutions  develop  in  them  not  the  desire  of  freedom, 
but  an  unmeasured  appetite  for  place  and  power ; diverting  the 
intelligence  and  activity  of  the  country  from  its  principal  business 
to  a wretched  competition  for  the  selfish  prizes  and  the  petty  vanities 
of  office. 

§ 7.  The  preceding  are  the  principal  reasons,  of  a general 
character,  in  favour  of  restricting  to  the  narrowest  compass  the 
intervention  of  a public  authority  in  the  business  of  the  com- 
munity : and  few  will  dispute  the  more  than  sufficiency  of  these 
reasons,  to  throw,  in  every  instance,  the  burthen  of  making  out 
a strong  case,  not  on  those  who  resist,  but  on  those  who  recom- 
mend, government  interference.  Laisser-faire,  in  short,  should  be 
the  general  practice : every  departure  from  it,  unless  required  by 
some  great  good,  is  a certain  evil. 

The  degree  in  which  the  maxim,  even  in  the  cases  to  which  it  is 
most  manifestly  applicable,  has  heretofore  been  infringed  by  govern- 
ments, future  ages  will  probably  have  difficulty  in  crediting.  Some 
idea  may  be  formed  of  it  from  the  description  of  M.  Dunoyer  * of 
the  restraints  imposed  on  the  operations  of  manufacture  under  the 
old  government  of  France,  by  the  meddling  and  regulating  spirit 
of  legislation. 

“ The  State  exercised  over  manufacturing  industry  the  most 
unlimited  and  arbitrary  jurisdiction.  It  disposed  without  scruple  of 
the  resources  of  manufacturers  : it  decided  who  should  be  allowed 
to  work,  what  things  it  should  be  permitted  to  make,  what  materials 


De  la  Liherti  du  Travail,  vol.  i.  pp.  353-4. 


UMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


051 


should  be  employed,  what  processes  followed,  what  forms  should  be 
given  to  productions.  It  was  not  enough  to  do  well,  to  do  better  ; 
it  was  necessary  to  do  according  to  the  rules.  Everybody  knows 
the  regulation  of  1670  which  prescribed  to  seize  and  nail  to  the 
pillory,  with  the  names  of  the  makers,  goods  not  conformable  to 
the  rules,  and  which,  on  a second  repetition  of  the  offence,  directed 
that  the  manufacturers  themselves  should  be  attached  also.  Not 
the  taste  of  the  consumers,  but  the  commands  of  the  law  must  be 
attended  to.  Legions  of  inspectors,  commissioners,  controllers, 
jurymen,  guardians,  were  charged  with  its  execution.  Machines 
were  broken,  products  were  burned  when  not  conformable  to 
the  rules  : improvements  were  punished ; inventors  were  fined. 
There  were  different  sets  of  rules  for  goods  destined  for  home  con- 
sumption and  for  those  intended  for  exportation.  An  artizan  could 
neither  choose  the  place  in  which  to  establish  himself,  nor  work  at 
all  seasons,  nor  work  for  all  customers.  There  exists  a decree  of 
March  30, 1700,  which  limits  to  eighteen  towns  the  number  of  places 
where  stockings  might  be  woven.  A decree  of  June  18,  1723, 
enjoins  the  manufacturers  at  Rouen  to  suspend  their  works  from 
the  1st  of  July  to  the  15th  of  September,  in  order  to  facilitate  the 
harvest.  Louis  XIV.,  when  he  intended  to  construct  the  colonnade 
of  the  Louvre,  forbade  all  private  persons  to  employ  workmen 
without  his  permission,  under  a penalty  of  10,000  livres,  and  forbade 
workmen  to  work  for  private  persons,  on  pain  for  the  first  offence, 
of  imprisonment,  and  for  the  second,  of  the  galleys.’* 

That  these  and  similar  regulations  were  not  a dead  letter,  and 
that  the  officious  and  vexatious  meddling  was  prolonged  down  to  the 
French  Revolution,  we  have  the  testimony  of  Roland,  the  Girondist 
minister.*  “ I have  seen,”  says  he,  “ eighty,  ninety,  a hundred 
pieces  of  cotton  or  woollen  stuff  cut  up,  and  completely  destroyed.  I 
have  witnessed  similar  scenes  every  week  for  a number  of  years.  I 
have  seen  manufactured  goods  confiscated  ; heavy  fines  laid  on  the 
manufacturers ; some  pieces  of  fabric  were  burnt  in  public  places, 
and  at  the  hours  of  market : others  were  fixed  to  the  pillory,  with 
the  name  of  the  manufacturer  inscribed  upon  them,  and  he  himself 
was  threatened  with  the  pillory,  in  case  of  a second  offence.  All 
this  was  done  under  my  eyes,  at  Rouen,  in  conformity  with  existing 
regulations,  or  ministerial  orders.  What  crime  deserved  so  cruel 
a punishment  ? Some  defects  in  the  materials  employed,  or  in 

♦ I quote  at  second  hand,  from  Mr.  Carey’s  Essay  on  the  Mate  of  Wagest 
pp.  195-6. 


952  BOOK  V.  CHAPTER  XL  § 1 

the  texture  of  the  fabric,  or  even  in  some  of  the  threads  of  the 
warp. 

“ I have  frequently  seen  manufacturers  visited  by  a band  of 
satellites  who  put  all  in  confusion  in  their  establishments,  spread 
terror  in  their  families,  cut  the  stuffs  from  the  frames,  tore  off  the 
warp  from  the  looms,  and  carried  them  away  as  proofs  of  infringe- 
ment ; the  manufacturers  were  summoned,  tried,  and  condemned  : 
their  goods  confiscated ; copies  of  their  judgment  of  confiscation 
posted  up  in  every  public  place ; fortune,  reputation,  credit,  all 
was  lost  and  destroyed.  And  for  what  offence  ? Because  they  had 
made  of  worsted  a kind  of  cloth  called  shag,  such  as  the  English  used 
to  manufacture,  and  even  sell  in  France,  while  the  French  regulations 
stated  that  that  kind  of  cloth  should  be  made  with  mohair.  I have 
seen  other  manufacturers  treated  in  the  same  way,  because  they  had 
made  camlets  of  a particular  width,  used  in  England  and  Germany, 
for  which  there  was  a great  demand  from  Spain,  Portugal,  and 
other  countries,  and  from  several  parts  of  France,  while  the  French 
regulations  prescribed  other  widths  for  camlets.” 

The  time  is  gone  by,  when  such  applications  as  these  of  the 
principle  of  “ paternal  government  ” would  be  attempted  in  even 
the  least  enlightened  country  of  the  European  commonwealth  of 
nations.  In  such  cases  as  those  cited,  all  the  general  objections  to 
government  interference  are  valid,  and  several  of  them  in  nearly 
their  highest  degree.  But  we  must  now  turn  to  the  second  part 
of  our  task,  and  direct  our  attention  to  cases,  in  which  some  of 
those  general  objections  are  altogether  absent,  while  those  which 
can  never  be  got  rid  of  entirely  are  overruled  by  counter-considera- 
tions of  still  greater  importance. 

We  have  observed  that,  as  a general  rule,  the  business  of  life 
is  better  performed  when  those  who  have  an  immediate  interest  in 
it  are  left  to  take  their  own  course,  uncontrolled  either  by  the  mandate 
of  the  law  or  by  the  meddling  of  any  public  functionary.  The 
persons,  or  some  of  the  persons,  who  do  the  work,  are  likely  to  be 
better  judges  than  the  government,  of  the  means  of  attaining  the 
particular  end  at  which  they  aim.  Were  we  to  suppose,  what  is  not 
very  probable,  that  the  government  has  possessed  itself  of  the  best 
knowledge  which  had  been  acquired  up  to  a given  time  by  the 
persons  most  skilled  in  the  occupation  ; even  then  the  individual 
agents  have  so  much  stronger  and  more  direct  an  interest  in  the 
result,  that  the  means  are  far  more  likely  to  be  improved  and 
perfected  if  left  to  their  uncontrolled  choice.  But  if  the  workman 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


953 


is  generally  the  best  selector  of  means,  can  it  be  affirmed  with  the 
same  universality,  that  the  consumer,  or  person  served,  is  the  most 
competent  judge  of  the  end  ? Is  the  buyer  always  qualified  to  judge 
of  the  commodity  ? If  not,  the  presumption  in  favour  of  the  com- 
petition of  the  market  does  not  apply  to  the  case ; and  if  the  com- 
modity be  one  in  the  quality  of  which  society  has  much  at  stake, 
the  balance  of  advantages  may  be  in  favour  of  some  mode  and 
degree  of  intervention  by  the  authorized  representatives  of  the 
collective  interest  of  the  state. 

§ 8.  Now,  the  proposition  that  the  consumer  is  a competent 
judge  of  the  commodity,  can  be  admitted  only  with  numerous 
abatements  and  exceptions.  He  is  generally  the  best  judge  (though 
even  this  is  not  true  universally)  of  the  material  objects  produced 
for  his  use.  These  are  destined  to  supply  some  physical  want,  or 
gratify  some  taste  or  inclination,  respecting  which  wants  or  inchna- 
tions  there  is  no  appeal  from  the  person  who  feels  them ; or  they 
are  the  means  and  appliances  of  some  occupation,  for  the  use  of  the 
persons  engaged  in  it,  who  may  be  presumed  to  be  judges  of  the 
things  required  in  their  own  habitual  employment.  But  there  are 
other  things,  of  the  worth  of  which  the  demand  of  the  market  is  by 
no  means  a test ; things  of  which  the  utility  does  not  consist  in 
ministering  to  inchnations,  nor  in  serving  the  daily  uses  of  life,  and 
the  want  of  which  is  least  felt  where  the  need  is  greatest.  This  is 
pecuharly  true  of  those  things  which  are  chiefly  useful  as  tending 
to  raise  the  character  of  human  beings.  The  uncultivated  cannot 
be  competent  judges  of  cultivation.  Those  who  most  need  to  be 
made  wiser  and  better,  usually  desire  it  least,  and,  if  they  desired 
it,  would  be  incapable  of  finding  the  way  to  it  by  their  own  lights. 
It  will  continually  happen,  on  the  voluntary  system,  that,  the  end 
not  being  desired,  the  means  will  not  be  provided  at  all,  or  that,  the 
persons  requiring  improvement  having  an  imperfect  or  altogether 
erroneous  conception  of  what  they  want,  the  supply  called  forth 
by  the  demand  of  the  market  will  be  anything  but  what  is  really 
required.  Now  any  well-intentioned  and  tolerably  civilized  govern- 
ment may  think,  without  presumption,  that  it  does  or  ought  to 
possess  a degree  of  cultivation  above  the  average  of  the  community 
which  it  rules,  and  that  it  should  therefore  be  capable  of  offering 
better  education  and  better  instruction  to  the  people,  than  the 
greater  number  of  them  would  spontaneously  demand.  Education, 
therefore,  is  one  of  those  things  which  it  is  admissible  in  principle 


d54 


BOOK  V.  CHAPTER  XL  § 8 


that  a government  should  provide  for  the  people.  The  case  is 
one  to  which  the  reasons  of  the  non-interference  principle  do  not 
necessarily  or  universally  extend.* 

With  regard  to  elementary  education,  the  exception  to  ordinary 
rules  may,  I conceive,  justifiably  be  carried  still  further.  There 
are  certain  primary  elements  and  means  of  knowledge,  which  it  is 
in  the  highest  degree  desirable  that  all  human  beings  born  into  the 
community  should  acquire  during  childhood.  If  their  parents, 
or  those  on  whom  they  depend,  have  the  power  of  obtaining  for 
them  this  instruction,  and  fail  to  do  it,  they  commit  a double  breach 
of  duty,  towards  the  children  themselves,  and  towards  the  members 
of  the  community  generally,  who  are  all  liable  to  suffer  seriously 
from  the  consequences  of  ignorance  and  want  of  education  in  their 
fellow-citizens.  It  is  therefore  an  allowable  exercise  of  the  powers 
of  government  to  impose  on  parents  the  legal  obligation  of  giving 
elementary  instruction  to  children.  This,  however,  cannot  fairly 
be  done,  without  taking  measures  to  insure  that  such  instruction 
shall  be  always  accessible  to  them,  either  gratuitously  or  at  a trifling 
expense. 

* In  opposition  to  these  opinions,  a writer,  with  whom  on  many  points  I 
agree,  but  whose  hostility  to  government  intervention  seems  to  me  too  indis- 
criminate  and  unqualified,  M.  Dunoyer,  observes,  that  instruction,  however 
good  in  itself,  can  only  be  useful  to  the  public  in  so  far  as  they  are  willing  to 
receive  it,  and  that  the  best  proof  that  the  instruction  is  suitable  to  their  wants 
is  its  success  as  a pecuniary  enterprise.  This  argument  seems  no  more  con- 
clusive respecting  instruction  for  the  mind,  than  it  would  be  respecting  medicine 
for  the  body.  No  medicine  will  do  the  patient  any  good  if  he  cannot  be  in- 
duced to  take  it ; but  we  are  not  bound  to  admit  as  a coroUary  from  this,  that 
the  patient  will  select  the  right  medicine  without  assistance.  Is  it  not  probable 
that  a recommendation,  from  any  quarter  which  he  respects,  may  induce  him 
to  accept  a better  medicine  than  he  would  spontaneously  have  chosen  ? This 

is,  in  respect  to  education,  the  very  point  in  debate.  Without  doubt,  in- 
struction which  is  so  far  in  advance  of  the  people  that  they  cannot  be  induced 
to  avail  themselves  of  it,  is  to  them  of  no  more  worth  than  if  it  did  not  exist. 
But  between  what  they  spontaneously  choose,  and  what  they  will  refuse  to 
accept  when  offered,  there  is  a breadth  of  interval  proportioned  to  their  defer- 
ence for  the  recommender.  Besides,  a thing  of  which  the  public  are  bad  judges 
may  require  to  be  shown  to  them  and  pressed  on  their  attention  for  a long  time, 
and  to  prove  its  advantages  by  long  experience,  before  they  learn  to  appreciate 

it,  yet  they  may  learn  at  last ; which  they  might  never  have  done,  if  the  thing 
had  not  been  thus  obtruded  upon  them  in  act,  but  only  recommended  in  theory. 
Now,  a pecuniary  speculation  cannot  wait  years,  or  perhaps  generations  for 
success  ; it  must  succeed  rapidly,  or  not  at  all.  Another  consideration  which 
M.  Dunoyer  seems  to  have  overlooked,  is,  that  institutions  and  modes  of  tuition 
which  never  could  be  made  sufficiently  popular  to  repay,  with  a profit,  the 
expenses  incurred  on  them,  may  be  invaluable  to  the  many  by  giving  the  highest 
quality  of  education  to  the  few,  and  keeping  up  the  perpetual  succession  of 
superior  minds,  by  whom  knowledge  is  advanced,  and  the  community  urged 
forward  in  civilization. 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


955 


It  may  indeed  be  objected  that  the  education  of  children  is  one 
of  those  expenses  which  parents,  even  of  the  labouring  class,  ought 
to  defray  ; that  it  is  desirable  that  they  should  feel  it  incumbent 
on  them  to  provide  by  their  own  means  for  the  fulfilment  of  their 
duties,  and  that  by  giving  education  at  the  cost  of  others,  just  as 
much  as  by  giving  subsistence,  the  standard  of  necessary  wages  is 
proportionally  lowered,  and  the  springs  of  exertion  and  self-restraint 
in  so  much  relaxed.  This  argument  could,  at  best,  be  only  valid 
if  the  question  were  that  of  substituting  a public  provision  for  what 
individuals  would  otherwise  do  for  themselves ; if  all  parents  in 
the  labouring  class  recognised  and  practised  the  duty  of  giving 
instruction  to  their  children  at  their  own  expense.  But  inasmuch 
as  parents  do  not  practise  this  duty,  and  do  not  include  education 
among  those  necessary  expenses  which  their  wages  must  provide 
for,  therefore  the  general  rate  of  wages  is  not  high  enough  to  bear 
those  expenses,  and  they  must  be  borne  from  some  other  source. 
And  this  is  not  one  of  the  cases  in  which  the  tender  of  help  per- 
petuates the  state  of  things  which  renders  help  necessary.  Instruc- 
tion, when  it  is  really  such,  does  not  enervate,  but  strengthens  as 
well  as  enlarges  the  active  faculties  : in  whatever  manner  acquired, 
its  effect  on  the  mind  is  favourable  to  the  spirit  of  independence ; 
and  when,  unless  had  gratuitously,  it  would  not  be  had  at  all,  help 
in  this  form  has  the  opposite  tendency  to  that  which  in  so  many 
other  cases  makes  it  objectionable  ; it  is  help  towards  doing  without 
help. 

In  England,  and  most  European  countries,  elementary  instruction 
cannot  be  paid  for,  at  its  full  cost,  from  the  common  wages  of 
unskilled  labour,  and  would  not  if  it  could.  The  alternative,  there- 
fore, is  not  between  government  and  private  speculation,  but 
between  a government  provision  and  voluntary  charity  : between 
interference  by  government,  and  interference  by  associations  of 
individuals,  subscribing  their  own  money  for  the  purpose,  like 
the  two  great  School  Societies.  It  is,  of  course,  not  desirable  that 
anything  should  be  done  by  funds  derived  from  compulsory  taxation, 
which  is  already  sufficiently  well  done  by  individual  liberality.  How 
far  this  is  the  case  with  school  instruction,  is,  in  each  particular 
instance,  a question  of  fact.  The  education  provided  in  this  country 
on  the  voluntary  principle  has  of  late  been  so  much  discussed, 
that  it  is  needless  in  this  place  to  criticise  it  minutely,  and  I shall 
merely  express  my  conviction,  that  even  in  quantity  it  is  [1848], 
and  is  Hkely  to  remain,  altogether  insufficient,  while  in  quality, 


956 


BOOK  V.  CHAPTEB  XL  § 9 


though  with  some  slight  tendency  to  improvement,  it  is  never  good 
except  by  some  rare  accident,  and  generally  so  bad  as  to  be  little 
more  than  nominal.  I hold  it  therefore  the  duty  of  the  government 
to  supply  the  defect,  by  giving  pecuniary  support  to  elementary 
schools,  such  as  to  render  them  accessible  to  all  the  children  of  the 
poor,  either  freely,  or  for  a payment  too  inconsiderable  to  be 
sensibly  felt.i 

One  thing  must  be  strenuously  insisted  on  ; that  the  government 
must  claim  no  monopoly  for  its  education,  either  in  the  lower  or  in 
the  higher  branches  ; must  exert  neither  authority  nor  influence 
to  induce  the  people  to  resort  to  its  teachers  in  preference  to  others, 
and  must  confer  no  peculiar  advantages  on  those  who  have  been 
instructed  by  them.  Though  the  government  teachers  will  probably 
be  superior  to  the  average  of  private  instructors,  they  will  not  embody 
all  the  knowledge  and  sagacity  to  be  found  in  all  instructors  taken 
together,  and  it  is  desirable  to  leave  open  as  many  roads  as  possible 
to  the  desired  end.  It  is  not  endurable  that  a government  should, 
either  de  jure  or  de  facto , have  a complete  control  over  the  education 
of  the  people.  To  possess  such  a control,  and  actually  exert  it, 
is  to  be  despotic.  A government  which  can  mould  the  opinions 
and  sentiments  of  the  people  from  their  youth  upwards,  can  do 
with  them  whatever  it  pleases.  Though  a government,  therefore, 
may,  and  in  many  cases  ought  to,  establish  schools  and  colleges, 
it  must  neither  compel  nor  bribe  any  person  to  come  to  them  ; nor 
ought  the  power  of  individuals  to  set  up  rival  establishments  to 
depend  in  any  degree  upon  its  authorization.  It  would  be  justified 
in  requiring  from  aU  the  people  that  they  shall  possess  instruction 
in  certain  things,  but  not  in  prescribing  to  them  how  or  from  whom 
they  shall  obtain  it. 

§ 9.  In  the  matter  of  education,  the  intervention  of  govern- 
ment is  justifiable,  because  the  case  is  not  one  in  which  the  interest 
and  judgment  of  the  consumer  are  a sufficient  security  for  the  goodness 
of  the  commodity.  Let  us  now  consider  another  class  of  cases, 
w^here  there  is  no  person  in  the  situation  of  a consumer,  and  where 
the  interest  and  judgment  to  be  relied  on  are  those  of  the  agent 

^ [The  paragraph  originally  went  on ; “ but  which  it  might  be  proper  to 
demand,  merely  in  recognition  of  a principle  : the  remainder  of  the  cost  to  be 
defrayed,  as  in  Scotland,  by  a local  rate,  that  the  inhabitants  of  the  locality 
might  have  a greater  interest  in  watching  over  the  management,  and 
checking  negligence  and  abuse.”  These  words  were  omitted  in  the  4th 
ed.  (1857).] 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


957 


himself  ; as  in  the  conduct  of  any  business  in  which  he  is  exclusively 
interested,  or  in  entering  into  any  contract  or  engagement  by  which 
he  himself  is  to  be  bound. 

The  ground  of  the  practical  principle  of  non-interference  must 
here  be,  that  most  persons  take  a juster  and  more  intelligent  view 
of  their  own  interest,  and  of  the  means  of  promoting  it,  than  can 
either  be  prescribed  to  them  by  a general  enactment  of  the  legis- 
lature, or  pointed  out  in  the  particular  case  by  a public  functionary. 
The  maxim  is  unquestionably  sound  as  a general  rule  ; but  there 
is  no  difficulty  in  perceiving  some  very  large  and  conspicuous 
exceptions  to  it.  These  may  be  classed  under  several  heads. 

First : — The  individual  who  is  presumed  to  be  the  best  judge 
of  his  own  interests  may  be  incapable  of  judging  or  acting  for 
himself ; may  be  a lunatic,  an  idiot,  an  infant : or  though  not 
wholly  incapable,  may  be  of  immature  years  and  judgment.  In 
this  case  the  foundation  of  the  laisser-faire  principle  breaks  down 
entirely.  The  person  most  interested  is  not  the  best  judge  of  the 
matter,  nor  a competent  judge  at  all.  Insane  persons  are  every- 
where regarded  as  proper  objects  of  the  care  of  the  state.*  In  the 
case  of  children  and  young  persons,  it  is  common  to  say,  that  though 
they  caimot  judge  for  themselves,  they  have  their  parents  or  other 
relatives  to  judge  for  them.  But  this  removes  the  question  into 
a different  category ; making  it  no  longer  a question  whether  the 
government  should  interfere  with  individuals  in  the  direction  of 

* [1852]  The  practice  of  the  English  law  with  respect  to  insane  persons, 
especially  on  the  all-important  point  of  the  ascertainment  of  insanity,  most 
urgently  demands  reform.  At  present  no  persons,  whose  property  is  worth 
coveting,  and  whose  nearest  relations  are  unscrupulous,  or  on  bad  terms  with 
them,  are  secure  against  a commission  of  lunacy.  At  the  instance  of  the  persons 
who  would  profit  by  their  being  declared  insane,  a jury  may  be  impanelled 
and  an  investigation  held  at  the  expense  of  the  property,  in  which  all  their 
personal  peculiarities,  with  all  the  additions  made  by  the  lying  gossip  of  low 
servants,  are  poured  into  the  credulous  ears  of  twelve  petty  shopkeepers, 
ignorant  of  all  ways  of  life  except  those  of  their  own  class,  and  regarding  every 
trait  of  individuality  in  character  or  taste  as  eccentricity,  and  all  eccentricity 
as  either  insanity  or  wickedness.  If  this  sapient  tribunal  gives  the  desired 
verdict,  the  property  is  handed  over  to  perhaps  the  last  persons  whom  the 
rightful  owner  would  have  desired  or  suffered  to  possess  it.  Some  recent  in- 
stances of  this  kind  of  investigation  have  been  a scandal  to  the  administration 
of  justice.  Whatever  other  changes  in  this  branch  of  law  may  be  made,  two 
at  least  are  imperative  : first,  that,  as  in  other  legal  proceedings,  the  expenses 
should  not  be  borne  by  the  person  on  trial,  but  by  the  promoters  of  the  inquiry, 
subject  to  recovery  of  costs  in  case  of  success  : and  secondly,  that  the  property 
of  a person  declared  insane  should  in  no  case  be  made  over  to  heirs  while  the 
proprietor  is  alive,  but  should  be  managed  by  a public  officer  until  his  death 
or  recovery. 


958 


BOOK  V.  CHAPTER  XL  § 9 


their  own  conduct  and  interests,  but  whether  it  should  leave  abso- 
lutely in  their  power  the  conduct  and  interests  of  somebody  else. 
Parental  power  is  as  susceptible  of  abuse  as  any  other  power,  and 
is,  as  a matter  of  fact,  constantly  abused.  If  laws  do  not  succeed 
in  preventing  parents  from  brutally  ill-treating,  and  even  from 
murdering  their  children,  far  less  ought  it  to  be  presumed  that  the 
interests  of  children  will  never  be  sacrificed,  in  more  commonplace 
and  less  revolting  ways,  to  the  selfishness  or  the  ignorance  of  their 
parents.  Whatever  it  can  be  clearly  seen  that  parents  ought  to  do 
or  forbear  for  the  interests  of  children,  the  law  is  warranted,  if  it  is 
able,  in  compelling  to  be  done  or  forborne,  and  is  generally  bound  to 
do  so.  To  take  an  example  from  the  peculiar  province  of  pohtical 
economy  ; it  is  right  that  children  and  young  persons  not  yet  arrived 
at  maturity  should  be  protected,  so  far  as  the  eye  and  hand  of  the 
state  can  reach,  from  being  over-worked.  Labouring  for  too  many 
hours  in  the  day,  or  on  work  beyond  their  strength,  should  not  be 
permitted  to  them,  for  if  permitted  it  may  always  be  compelled. 
Freedom  of  contract,  in  the  case  of  children,  is  but  another  word 
for  freedom  of  coercion.  Education  also,  the  best  which  circum- 
stances admit  of  their  receiving,  is  not  a thing  which  parents  or 
relatives,  from  indifference,  jealousy,  or  avarice,  should  have  it  in 
their  power  to  withhold. 

The  reasons  for  legal  intervention  in  favour  of  children,  apply 
not  less  strongly  to  the  case  of  those  unfortunate  slaves  and  victims 
of  the  most  brutal  part  of  mankind,  the  lower  animals.  It  is  by 
the  grossest  misunderstanding  of  the  principles  of  liberty,  that  the 
infiiction  of  exemplary  punishment  on  ruffianism  practised  towards 
these  defenceless  creatures  has  been  treated  as  a meddling  by  govern- 
ment with  things  beyond  its  province  ; an  interference  with  domestic 
life.  The  domestic  life  of  domestic  tyrants  is  one  of  the  things 
which  it  is  the  most  imperative  on  the  law  to  interfere  with ; and 
it  is  to  be  regretted  that  metaphysical  scruples  respecting  the 
nature  and  source  of  the  authority  of  government  should  induce 
many  warm  supporters  of  laws  against  cruelty  to  animals  to  seek 
for  a justification  of  such  laws  in  the  incidental  consequences  of  the 
indulgence  of  ferocious  habits  to  the  interests  of  human  beings, 
rather  than  in  the  intrinsic  merits  of  the  case  itself.  What  it  would 
be  the  duty  of  a human  being,  possessed  of  the  requisite  physical 
strength,  to  prevent  by  force  if  attempted  in  his  presence,  it  cannot 
be  less  incumbent  on  society  generally  to  repress.  The  existing 
laws  of  England  on  the  subject  are  chiefiy  defective  in  the  trifling, 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


959 


often  almost  nominal,  maximum,  to  whicli  the  penalty  even  in  the 
worst  cases  is  limited. 

Among  those  members  of  the  community  whose  freedom  of 
contract  ought  to  be  controlled  by  the  legislature  for  their  own 
protection,  on  account  (it  is  said)  of  their  dependent  position,  it  is 
frequently  proposed  to  include  women  : and  in  the  existing  Factory 
Acts^  their  labour,  in  common  with  that  of  young  persons,  has  been 
placed  under  peculiar  restrictions.  But  the  classing  together,  for 
this  and  other  purposes,  of  women  and  children,  appears  to  me  both 
indefensible  in  principle  and  mischievous  in  practice.  Children 
below  a certain  age  cannot  judge  or  act  for  themselves ; up  to  a 
considerably  greater  age  they  are  inevitably  more  or  less  disqualified 
for  doing  so  ; but  women  are  as  capable  as  men  of  appreciating  and 
managing  their  own  concerns,  and  the  only  hindrance  to  their  doing 
so  arises  from  the  injustice  of  their  present  social  position.  When 
the  law  makes  everything  which  the  wife  acquires,  the  property  of 
the  husband,  while  by  compelling  her  to  live  with  him  it  forces  her 
to  submit  to  almost  any  amount  of  moral  and  even  physical  tyranny 
which  he  may  choose  to  inflict,  there  is  some  ground  for  regarding 
every  act  done  by  her  as  done  under  coercion  : but  it  is  the  great 
error  of  reformers  and  philanthropists  in  our  time  to  nibble  at  the 
consequences  of  unjust  power,  instead  of  redressing  the  injustice 
itself.  If  women  had  as  absolute  a control  as  men  have,  over  their 
own  persons  and  their  own  patrimony  or  acquisitions,  there  would 
be  no  plea  for  limiting  their  hours  of  labouring  for  themselves,  in 
order  that  they  might  have  time  to  labour  for  the  husband,  in  what 
is  called,  by  the  advocates  of  restriction,  his  home.  Women 
employed  in  factories  are  the  only  women  in  the  labouring  rank  of 
life  whose  position  is  not  that  of  slaves  and  drudges ; precisely 
because  they  cannot  easily  be  compelled  to  work  and  earn  wages 
in  factories  against  their  will.  For  improving  the  condition  of 
women,  it  should,  on  the  contrary,  be  an  object  to  give  them  the 
readiest  access  to  independent  industrial  employment,  instead  of 
closing,  either  entirely  or  partially,  that  which  is  already  open  to 
them.2 

§ 10,  A second  exception  to  the  doctrine  that  individuals  are 
the  best  judges  of  their  own  interest,  is  when  an  individual  attempts 

* [“  Acts  ” since  7th  ed.  (1871).  Originally  (1848) : “ the  recent  Factory 
Act.”] 

* [See  Appendix  KK.  The  Factory 


BOOK  V.  CHAPTER  XI.  § 11 


to  decide  irrevocably  now  what  will  be  best  for  his  interest  at  some 
future  and  distant  time.  The  presumption  in  favour  of  individual 
judgment  is  only  legitimate,  where  the  judgment  is  grounded  on 
actual,  and  especially  on  present,  personal  experience ; not  where 
it  is  formed  antecedently  to  experience,  and  not  suffered  to  be 
reversed  even  after  experience  has  condemned  it.  When  persons 
have  bound  themselves  by  a contract,  not  simply  to  do  some  one 
thing,  but  to  continue  doing  something  for  ever  or  for  a prolonged 
period,  without  any  power  of  revoking  the  engagement,  the  pre- 
sumption which  their  perseverance  in  that  course  of  conduct  would 
otherwise  raise  in  favour  of  its  being  advantageous  to  them,  does 
not  exist ; and  any  such  presumption  which  can  be  grounded  on 
their  having  voluntarily  entered  into  the  contract,  perhaps  at  an 
early  age,  and  without  any  real  knowledge  of  what  they  undertook, 
is  commonly  next  to  null.  The  practical  maxim  of  leaving  contracts 
free  is  not  applicable  without  great  limitations  in  case  of  engagements 
in  perpetuity ; and  the  law  should  be  extremely  jealous  of  such 
engagements  ; should  refuse  its  sanction  to  them,  when  the  obliga- 
tions they  impose  are  such  as  the  contracting  party  cannot  be  a 
competent  judge  of ; if  it  ever  does  sanction  them,  it  should  take 
every  possible  security  for  their  being  contracted  with  foresight 
and  deliberation  ; and  in  compensation  for  not  permitting  the  parties 
themselves  to  revoke  their  engagement,  should  grant  them  a release 
from  it,  on  a sufficient  case  being  made  out  before  an  impartial 
authority.  These  considerations  are  eminently  applicable  to 
marriage,  the  most  important  of  all  cases  of  engagement  for  life.i 

§ 11.  The  third  exception  which  I shall  notice,  to  the  doctrine 
that  government  cannot  manage  the  affairs  of  individuals  as  well 
as  the  individuals  themselves,  has  reference  to  the  great  class  of 
cases  in  which  the  individuals  can  only  manage  the  concern  by 
delegated  agency,  and  in  which  the  so-called  private  management 
is,  in  point  of  fact,  hardly  better  entitled  to  be  called  management 
by  the  persons  interested  than  administration  by  a public  officer. 
Whatever,  if  left  to  spontaneous  agency,  can  only  be  done  by  joint- 
stock  associations,  will  often  be  as  well,  and  sometimes  better  done, 
as  far  as  the  actual  work  is  concerned,  by  the  state.  Government 
management  is, indeed,  proverbially  jobbing, careless,  and  ineffective, 
but  so  likewise  has  generally  been  joint-stock  management.  The 


* [This  last  sentence  abided  in  3rd  ed.  (1852).] 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


961 


directors  of  a joint-stock  company,  it  is  true,  are  always  share- 
holders ; but  also  the  members  of  a government  are  invariably 
taxpayers  ; and  in  the  case  of  directors,  no  more  than  in  that  of 
governments,  is  their  proportional  share  of  the  benefits  of  good 
management  equal  to  the  interest  they  may  possibly  have  in  mis- 
management, even  without  reckoning  the  interest  of  their  ease.  It 
may  be  objected,  that  the  shareholders,  in  their  collective  character, 
exercise  a certain  control  over  the  directors,  and  have  almost  always 
full  power  to  remove  them  from  office.  Practically,  however,  the 
difficulty  of  exercising  this  power  is  found  to  be  so  great,  that  it  is 
hardly  ever  exercised  except  in  cases  of  such  flagrantly  unskilful, 
or,  at  least,  unsuccessful  management,  as  would  generally  produce 
the  ejection  from  office  of  managers  appointed  by  the  government. 
Against  the  very  ineflectual  security  afforded  by  meetings  of  share- 
holders, and  by  their  individual  inspection  and  inquiries,  may  be 
placed  the  greater  publicity  and  more  active  discussion  and  comment, 
to  be  expected  in  free  countries  with  regard  to  affairs  in  which  the 
general  government  takes  part.  The  defects,  therefore,  of  govern- 
ment management  do  not  seem  to  be  necessarily  much  greater,  if 
necessarily  greater  at  all,  than  those  of  management  by  joint-stock. 

The  true  reasons  in  favour  of  leaving  to  voluntary  associations 
all  such  things  as  they  are  competent  to  perform  would  exist  in 
equal  strength  if  it  were  certain  that  the  work  itself  would  be  as 
well  or  better  done  by  public  officers.  These  reasons  have  been 
already  pointed  out : the  mischief  of  overloading  the  chief  function- 
aries of  government  with  demands  on  their  attention,  and  diverting 
them  from  duties  which  they  alone  can  discharge,  to  objects  which 
can  be  sufficiently  well  attained  without  them  ; the  danger  of 
unnecessarily  swelling  the  direct  power  and  indirect  influence  of 
government,  and  multiplying  occasions  of  collision  between  its 
agents  and  private  citizens  ; and  the  inexpediency  of  concentrating 
in  a dominant  bureaucracy  all  the  skill  and  experience  in  the  manage- 
ment of  large  interests,  and  all  the  power  of  organized  action, 
existing  in  the  community  ; a practice  which  keeps  the  citizens  in  a 
relation  to  the  government  like  that  of  children  to  their  guardians, 
and  is  a main  cause  of  the  inferior  capacity  for  political  life  which 
has  hitherto  characterized  the  over-governed  countries  of  the 
Contirent,  whether  with  or  without  the  forms  of  representative 
government.* 

* A parallel  case  may  be  found  in  the  distaste  for  politics,  and  absence  of 
public  spirit,  by  which  women,  as  a class,  are  characterized  in  the  present 


962 


BOOK  V.  CHAPTER  XI.  § 11 


But  although,  for  these  reasons,  most  things  which  are  likely  to 
be  even  tolerably  done  by  voluntary  associations  should,  generally 
speaking,  be  left  to  them ; it  does  not  follow  that  the  manner  in 
which  those  associations  perform  their  work  should  be  entirely 
uncontrolled  by  the  government.  There  are  many  cases  in  which 
the  agency,  of  whatever  nature,  by  which  a service  is  performed,  is 
certain,  from  the  nature  of  the  case,  to  be  virtually  single  ; in  which 
a practical  monopoly,  with  all  the  power  it  confers  of  taxing  the 
community,  cannot  be  prevented  from  existing.  I have  already 
more  than  once  adverted  to  the  case  of  the  gas  and  water  companies, 
among  which,  though  perfect  freedom  is  allowed  to  competition,  none 
really  takes  place,  and  practically  they  are  found  to  be  even  more 
irresponsible,  and  unapproachable  by  individual  complaints,  than 
the  government.  There  are  the  expenses  without  the  advantages  of 
plurality  of  agency  ; and  the  charge  made  for  services  which  cannot 
be  dispensed  with,  is,  in  substance,  quite  as  much  compulsory  taxa- 
tion as  if  imposed  by  law  ; there  are  few  householders  who  make  any 
distinction  between  their  “ water-rate  ” and  their  other  local  taxes. 
In  the  case  of  these  particular  services,  the  reasons  preponderate  in 
favour  of  their  being  performed,  like  the  paving  and  cleansing  of  the 
streets,  not  certainly  by  the  general  government  of  the  state,  but  by 
the  municipal  authorities  of  the  town,  and  the  expense  defrayed, 
as  even  now  it  in  fact  is,  by  a local  rate.  But  in  the  many  analogous 
cases  which  it  is  best  to  resign  to  voluntary  agency,  the  community 
needs  some  other  security  for  the  fit  performance  of  the  service 
than  the  interest  of  the  managers  ; and  it  is  the  part  of  government, 
either  to  subject  the  business  to  reasonable  conditions  for  the  general 
advantage,  or  to  retain  such  power  over  it  that  the  profits  of  the 
monopoly  may  at  least  be  obtained  for  the  public.  This  applies 
to  the  case  of  a road,  a canal,  or  a railway.  These  are  always,  in 
a great  degree,  practical  monopolies ; and  a government  which 
concedes  such  monopoly  unreservedly  to  a private  company  does 
much  the  same  thing  as  if  it  allowed  an  individual  or  an  association 

state  of  society,  and  which  is  often  felt  and  complained  of  by  political  reformers, 
without,  in  general,  making  them  willing  to  recognise,  or  desirous  to  remove, 
its  cause.  It  obviously  arises  from  their  being  taught,  both  by  institutions  and 
by  the  whole  of  their  education,  to  regard  themselves  as  entirely  apart  from 
politics.  Wherever  they  have  been  politicians,  they  have  shown  as  ^eat 
interest  in  the  subject,  and  as  great  aptitude  for  it,  according  to  the  spnit  of 
their  time,  as  the  men  with  whom  they  were  cotemporaries : in  that  period  of 
history  (for  example)  in  which  Isabella  of  Castile  and  Elizabeth  of  England 
were,  not  rare  exceptions,  but  merely  brilliant  examples  of  a spirit  and  capacity 
very  largely  diffus^  among  women  of  high  station  and  cultivation  in  Europe. 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


963 


to  levy  any  tax  they  chose,  for  their  own  benefit,  on  all  the 
malt  produced  in  the  country,  or  on  all  the  cotton  imported  into  it. 
To  make  the  concession  for  a limited  time  is  generally  justifiable, 
on  the  principle  which  justifies  patents  for  inventions  : but  the  state 
should  either  reserve  to  itself  a reversionary  property  in  such  public 
works,  or  should  retain,  and  freely  exercise,  the  right  of  fixing  a 
maximum  of  fares  and  charges,  and,  from  time  to  time,  varying  that 
maximum.  It  is  perhaps  necessary  to  remark,  that  the  state  may 
be  the  proprietor  of  canals  or  railways  without  itself  working  them  ; 
and  that  they  wiU  almost  always  be  better  worked  by  means  of  a 
company  renting  the  railway  or  canal  for  a limited  period  from  the 
state. 


§ 12.  To  a fourth  case  of  exception  I must  request  particular 
attention,  it  being  one  to  which,  as  it  appears  to  me,  the  attention  of 
pohtical  economists  has  not  yet  been  sufficiently  drawn.  There  are 
matters  in  which  the  interference  of  law  is  required,  not  to  overrule 
the  judgment  of  individuals  respecting  their  own  interest,  but  to 
give  efiect  to  that  judgment : they  being  unable  to  give  effect  to  it 
except  by  concert,  which  concert  again  cannot  be  effectual  unless 
it  receives  vahdity  and  sanction  from  the  law.  For  illustration,  and 
without  prejudging  the  particular  point,  I may  advert  to  the  question 
of  diminishing  the  hours  of  labour.  Let  us  suppose,  what  is  at  least 
supposable,  whether  it  be  the  fact  or  not — that  a general  reduction 
of  the  hours  of  factory  labour,  say  from  ten  to  nine,i  would  be  for 
the  advantage  of  the  workpeople  : that  they  would  receive  as  high 
wages,  or  nearly  as  high,  for  nine  hours’  labour  as  they  receive  for  ten. 
If  this  would  be  the  result,  and  if  the  operatives  generally  are  con- 
vinced that  it  would,  the  hmitation,  some  may  say,  will  be  adopted 
spontaneously.  I answer,  that  it  will  not  be  adopted  unless  the  body 
of  operatives  bind  themselves  to  one  another  to  abide  by  it.  A 
workman  who  refused  to  work  more  than  nine  hours  while  there 
were  others  who  worked  ten,  would  either  not  be  employed  at  aU,  or 
if  employed,  must  submit  to  lose  one-tenth  of  his  wages.  However 
convinced,  therefore,  he  may  be  that  it  is  the  interest  of  the  class  to 
work  short  time,  it  is  contrary  to  his  own  interest  to  set  the  example, 
unless  he  is  well  assured  that  all  or  most  others  will  follow  it.  But 
suppose  a general  agreement  of  the  whole  class  : might  not  this  be 

^ [The  original  “ twelve  to  ten  ” (1848)  was  changed  to  the  present  text, 
and  the  consequent  alterations  made  in  the  rest  of  the  paragraph,  in  the 
6th  ed.  (1862).] 


D64 


BOOK  V.  CHAPTER  XI.  § 12 


effectual  without  the  sanction  of  law  ? Not  unless  enforced  by 
opinion  with  a rigour  practically  equal  to  that  of  law.  For  however 
beneficial  the  observance  of  the  regulation  might  be  to  the  class 
collectively,  the  immediate  interest  of  every  individual  would  lie  in 
violating  it : and  the  more  numerous  those  who  adhered  to  the 
rule,  the  more  would  individuals  gain  by  departing  from  it.  If 
nearly  all  restricted  themselves  to  nine  hours,  those  who  chose  to 
work  for  ten  would  gain  all  the  advantages  of  the  restriction,  together 
with  the  profit  of  infringing  it ; they  would  get  ten  hours’  wages  fo’* 
nine  hours’  work,  and  an  hour’s  wages  besides.  I grant  that  if  a 
large  majority  adhered  to  the  nine  hours,  there  would  be  no  harm 
done  : the  benefit  would  be,  in  the  main,  secured  to  the  class,  while 
those  individuals  who  preferred  to  work  harder  and  earn  more, 
would  have  an  opportunity  of  doing  so.  This  certainly  would  be 
the  state  of  things  to  be  wished  for  ; and  assuming  that  a reduction 
of  hours  without  any  diminution  of  wages  could  take  place  without 
expelling  the  commodity  from  some  of  its  markets — which  is  in 
every  particular  instance  a question  of  fact,  not  of  principle — the 
manner  in  which  it  would  be  most  desirable  that  this  effect  should 
be  brought  about,  would  be  by  a quiet  change  in  the  general  oostom 
of  the  trade ; short  hours  becoming,  by  spontaneous  choice,  the 
general  practice,  but  those  who  chose  to  deviate  from  it  having  the 
fullest  hberty  to  do  so.  Probably,  however,  so  many  would  prefer 
the  ten  hours’  work  on  the  improved  terms,  that  the  limitation  could 
not  be  maintained  as  a general  practice  : what  some  did  from  choice, 
others  would  soon  be  obhged  to  do  from  necessity,  and  those  who  had 
chosen  long  hours  for  the  sake  of  increased  wages,  would  be  forced 
in  the  end  to  work  long  hours  for  no  greater  wages  than  before. 
Assuming  then  that  it  really  would  be  the  interest  of  each  to  work 
only  nine  hours  if  he  could  be  assured  that  all  others  would  do  the 
same,  there  might  be  no  means  of  their  attaining  this  object  but  by 
converting  their  supposed  mutual  agreement  into  an  engagement 
under  penalty,  by  consenting  to  have  it  enforced  by  law.  I am  not 
expressing  any  opinion  in  favour  of  such  an  enactment,  which  has 
never  in  this  country  been  demanded,  and  which  I certainly  should 
not,  in  present  circumstances,  recommend  d but  it  serves  to  exemplify 
the  manner  in  which  classes  of  persons  may  need  the  assistance  of 

^ [“  Which  has  never  . . . recommend  ” was  added  in  the  5th  ed. 
(1862).  A Nine  Hours  Movement  made  its  appearance  in  the  70’s.  The  hours 
of  labour  for  women,  young  persons  and  children  in  textile  factories  were  reduced 
to  56^  per  week  by  the  Act  of  1874,  and  to  55  J by  the  Act  of  1901.  A Miners* 
Eight  Hours  Act  was  passed  in  1908.] 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT  96(» 

law,  to  give  effect  to  their  deliberate  collective  opinion  of  their  own 
interest,  by  affording  to  every  individual  a guarantee  that  his 
competitors  will  pursue  the  same  course,  without  which  he  cannot 
safely  adopt  it  himself. 

Another  exemplification  of  the  same  principle  is  afforded  by  what 
is  known  as  the  Wakefield  system  of  colonization.  This  system  is 
grounded  on  the  important  principle,  that  the  degree  of  productive- 
ness of  land  and  labour  depends  on  their  being  in  a due  proportion 
to  one  another ; that  if  a few  persons  in  a newly-settled  country 
attempt  to  occupy  and  appropriate  a large  district,  or  if  each 
labourer  becomes  too  soon  an  occupier  and  cultivator  of  land, 
there  is  a loss  of  productive  power,  and  a great  retardation  of  the 
progress  of  the  colony  in  wealth  and  civilization  : that  nevertheless 
the  instinct  (as  it  may  almost  be  called)  of  appropriation,  and  the 
feelings  associated  in  old  countries  with  landed  proprietorship, 
induce  almost  every  emigrant  to  take  possession  of  as  much  land  as 
he  has  the  means  of  acquiring,  and  every  labourer  to  become  at  once 
a proprietor,  cultivating  his  own  land  with  no  other  aid  than  that 
of  his  family.  If  this  propensity  to  the  immediate  possession  of 
land  could  be  in  some  degree  restrained,  and  each  labourer  induced 
to  work  a certain  number  of  years  on  hire  before  he  became  a landed 
proprietor,  a perpetual  stock  of  hired  labourers  could  be  maintained, 
available  for  roads,  canals,  worxs  of  irrigation,  &c.,  and  for  the  estab- 
lishment and  earring  on  of  the  different  branches  of  town  industry  ; 
whereby  the  labourer,  when  he  did  at  last  become  a landed  proprietor, 
would  find  his  land  much  more  valuable,  through  access  to  markets, 
and  facility  of  obtaining  hired  labour.  Mr.  Wakefield  therefore 
proposed  to  check  the  premature  occupation  of  land,  and  dispersion 
of  the  people,  by  putting  upon  all  unappropriated  lands  a rather 
high  price,  the  proceeds  of  which  were  to  be  expended  in  conveying 
emigrant  labourers  from  the  mother  country. 

This  salutary  provision,  however,  has  been  objected  to,  in  the 
name  and  on  the  authority  of  what  was  represented  as  the  great 
principle  of  political  economy,  that  individuals  are  the  best  judges 
of  their  own  interest.  It  was  said,  that  when  things  are  left  to 
themselves,  land  is  appropriated  and  occupied  by  the  spontaneous 
choice  of  individuals,  in  the  quantities  and  at  the  times  most  advan- 
tageous to  each  person,  and  therefore  to  the  community  generally  ; 
and  that  to  interpose  artificial  obstacles  to  their  obtaining  land  is 
to  prevent  them  from  adopting  the  course  which  in  their  own 
judgment  is  most  beneficial  to  them,  from  a self- conceited  notion 


966 


BOOK  V.  CHAPTER  XI.  § 13 


of  the  legislator,  that  he  knows  what  is  most  for  their  interest  better 
than  they  do  themselves.  Now  this  is  a complete  misunderstanding, 
either  of  the  system  itself,  or  of  the  principle  with  which  it  is  alleged 
to  conflict.  The  oversight  is  similar  to  that  which  we  have  just 
seen  exemplified  on  the  subject  of  hours  of  labour.  However  bene- 
ficial it  might  be  to  the  colony  in  the  aggregate,  and  to  each  individual 
composing  it,  that  no  one  should  occupy  more  land  than  he  can 
properly  cultivate,  nor  become  a proprietor  until  there  are  other 
labourers  ready  to  take  his  place  in  working  for  hire  ; it  can  never 
be  the  interest  of  an  individual  to  exercise  this  forbearance,  unless 
he  is  assured  that  others  will  do  so  too.  Surrounded  by  settlers  who 
have  each  their  thousand  acres,  how  is  he  benefited  by  restricting 
himself  to  fifty  ? or  what  does  a labourer  gain  by  deferring  the 
acquisition  altogether  for  a few  years,  if  all  other  labourers  rush  to 
convert  their  first  earnings  into  estates  in  the  wilderness,  several 
miles  apart  from  one  another  ? If  they,  by  seizing  on  land,  prevent 
the  formation  of  a class  of  labourers  for  wages,  he  will  not,  by  post- 
poning the  time  of  his  becoming  a proprietor,  be  enabled  to  employ  the 
land  with  any  greater  advantage  when  he  does  obtain  it ; to  what 
end,  therefore,  should  he  place  himself  in  what  will  appear  to  him  and 
others  a position  of  inferiority,  by  remaining  a hired  labourer,  when 
all  around  him  are  proprietors  ? It  is  the  interest  of  each  to  do  what 
is  good  for  all,  but  only  if  others  will  do  likewise. 

The  principle  that  each  is  the  best  judge  of  his  own  interest, 
understood  as  these  objectors  understand  it,  would  prove  that 
governments  ought  not  to  fulfil  any  of  their  acknowledged  duties — 
ought  not,  in  fact,  to  exist  at  aU.  It  is  greatly  the  interest  of  the 
community,  collectively  and  individually,  not  to  rob  or  defraud  one 
another  : but  there  is  not  the  less  necessity  for  laws  to  punish 
robbery  and  fraud ; because,  though  it  is  the  interest  of  each  that 
nobody  should  rob  or  cheat,  it  is  not  any  one’s  interest  to  refrain 
from  robbing  and  cheating  others  when  all  others  are  permitted  to 
rob  and  cheat  him.  Penal  laws  exist  at  all,  chiefly  for  this  reason 
— because  even  an  unanimous  opinion  that  a certain  line  of  conduct 
is  for  the  general  interest  does  not  always  make  it  people’s  individual 
interest  to  adhere  to  that  line  of  conduct. 

§ 13.  Fifthly  ; the  argument  against  government  interference, 
grounded  on  the  maxim  that  individuals  are  the  best  judges  of  their 
own  interest,  cannot  apply  to  the  very  large  class  of  cases,  in  which 
those  acts  of  individuals  with  which  the  government  claims  to  inter- 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


967 


fere,  are  not  done  by  those  individuals  for  their  own  interest,  but 
for  the  interest  of  other  people.  This  includes,  among  other  things, 
tlie  important  and  much  agitated  subject  of  public  charity.  Though 
individuals  should,  in  general,  be  left  to  do  for  themselves  whatever 
it  can  reasonably  be  expected  that  they  should  be  capable  of  doing, 
yet  when  they  are  at  any  rate  not  to  be  left  to  themselves,  but  to  be 
helped  by  other  people,  the  question  arises  whether  it  is  better  that 
they  should  receive  this  help  exclusively  from  individuals,  and 
therefore  uncertainly  and  casually,  or  by  systematic  arrangements, 
in  which  society  acts  through  its  organ,  the  state. 

This  brings  us  to  the  subject  of  Poor  Laws ; a subject  which 
would  be  of  very  minor  importance  if  the  habits  of  all  classes  of  the 
people  were  temperate  and  prudent,  and  the  diffusion  of  property 
satisfactory ; but  of  the  greatest  moment  in  a state  of  things  so 
much  the  reverse  of  this,  in  both  points,  as  that  which  the  British 
Islands  present. 

Apart  from  any  metaphysical  considerations  respecting  the 
foundation  of  morals  or  of  the  social  union,  it  will  be  admitted  to  be 
right  that  human  beings  should  help  one  another  ; and  the  more  so, 
in  proportion  to  the  urgency  of  the  need  : and  none  needs  help  so 
urgently  as  one  who  is  starving.  The  claim  to  help,  therefore, 
created  by  destitution,  is  one  of  the  strongest  which  can  exist ; and 
there  is  frirnd  facie  the  amplest  reason  for  making  the  relief  of  so 
extreme  an  exigency  as  certain  to  those  who  require  it  as  by  any 
arrangements  of  society  it  can  be  made. 

On  the  other  hand,  in  all  cases  of  helping,  there  are  two  sets  of 
consequences  to  be  considered  ; the  consequences  of  the  assistance 
itself,  and  the  consequences  of  relying  on  the  assistance.  The  former 
are  generally  beneficial,  but  the  latter,  for  the  most  part,  injurious  ; 
so  much  so,  in  many  cases,  as  greatly  to  outweigh  the  value  of  the 
benefit.  And  this  is  never  more  likely  to  happen  than  in  the  very 
cases  where  the  need  of  help  is  the  most  intense.  There  are  few 
things  for  which  it  is  more  mischievous  that  people  should  rely  on 
the  habitual  aid  of  others,  than  for  the  means  of  subsistence,  and 
unhappily  there  is  no  lesson  which  they  more  easily  learn.  The 
problem  to  be  solved  is  therefore  one  of  peculiar  nicety  as  well  as 
importance  ; how  to  give  the  greatest  amount  of  needful  help,  with 
the  smallest  encouragement  to  undue  reliance  on  it. 

Energy  and  self-dependence  are,  however,  liable  to  be  impaired 
by  the  absence  of  help,  as  well  as  by  its  excess.  It  is  even  more 
fatal  to  exertion  to  have  no  hope  of  succeeding  by  it,  than  to  be  assured 


968 


BOOK  V.  CHAPTER  XI.  § 13 


of  succeeding  without  it.  When  the  condition  of  any  one  is  so 
disastrous  that  his  energies  are  paralyzed  by  discouragement, 
assistance  is  a tonic,  not  a sedative  : it  braces  instead  of  deadening 
the  active  faculties : always  provided  that  the  assistance  is  not  such 
as  to  dispense  with  self-help,  by  substituting  itself  for  the  person’s 
own  labour,  skill,  and  prudence,  but  is  limited  to  afiording  him  a 
better  hope  of  attaining  success  by  those  legitimate  means.  This 
accordingly  is  a test  to  which  all  plans  of  philanthropy  and  benevo- 
lence should  be  brought,  whether  intended  for  the  benefit  of 
individuals  or  of  classes,  and  whether  conducted  on  the  voluntary 
or  on  the  government  principle. 

In  so  far  as  the  subject  admits  of  any  general  doctrine  or  maxim, 
it  would  appear  to  be  this — that  if  assistance  is  given  in  such  a manner 
that  the  condition  of  the  person  helped  is  as  desirable  as  that  of 
the  person  who  succeeds  in  doing  the  same  thing  without  help,  the 
assistance,  if  capable  of  being  previously  calculated  on,  is  mischiev- 
ous : but  if,  while  available  to  everybody,  it  leaves  to  every  one  a 
strong  motive  to  do  without  it  if  he  can,  it  is  then  for  the  most  part 
beneficial.  This  principle,  applied  to  a system  of  public  charity, 
is  that  of  the  Poor  Law  of  1834.  If  the  condition  of  a person  receiv- 
ing relief  is  made  as  eligible  as  that  of  the  labourer  who  supports 
himself  by  his  own  exertions,  the  system  strikes  at  the  root  of  all 
individual  industry  and  self-government ; and,  if  fully  acted  up  to, 
would  require  as  its  supplement  an  organized  system  of  compulsion 
for  governing  and  setting  to  work  hke  cattle  those  who  had  been 
removed  from  the  influence  of  the  motives  that  act  on  human  beings. 
But  if,  consistently  with  guaranteeing  all  persons  against  absolute 
want,  the  condition  of  those  who  are  supported  by  legal  charity 
can  be  kept  considerably  less  desirable  than  the  condition  of  those 
who  find  support  for  themselves,  none  but  beneficial  consequences 
can  arise  from  a law  which  renders  it  impossible  for  any  person, 
except  by  his  own  choice,  to  die  from  insufiiciency  of  food.  That  in 
England  at  least  this  supposition  can  be  reahzed,  is  proved  by  the 
experience  of  a long  period  preceding  the  close  of  the  last  century,  as 
well  as  by  that  of  many  highly  pauperized  districts  in  more  recent 
times,  which  have  been  dispauperized  by  adopting  strict  rules  of 
poor-law  administration,  to  the  great  and  permanent  benefit  of  the 
whole  labouring  class.  There  is  probably  no  country  in  which,  by 
varying  the  means  suitably  to  the  character  of  the  people,  a legal 
provision  for  the  destitute  might  not  be  made  compatible  with  the 
observance  of  the  conditions  necessary  to  its  being  innocuous. 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


909 


Subject  to  these  conditions,  I conceive  it  to  be  highly  desirable 
that  the  certainty  of  subsistence  should  be  held  out  by  law  to  the 
destitute  able-bodied,  rather  than  that  their  relief  should  depend 
on  voluntary  charity.  In  the  first  place,  charity  almost  always 
does  too  much  or  too  little : it  lavishes  its  bounty  in  one  place,  and 
leaves  people  to  starve  in  another.  Secondly,  since  the  state  must 
necessarily  provide  subsistence  for  the  criminal  poor  while  under- 
going punishment,  not  to  do  the  same  for  the  poor  who  have  not 
offended  is  to  give  a premium  on  crime.  And  lastly,  if  the  poor  are 
left  to  individual  charity,  a vast  amount  of  mendicity  is  inevitable.^ 
What  the  state  may  and  should  abandon  to  private  charity,  is  the 
task  of  distinguishing  between  one  case  of  real  necessity  and  another. 
Private  charity  can  give  more  to  the  more  deserving.  The  state 
must  act  by  general  rules.  It  cannot  undertake  to  discriminate 
between  the  deserving  and  the  undeserving  indigent.  It  owes  no 
more  than  subsistence  to  the  first,  and  can  give  no  less  to  the  last. 
What  is  said  about  the  injustice  of  a law  which  has  no  better  treat- 
ment for  the  merely  unfortunate  poor  than  for  the  ill-conducted, 
is  founded  on  a misconception  of  the  province  of  law  and  pubhc 
authority.  The  dispensers  of  pubhc  relief  have  no  business  to  be 
inquisitors.  Guardians  and  overseers  are  not  fit  to  be  trusted  to 
give  or  withhold  other  people’s  money  according  to  their  verdict  on 
the  morahty  of  the  person  sohciting  it ; and  it  would  show  much 
ignorance  of  the  ways  of  mankind  to  suppose  that  such  persons,  even 
in  the  almost  impossible  case  of  their  being  quahfied,  will  take  the 
trouble  of  ascertaining  and  sifting  the  past  conduct  of  a person  in 
distress,  so  as  to  form  a rational  judgment  on  it.  Private  charity 
can  make  these  distinctions ; and  in  bestowing  its  own  money,  is 
entitled  to  do  so  according  to  its  own  judgment.  It  should  under- 
stand that  this  is  its  pecuHar  and  appropriate  province,  and  that  it  is 
commendable  or  the  contrary,  as  it  exercises  the  function  with  more 
or  less  discernment.  But  the  administrators  of  a public  fund  ought 
not  to  be  required  to  do  more  for  anybody,  than  that  minimum 
which  is  due  even  to  the  worst.  If  they  are,  the  indulgence  very 
speedily  becomes  the  rule,  and  refusal  the  more  or  less  capricious  or 
tyrannical  exception. ^ 

§ 14.  Another  class  of  cases  which  fall  within  the  same  general 

* [The  remark  in  the  original,  “ and  to  get  rid  of  this  is  important,  even 
as  a matter  of  justice,”  was  omitted  from  the  3rd  ed.  (1852).] 

^ [See  Appendix  LL.  The  Poor  Law.1 


970 


BOOK  V.  CHAPTER  XI.  § 14 


principle  as  the  case  of  public  charity,  are  those  in  which  the  acts 
done  by  individuals,  though  intended  solely  for  their  own  benefit, 
involve  consequences  extending  indefinitely  beyond  them,  to  interests 
of  the  nation  or  of  posterity,  for  which  society  in  its  collective  capacity 
is  alone  able,  and  alone  bound,  to  provide.  One  of  these  cases  is  that 
of  Colonization.  If  it  is  desirable,  as  no  one  wiU  deny  it  to  be, 
that  the  planting  of  colonies  should  be  conducted,  not  with  an 
exclusive  view  to  the  private  interests  of  the  first  founders,  but  with 
a deliberate  regard  to  the  permanent  welfare  of  the  nations  after- 
wards to  arise  from  these  small  beginnings ; such  regard  can  only  be 
secured  by  placing  the  enterprise,  from  its  commencement,  under 
regulations  constructed  with  the  foresight  and  enlarged  views  of 
philosophical  legislators ; and  the  government  alone  has  power 
either  to  frame  such  regulations,  or  to  enforce  their  observance. 

The  question  of  government  intervention  in  the  work  of  Coloniza- 
tion involves  the  future  and  permanent  interests  of  civilization  itself, 
and  far  outstretches  the  comparatively  narrow  limits  of  purely 
economical  considerations.  But  even  with  a view  to  those  con- 
siderations alone,  the  removal  of  population  from  the  overcrowded 
to  the  unoccupied  parts  of  the  earth’s  surface  is  one  of  those  works 
of  eminent  social  usefulness,  which  most  require,  and  which  at  the 
same  time  best  repay,  the  intervention  of  government. 

To  appreciate  the  benefits  of  colonization,  it  should  be  considered 
in  its  relation,  not  to  a single  country,  but  to  the  collective  economical 
interests  of  the  human  race.  The  question  is  in  general  treated  too 
exclusively  as  one  of  distribution ; of  relieving  one  labour  market 
and  supplying  another.  It  is  this,  but  it  is  also  a question  of  pro- 
duction, and  of  the  most  efficient  employment  of  the  productive 
resources  of  the  world.  Much  has  been  said  of  the  good  economy 
of  importing  commodities  from  the  place  where  they  can  be  bought 
cheapest ; while  the  good  economy  of  producing  them  where  they 
can  be  produced  cheapest  is  comparatively  little  thought  of.  If 
to  carry  consumable  goods  from  the  places  where  they  are  superabun- 
dant to  those  where  they  are  scarce  is  a good  pecuniary  speculation, 
is  it  not  an  equally  good  speculation  to  do  the  same  thing  with 
regard  to  labour  and  instruments  ? The  exportation  of  labourers 
and  capital  from  old  to  new  countries,  from  a place  where  their 
productive  power  is  less  to  a place  where  it  is  greater,  increases  by 
so  much  the  aggregate  produce  of  the  labour  and  capital  of  the  world. 
It  adds  to  the  joint  wealth  of  the  old  and  the  new  country,  what 
amounts  in  a short  period  to  many  times  the  mere  cost  of  efiecting  the 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


971 


transport.  There  needs  be  no  hesitation  in  affirming  that  Coloniza- 
tion, in  the  present  state  of  the  world,  is  the  best  affair  of  business, 
in  which  the  capital  of  an  old  and  wealthy  country  can  engage. 

It  is  equally  obvious,  however,  that  Colonization  on  a great  scalo 
can  be  undertaken,  as  an  affair  of  business,  only  by  the  government, 
or  by  some  combination  of  individuals  in  complete  understanding 
with  the  government ; except  under  such  very  peculiar  circum- 
stances as  those  which  succeeded  the  Irish  famine.^  Emigration  on 
the  voluntary  principle  rarely  has  any  material  influence  in  lightening 
the  pressure  of  population  in  the  old  country,  though  as  far  as  it  goes 
it  is  doubtless  a benefit  to  the  colony.  Those  labouring  persons  who 
voluntarily  emigrate  are  seldom  the  very  poor ; they  are  small 
farmers  with  some  little  capital,  or  labourers  who  have  saved 
something,  and  who,  in  removing  only  their  own  labour  from  the 
crowded  labour-market,  withdraw  from  the  capital  of  the  country 
a fund  which  maintained  and  employed  more  labourers  than  them- 
selves. Besides,  this  portion  of  the  community  is  so  limited  in 
number,  that  it  might  be  removed  entirely,  without  making  any 
sensible  impression  upon  the  numbers  of  the  population!,  or  even 
upon  the  annual  increase.  Any  considerable  emigration  of  labour 
is  only  practicable,  when  its  cost  is  defrayed,  or  at  least  advanced, 
by  others  than  the  emigrants  themselves.  Who  then  is  to  advance 
it  ? Naturally,  it  may  be  said,  the  capitalists  of  the  colony,  who 
require  the  labour,  and  who  intend  to  employ  it.  But  to  this  there 
is  the  obstacle,  that  a capitalist,  after  going  to  the  expense  of 
carrying  out  labourers,  has  no  security  that  he  shall  be  the  person 
to  derive  any  benefit  from  them.  If  all  the  capitalists  of  the  colony 
were  to  combine,  and  bear  the  expense  by  subscription,  they  would 
still  have  no  security  that  the  labourers,  when  there,  would  continue 
to  work  for  them.  After  working  for  a short  time  and  earning  a few 
pounds,  they  always,  unless  prevented  by  the  government,  squat 
on  unoccupied  land,  and  work  only  for  themselves.  The  experi- 
ment has  been  repeatedly  tried  whether  it  was  possible  to  enforce 
contracts  for  labour,  or  the  repayment  of  the  passage  money  of 
emigrants  to  those  who  advanced  it,  and  the  trouble  and  expense 
have  always  exceeded  the  advantage.  The  only  other  resource  is 
the  voluntary  contributions  of  parishes  or  individuals,  to  rid  them- 
selves of  surplus  labourers  who  are  already,  or  who  are  likely  to 
become,  locally  chargeable  on  the  poor-rate.  Were  this  speculation 

* [The  exception  was  added  in  the  5th  ed.  (1862).  In  the  next  line 
**  cannot  have  ” had  been  changed  into  “ rarely  hae  ” in  the  3rd  (1852).] 


972 


BOOK  V.  CHAPTER  XL  § 14 


to  become  general,  it  might  produce  a sufficient  amount  of  emigration 
to  clear  off  the  existing  unemployed  population,  but  not  to  raise  the 
wages  of  the  employed  : and  the  same  thing  would  require  to  be 
done  over  again  in  less  than  another  generation. 

One  of  the  principal  reasons  why  Colonization  should  be  a 
national  undertaking  is  that  in  this  manner  alone,  save  in  highly 
exceptional  cases,  can  emigration  be  self-supporting.  The  exporta- 
tion  of  capital  and  labour  to  a new  country  being,  as  before  observed, 
one  of  the  best  of  all  affairs  of  business,  it  is  absurd  that  it  should  not, 
like  other  affairs  of  business,  repay  its  own  expenses.  Of  the  great 
addition  which  it  makes  to  the  produce  of  the  world,  there  can  be 
no  reason  why  a sufficient  portion  should  not  be  intercepted,  and 
employed  in  reimbursing  the  outlay  incurred  in  effecting  it.  For 
reasons  already  given,  no  individual,  or  body  of  individuals,  can 
reimburse  themselves  for  the  expense ; the  government,  however, 
can.  It  can  take  from  the  annual  increase  of  wealth,  caused  by  the 
emigration,  the  fraction  which  suffices  to  repay  with  interest  what  the 
emigration  has  cost.  The  expenses  of  emigration  to  a colony  ought 
to  be  borne  by  the  colony;  and  this,  in  general,  is  only  possible 
when  they  are  borne  by  the  colonial  government. 

Of  the  modes  in  which  a fund  for  the  support  of  colonization  can 
be  raised  in  the  colony,  none  is  comparable  in  advantage  to  that 
which  was  first  suggested,  and  so  ably  and  perseveringly  advocated, 
by  Mr.  Wakefield : the  plan  of  putting  a price  on  all  unoccupied 
land  and  devoting  the  proceeds  to  emigration.  The  unfounded  and 
pedantic  objections  to  this  plan  have  been  answered  in  a former 
part  of  this  chapter  : we  have  now  to  speak  of  its  advantages.  First, 
it  avoids  the  difficulties  and  discontents  incident  to  raising  a large 
annual  amount  by  taxation ; a thing  which  it  is  almost  useless  to 
attempt  with  a scattered  population  of  settlers  in  the  wilderness, 
who,  as  experience  proves,  can  seldom  be  compelled  to  pay  direct 
taxes,  except  at  a cost  exceeding  their  amount ; while  in  an  infant 
community  indirect  taxation  soon  reaches  its  limit.  The  sale  of 
lands  is  thus  by  far  the  easiest  mode  of  raising  the  requisite  funds. 
But  it  has  other  and  still  greater  recommendations.  It  is  a bene- 
ficial check  upon  the  tendency  of  a population  of  colonists  to  adopt 
the  tastes  and  inclinations  of  savage  life,  and  to  disperse  so  widely 
as  to  lose  all  the  advantages  of  commerce,  of  markets,  of  separation 
of  employments,  and  combination  of  labour.  By  making  it  necessary 
for  those  who  emigrate  at  the  expense  of  the  fund  to  earn  a con- 
siderable sum  before  they  can  become  landed  proprietors,  it  keeps 


LBTITS  OF  THE  PROVINCE  OF  GOVERNMENT 


073 


lip  a perpetual  succession  of  labourers  for  hire,  who  in  every  country 
are  a most  important  auxiliary  even  to  peasant  proprietors  : and 
by  diminishing  the  eagerness  of  agricultural  speculators  to  add  to 
their  domain,  it  keeps  the  settlers  within  reach  of  each  other  for 
purposes  of  co-operation,  arranges  a numerous  body  of  them  within 
easy  distance  of  each  centre  of  foreign  commerce  and  non-agricul- 
tural  industry,  and  insures  the  formation  and  rapid  growth  of  towns 
and  town  products.  This  concentration,  compared  with  the  dis- 
persion which  uniformly  occurs  when  unoccupied  lajid  can  be  had 
for  nothing,  greatly  accelerates  the  attainment  of  prosperity,  and 
enlarges  the  fund  which  may  be  drawn  upon  for  further  emigration. 
Before  the  adoption  of  the  Wakefield  system,  the  early  years 
of  all  new  colonies  were  full  of  hardship  and  difficulty  : the  last 
colony  founded  on  the  old  principle,  the  Swan  River  settlement, 
being  one  of  the  most  characteristic  instances.  Tn  all  subsequent 
colonization,  the  Wakefield  principle  has  been  acted  upon,  though 
imperfectly,!  a part  only  of  the  proceeds  of  the  sale  of  land  being 
devoted  to  emigration  : yet  wherever  it  has  been  introduced  at  all, 
as  in  South  Australia,  Victoria,  and  New  Zealand,  the  restraint  put 
upon  the  dispersion  of  the  settlers,  and  the  influx  of  capital  caused 
by  the  assurance  of  being  able  to  obtain  hired  labour,  has,  in  spite 
of  many  difficulties  and  much  mismanagement,  produced  a sudden- 
ness and  rapidity  of  prosperity  more  like  fable  than  reality,*  ^ 

The  self-supporting  system  of  colonization,  once  established, 
would  increase  in  efficiency  every  year  ; its  effect  would  tend  to 
increase  in  geometrical  progression  : for  since  every  able-bodied 
emigrant,  until  the  country  is  fully  peopled,  adds  in  a very  short 
time  to  its  wealth,  over  and  above  his  own  consumption,  as  much  as 
would  defray  the  expense  of  bringing  out  another  emigrant,  it  follows 

* [“  The  price  of  land  being  generally  fixed  too  low  and  ” omitted  from  3rd 
cd.  (1852).] 

* [1857]  The  objections  which  have  been  made,  with  so  much  virulence,  in 
some  of  these  colonies,  to  the  Wakefield  system,  apply,  in  so  far  as  they  have 
any  validity,  not  to  the  principle,  but  to  some  provisions  which  are  no  part  of 
the  system,  and  have  been  most  unnecessarily  and  improperly  engrafted  on  it ; 
such  as  the  offering  only  a limited  quantity  of  land  for  sale,  and  that  by  auction, 
and  in  lots  of  not  less  than  640  acres,  instead  of  selling  all  land  which  is  asked 
for,  and  allowing  to  the  buyer  unlimited  freedom  of  choice,  both  as  to  quantity 
and  situation,  at  a fixed  price. 

^ [From  the  3rd  ed.  was  omitted  the  following  passage  of  the  original  (1848)  : 
“ The  oldest  of  the  Wakefield  colonies.  South  Australia,  is  scarcely  ” (in  2nd 
ed.  (1849),  “ little  more  than  ”)  “ twelve  years  old  ; Port  Philip  ” (Victoria)  “ is 
still  more  recent ; and  they  are  probably  at  this  moment  the  two  places,  in  the 
known  world,  where  labour  on  the  one  hand,  and  capital  on  the  other,  are  the 
most  highly  remunerated.”] 


974 


BOOK  V.  CHAPTER  XI.  § 14 


that  the  greater  the  number  already  sent,  the  greater  number  might 
continue  to  be  sent,  each  emigrant  laying  the  foundation  of  a 
succession  of  other  emigrants  at  short  intervals  without  fresh 
expense,  until  the  colony  is  filled  up.  It  would  therefore  be  worth 
while,  to  the  mother  country,  to  accelerate  the  early  stages  of  this 
progression,  by  loans  to  the  colonies  for  the  purpose  of  emigration, 
repayable  from  the  fund  formed  by  the  sales  of  land.  In  thus 
advancing  the  means  of  accomplishing  a large  immediate  emigration, 
it  would  be  investing  that  amount  of  capital  in  the  mode,  of  all 
others,  most  beneficial  to  the  colony ; and  the  labour  and  savings 
of  these  emigrants  would  hasten  the  period  at  which  a large  sum 
would  be  available  from  sales  of  land.  It  would  be  necessary,  in 
order  not  to  overstock  the  labour  market,  to  act  in  concert  with  the 
persons  disposed  to  remove  their  own  capital  to  the  colony.  The 
knowledge  that  a large  amount  of  hired  labour  would  be  available, 
in  so  productive  a field  of  employment,  would  insure  a large  emigra- 
tion of  capital  from  a country,  like  England,  of  low  profits  and 
rapid  accumulation  : and  it  would  only  be  necessary  not  to  send  out 
a greater  number  of  labourers  at  one  time  than  this  capital  could 
absorb  and  employ  at  high  wages. 

Inasmuch  as,  on  this  system,  any  given  amount  of  expenditure, 
once  incurred,  would  provide  not  merely  a single  emigration,  but  a 
perpetually  flowing  stream  of  emigrants,  which  would  increase  in 
breadth  and  depth  as  it  flowed  on ; this  mode  of  relieving  over- 
population has  a recommendation,  not  possessed  by  any  other  plan 
ever  proposed  for  making  head  against  the  consequences  of  increase 
without  restraining  the  increase  itself : there  is  an  element  of 
indefiniteness  in  it;  no  one  can  perfectly  foresee  how  far  its 
influence,  as  a vent  for  surplus  population,  might  possibly  reach. 
There  is  hence  the  strongest  obligation  on  the  government  of  a 
country  like  our  own,  with  a crowded  population,  and  unoccupied 
continents  under  its  command,  to  build,  as  it  were,  and  keep 
open,  in  concert  with  the  colonial  governments,  a bridge  from 
the  mother  country  to  those  continents,  by  establishing  the  self- 
supporting  system  of  colonization  on  such  a scale,  that  as  great  an 
amount  of  emigration  as  the  colonies  can  at  the  time  accommodate 
may  at  all  times  be  able  to  take  place  without  cost  to  the  emigrants 
themselves. 

^ The  importance  of  these  considerations,  as  regards  the  British 

’ [The  reference  to  Irish  emigration  was  added  in  the  3rd  ed.  (1852),  and 
concluded  with  this  sentence  : “ While  the  stream  of  this  emigration  continuef 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


973 


islands,  has  been  of  late  considerably  diminished  by  the  unparalleled 
amount  of  spontaneous  emigration  from  Ireland ; an  emigration 
not  solely  of  small  farmers,  but  of  the  poorest  class  of  agricultural 
labourers,  and  which  is  at  once  voluntary  and  self-supporting,  the 
succession  of  emigrants  being  kept  up  by  funds  contributed  from 
the  earnings  of  their  relatives  and  connexions  who  had  gone  before. 
To  this  has  been  added  a large  amount  of  voluntary  emigration  to 
the  seats  of  the  gold  discoveries,  which  has  partly  supplied  the  wants 
of  our  most  distant  colonies,  where,  both  for  local  and  national 
interests,  it  was  most  of  all  required.  But  the  stream  of  both  these 
emigrations  has  already  considerably  slackened,  and  though  that 
from  Ireland  has  since  partially  revived,  it  is  not  certain  that  the 
aid  of  government  in  a systematic  form,  and  on  the  self-supporting 
principle,  will  not  again  become  necessary  to  keep  the  communication 
open  between  the  hands  needing  work  in  England,  and  the  work 
which  needs  hands  elsewhere. 

§ 15.  The  same  principle  which  points  out  colonization,  and 
the  relief  of  the  indigent,  as  cases  to  which  the  principal  objection 
to  government  interference  does  not  apply,  extends  also  to  a variety 
of  cases,  in  which  important  public  services  are  to  be  performed, 
while  yet  there  is  no  individual  specially  interested  in  performing 
them,  nor  would  any  adequate  remuneration  naturally  or  spon- 
taneously attend  their  performance.  Take  for  instance  a voyage 
of  geographical  or  scientific  exploration.  The  information  sought 
may  be  of  great  public  value,  yet  no  individual  would  derive  any 
benefit  from  it  which  would  repay  the  expense  of  fitting  out  the 
expedition  ; and  there  is  no  mode  of  intercepting  the  benefit  on  its 
way  to  those  who  profit  by  it,  in  order  to  levy  a toll  for  the  remunera- 
tion of  its  authors.  Such  voyages  are,  or  might  be,  undertaken 
by  private  subscription  ; but  this  is  a rare  and  precarious  resource. 
Instances  are  more  frequent  in  which  the  expense  has  been  borne 
by  public  companies  or  philanthropic  associations ; but  in  general 
such  enterprises  have  been  conducted  at  the  expense  of  government, 
which  is  thus  enabled  to  entrust  them  to  the  persons  in  its  judgment 

flowing,  as  broad  and  deop  as  at  present,  the  principal  office  required  from 
government  would  be  to  direct  a portion  of  it  to  quarters  (such  as  Australia) 
where,  both  for  local  and  national  interests,  it  is  most  of  all  required,  but  which 
it  does  not  sufficiently  reach  in  its  spontaneous  course.”  This  was  replaced  in 
the  4th  ed.  (1857)  by  the  reference  to  emigration  to  the  gold  fields.  The 
slackening  of  the  stream  was  noticed  in  the  5th  ed.  (1862),  and  the  partial 
revival  of  Irish  emigration  in  the  6th  ed.  (1865),] 


wa 


BOOK  V.  CHAPTER  XL  § 15 


best  qualified  for  tbe  task.  Again,  it  is  a proper  office  of  govern- 
ment to  build  and  maintain  liglitliouses,  establisli  buoys,  &c.,  for 
tbe  security  of  navigation  : for  since  it  is  impossible  that  the  ships 
at  sea  which  are  benefited  by  a lighthouse  should  be  made  to  pay  a 
toll  on  the  occasion  of  its  use,  no  one  would  build  lighthouses  from 
motives  of  personal  interest,  unless  indemnified  and  rewarded  from 
a compulsory  levy  made  by  the  state.  There  are  many  scientific 
researches,  of  great  value  to  a nation  and  to  mankind,  requiring 
assiduous  devotion  of  time  and  labour,  and  not  unfrequently  great 
expense,  by  persons  who  can  obtain  a high  price  for  their  services 
In  other  ways.  If  the  government  had  no  power  to  grant  indemnity 
for  expense,  and  remuneration  for  time  and  labour  thus  employed, 
such  researches  could  only  be  undertaken  by  the  very  few  persons 
who,  with  an  independent  fortune,  unite  technical  knowledge, 
laborious  habits,  and  either  great  public  spirit,  or  an  ardent  desire 
of  scientific  celebrity. 

Connected  with  this  subject  is  the  question  of  providing  by  means 
of  endowments  or  salaries,  for  the  maintenance  of  what  has  been 
called  a learned  class.  The  cultivation  of  speculative  knowledge, 
though  one  of  the  most  useful  of  aU  employments,  is  a service 
rendered  to  a community  collectively,  not  individually,  and  one 
consequently  for  which  it  is,  przmd/acie,  reasonable  that  the  com- 
munity collectively  should  pay  ; since  it  gives  no  claim  on  any 
individual  for  a pecuniary  remuneration ; and  unless  a provision 
is  made  for  such  services  from  some  public  fund,  there  is  not  only 
no  encouragement  to  them,  but  there  is  as  much  discouragement  as 
is  implied  in  the  impossibility  of  gaming  a living  by  such  pursuits, 
and  the  necessity  consequently  imposed  on  most  of  those  who  would 
be  capable  of  them  to  employ  the  greatest  part  of  their  time  in 
gaining  a subsistence.  The  evil,  however,  is  greater  in  appearance 
than  in  reality.  The  greatest  things,  it  has  been  said,  have  generally 
been  done  by  those  who  had  the  least  time  at  their  disposal ; and 
the  occupation  of  some  hours  every  day  in  a routine  employment, 
has  often  been  found  compatible  with  the  most  brilliant  achieve- 
ments in  literature  and  philosophy.  Yet  there  are  investigations  and 
experiments  which  require  not  only  a long  but  a continuous  devotion 
of  time  and  attention  : there  are  also  occupations  which  so  engross 
and  fatigue  the  mental  faculties,  as  to  be  inconsistent  with  any 
vigorous  employment  of  them  upon  other  subjects,  even  in  intervals 
of  leisure.  It  is  highly  desirable,  therefore,  that  there  should  be  a 
mode  of  insuring  to  the  public  the  services  of  scientific  discoverers, 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


977 


and  perhaps  of  some  other  classes  of  savants,  by  affording  them 
the  means  of  support  consistently  with  devoting  a sufficient  portion 
of  time  to  their  pecuhar  pursuits.  The  fellowships  of  the  Uni- 
versities are  an  institution  excellently  adapted  for  such  a purpose ; 
but  are  hardly  ever  applied  to  it,  being  bestowed,  at  the  best,  as  a 
reward  for  past  proficiency,  in  committing  to  memory  what  has 
been  done  by  others,  and  not  as  the  salary  of  future  labours  in 
the  advancement  of  knowledge.  In  some  countries.  Academies  of 
science,  antiquities,  history,  &c.,  have  been  formed  with  emoluments 
annexed.  The  most  effectual  plan,  and  at  the  same  time  least 
liable  to  abuse,  seems  to  be  that  of  conferring  Professorships,  with 
duties  of  instruction  attached  to  them.  The  occupation  of  teaching 
a branch  of  knowledge,  at  least  in  its  higher  departments,  is  a help 
rather  than  an  impediment  to  the  systematic  cultivation  of  the 
subject  itself.  The  duties  of  a professorship  almost  always  leave 
much  time  for  original  researches ; and  the  greatest  advances 
which  have  been  made  in  the  various  sciences,  both  moral  and 
physical,  have  originated  with  those  who  were  public  teachers  of 
them ; from  Plato  and  Aristotle  to  the  great  names  of  the  Scotch, 
French,  and  German  Universities.  I do  not  mention  the  English, 
because  until  very  lately  their  professorships  have  been,  as  is  well 
known,  little  more  than  nominal.  In  the  case,  too,  of  a lecturer 
in  a great  institution  of  education,  the  public  at  large  has  the  means 
of  judging,  if  not  the  quality  of  the  teaching,  at  least  the  talents  and 
industry  of  the  teacher ; and  it  is  more  diJB&cult  to  misemploy  the 
power  of  appointment  to  such  an  office,  than  to  job  in  pensions  and 
salaries  to  persons  not  so  directly  before  the  public  eye. 

It  may  be  said  generally,  that  anything  which  it  is  desirable 
should  be  done  for  the  general  interests  of  mankind  or  of  future 
generations,  or  for  the  present  interests  of  those  members  of  the 
community  who  require  external  aid,  but  which  is  not  of  a nature 
to  remunerate  individuals  or  associations  for  undertaking  it,  is  in 
itself  a suitable  thing  to  be  undertaken  by  government : though, 
before  making  the  work  their  own,  governments  ought  always  to 
consider  if  there  be  any  rational  probability  of  its  being  done  on  what 
is  called  the  voluntary  principle,  and  if  so,  whether  it  is  likely  to  be 
done  in  a better  or  more  effectual  manner  by  government  agency, 
than  by  the  zeal  and  liberahty  of  individuals. 

§ 16.  The  preceding  heads  comprise,  to  the  best  of  my  judgment, 
the  whole  of  the  exceptions  to  the  practical  maxim,  that  the  business 


978 


BOOR  V.  CHAPTER  XI.  § 16 


of  society  can  be  best  performed  by  private  and  voluntary  agency. 
It  is,  however,  necessary  to  add,  that  the  intervention  of  govern- 
ment cannot  always  practically  stop  short  at  the  limit  which  defines 
the  cases  intrinsically  suitable  for  it.  In  the  particular  circum- 
stances of  a given  age  or  nation,  there  is  scarcely  anything  really 
important  to  the  general  interest,  which  it  may  not  be  desirable, 
or  even  necessary,  that  the  government  should  take  upon  itself, 
not  because  private  individuals  cannot  effectually  perform  it,  but 
because  they  will  not.  At  some  times  and  places  there  will  be 
no  roads,  docks,  harbours,  canals,  works  of  irrigation,  hospitals, 
schools,  colleges,  printing-presses,  unless  the  government  establishes 
them ; the  public  being  either  too  poor  to  command  the  necessary 
resources,  or  too  little  advanced  in  intelligence  to  appreciate  the  ends, 
or  not  sufficiently  practised  in  joint  action  to  be  capable  of  the 
means.  This  is  true,  more  or  less,  of  all  countries  inured  to  despotism, 
and  particularly  of  those  in  which  there  is  a very  wide  distance  in 
civilization  between  the  people  and  the  government : as  in  those 
which  have  been  conquered  and  are  retained  in  subjection  by  a 
more  energetic  and  more  cultivated  people.  In  many  parts  of  the 
world,  the  people  can  do  nothing  for  themselves  which  requires 
large  means  and  combined  action  : all  such  things  are  left  undone, 
unless  done  by  the  state.  In  these  cases,  the  mode  in  which  the 
government  can  most  surely  demonstrate  the  sincerity  with  which 
it  intends  the  greatest  good  of  its  subjects,  is  by  doing  the  things 
which  are  made  incumbent  on  it  by  the  helplessness  of  the  public, 
in  such  a manner  as  shall  tend  not  to  increase  and  perpetuate, 
but  to  correct  that  helplessness.  A good  government  will  give  all 
its  aid  in  such  a shape  as  to  encourage  and  nurture  any  rudiments 
it  may  find  of  a spirit  of  individual  exertion.  It  will  be  assiduous 
in  removing  obstacles  and  discouragements  to  voluntary  enterprise, 
and  in  giving  whatever  facilities  and  whatever  direction  and  guidance 
may  be  necessary  : its  pecuniary  means  will  be  applied,  when 
practicable,  in  aid  of  private  efforts  rather  than  in  supercession  of 
them,  and  it  will  call  into  play  its  machinery  of  rewards  and  honours 
to  elicit  such  efforts.  Government  aid,  when  given  merely  in 
default  of  private  enterprise,  should  be  so  given  as  to  be  as  far 
as  possible  a course  of  education  for  the  people  in  the  art  of 
accomplishing  great  objects  by  individual  energy  and  voluntary 
co-operation. 

I have  not  thought  it  necessary  here  to  insist  on  that  part  of  the 
functions  of  government  which  all  admit  to  be  indispensable,  the 


LIMITS  OF  THE  PROVINCE  OF  GOVERNMENT 


079 


function  of  prohibiting  and  punishing  such  conduct  on  the  part  of 
individuals  in  the  exercise  of  their  freedom  as  is  clearly  injurious 
to  other  persons,  whether  the  case  be  one  of  force,  fraud,  or  negligence. 
Even  in  the  best  state  which  society  has  yet  reached,  it  is  lamentable 
to  think  how  great  a proportion  of  all  the  efforts  and  talents  in  the 
world  are  employed  in  merely  neutralizing  one  another.  It  is  the 
proper  end  of  government  to  reduce  this  wretched  waste  to  the 
smallest  possible  amount,  by  taking  such  measures  as  shall  cause 
the  energies  now  spent  by  mankind  in  injuring  one  another,  or  in 
protecting  themselves  against  injury,  to  be  turned  to  the  legitimate 
employment  of  the  human  faculties,  that  of  compelling  the  powers 
of  nature  to  be  more  and  more  subservient  to  physical  and  moral 
good.i 


* [See  Appendix  MM.  Limits  of  the  Sphere  of  Oovernment.] 


BIBLIOGRAPHICAL  APPENDIX 


Fob  the  history  of  economic  investigation  and  discussion  since  the  publication 
of  Mill’s  Principles  in  1848,  the  only  general  work  to  which  reference  can  be 
made  in  English  is  Palgrave’s  Dictionary  of  Political  Economy  (1894-1908), 
which  contains  many  useful  articles  under  the  headings  of  the  various  subjects 
and  authors.  Readers  of  French  will  obtain  some  assistance  from  Block,  Lea 
Progris  de  la  Science  Ilconomique  depuis  Adam  Smith  (1890),  representing  the 
strictest  school  of  French  orthodoxy,  and  from  Gide  and  Rist,  Histoire  des 
Doctrines  ^conomiquea  (1909),  written  from  a more  modern  point  of  view. 
Readers  of  German  will  naturally  refer  to  Conrad’s  Handworterbuch  der 
Staatswissenschaften,  of  which  the  third  and  enlarged  edition  is  now  being 
issued;  and  they  will  find  a number  of  valuable  reviews  of  the  course  of 
discussion  of  the  several  main  topics  in  the  series  of  monographs  brought 
together  under  the  title  Die  Entwicklung  der  deutschen  Volkswirthschaftslehre 
im  neunzehnten  Jahrhundert  (1908). 


A.— The  Meecantilb  System  (p.  6) 

Mill’s  account  is  based  on  that  of  Adam  Smith,  Wealth  of  Nations,  bk.  iv. 
ch.  i.  Much  investigation  has  subsequently  taken  place  into  mercantilist 
literature  and  policy,  some  results  of  which  may  be  seen  in  Roscher,  Geschichte 
der  National-Oekonomik  in  Deutschland  (1874),  § 57,  closely  followed  (with  a 
Positivist  colouring)  by  Ingram,  History  of  Political  Economy  (1888) ; in 
Schmoller,  The  Mercantile  System  and  its  Historical  Significance  (1884  ; Eng. 
trans.  1896),  and  Grundriaa  der  Allgemeinen  Volkswirthschaftslehre  (1900),  i. 
§ 39  (in  French  trans.,  Principes  d' Economic  Politique  (1905-1908),  i.  § 39) ; 
in  Cunningham,  Growth  of  English  Industry  and  Commerce,  vol.  ii.  pt.  i.. 
The  Mercantile  System  (1903);  and  in  Unwin,  Industrial  Organisation  in  the 
Sixteenth  and  Seventeenth  Centuries  (1904).  One  of  the  most  significant  of 
English  mercantilist  writings,  Mun’s  England's  Treasure  by  Forraign  Trade 
(1664),  has  been  recently  republished  (1895). 


B. — ^The  Definition  of  Wealth  (p.  G) 

Mill’s  definition  has  been  criticised,  from  very  different  points  of  view,  by 
Jevons,  Principles  of  Economics  (posthumously  published,  1905),  p.  14  ; Nichol- 
son, Principles  of  Political  Economy,  i.  (1893),  Introduction  ; and  Ruskin,  Unto 
this  Last  (1862),  Preface,  and  Munera  Pulveris  (1863),  Preface.  For  a recent 
classification  of  “ desirable  things,”  see  Marshall,  Principles  of  Economics 
(1890  ; 5th  ed.  1907),  bk.  ii.  ch.  2.  Sidgwick,  Principles  of  Political  Economy 
(1883),  bk.  i.  ch.  ii.,  points  out  that,  though  in  England  “ Wealth  ” has  commonly 
been  regarded  as  the  most  fundamental  conception  in  Pofitical  Economy,  it 
has  also  been  commonly  held  that  it  should  be  defined  by  the  characteristic  of 


982 


BIBLIOGRAPHICAL  APPENDIX 


possessing  “ Value,”  so  that  it  would  seem  more  logical  “ to  begin  by  attempting 
to  get  a precise  conception  of  this  characteristic.”  For  difficulties  attaching 
to  “ Richesse,”  as  the  French  equivalent  of  “ Wealth,”  see  Gide,  Coura 
d'^jconomie  Politique  (1909),  p.  47.  [By  the  earlier  French  economic  writers, 
however,  the  term  was  used  in  the  plural,  as  in  Turgot’s  Riflexiona  aur  la 
Formation  et  la  Diatribution  dea  Richeaaea  (1770  : trans.  by  Ashley,  1898).] 

The  German  language  possesses  no  one  inclusive  term  like  “ Wealth  ” ; and 
German  economists  have  long  been  accustomed  to  begin  with  the  definition  of 
“ goods  ” {Outer)  and,  in  consequence,  of  “ a good  ” {Out) — enjoying,  in  the 
use  of  the  latter  term,  an  advantage  not  available  in  current  English  speech. 
For  characteristic  examples  reference  may  be  made  to  Wagner,  Lehrhuch  der 
Politischen  Oehonomie^  Orundlagen  (3rd  ed.  1892),  I,  bk.  ii.  ch.  i. ; or  Conrad, 
Orundriaa  zum  Studium  der  Politiachen  Oekonomie  (6th  ed.  1907),  § 5.  The 
phrases  “ goods,”  “ economic  goods,”  “ an  economic  good,”  and  so  on,  have 
of  late  years  made  their  way  into  English  and  still  more  into  American  economic 
writings ; see,  for  instance,  Marshall  (as  above),  and  Clark,  Easentiala  of 
Economic  Theory  (1907),  ch.  2 ; and  cf.  Pierson,  Principles  of  Economica  (Eng. 
trans.  1902),  pt.  i.  ch.  i. 


C. — The  Types  op  Society  (p.  20) 

Mill’s  brief  sketch  of  the  general  economic  development  of  humanity  is  a 
masterly  one.  But  since  his  time  there  has  been  a vast  amount  of  work  done, 
especially  in  Germany,  in  the  field  of  economic  history.  The  best  introduction 
to  the  subject  is  now  SchmoUer’s  Orundriaa y bk.  ii.  (occup3dng  the  second  volume 
of  the  French  trans.,  Principes).  A very  suggestive  treatment  of  certain 
aspects  of  the  subject  is  presented  in  a brief  compass  in  Bucher,  Entatehung  der 
V ollcswirthschaft  (Eng.  trans.  under  the  title  Industrial  Evolution,  N.  Y.  1901) ; 
which  receives  some  necessary  correction  and  is  supplemented  in  important 
respects  by  Meyer,  Die  wirthschaftliche  EntwicTcelung  dea  Alterthuma,  Vortrag, 
1895,  and  Die  Sklaverei  im  Alterthum,  Vortrag,  1898 ; and  by  v.  Below,  "Ober 
Theorien  der  wirthschaftlichen  Entwichlung  der  Volker,  in  Historische  Zeitschrift, 
Ixxxvi.  (N.  F.  1.).  The  best  general  work  in  English  is  Cunningham’s  Western 
Civilisation  in  its  Economic  Aspects  ; Ancient  Times  (1898),  Mediaeval  and 
Modern  Times  (1900).  Seligman,  Principles  of  Economics  (1905),  part  ii.  bks. 
ii.  and  iii.,  bring!  together  a great  many  instructive  apergus  in  a short 
compass. 


D. — Productive  ahd  Unproductive  Labour  (p.  53) 

The  distinction  was  taken  from  Adam  Smith,  Wealth  of  Nations,  bk.  ii.  ch. 
3,  who  derived  the  words  themselves  from  the  l^ench  Physiocrats,  though  he 
used  them  in  a different  sense.  It  has  been  criticised  by  Jevons,  Principles, 
ch.  xviii.,  and  Cannan,  History  of  the  Thories  of  Production  and  Distribution 
(1893),  ch.  i.  § 7 ; and  it  is  now  but  little  used.  Cf.  Marshall,  bk.  ii,  ch.  3. 


E. — The  Definition  op  Capital  (p.  62) 

A good  introduction  to  the  large  contentious  literature  on  this  subject  is 
Schmoller,  Orundriss,  ii.  § 182  c (in  the  French  trans.  Principes,  iii.  pp.  409  seq.) ; 
which  makes  use  of  the  material  collected  in  Bohm-Bawerk,  The  Positive  Theory 
of  Capital  (Eng.  trans.  1891),  bk.  i.  ch.  3.  As  Wagner,  Orundlagen,  § 129,  has 


BIBLIOGRAPHICAL  APPENDIX 


983 


pointed  out,  the  conception  of  capital  is  twofold — economical  and  historical 
(cf.  Gide,  Cours,  bk.  i.  ch.  3) ; the  latter  aspect  was  emphasised  by  LassaUe  in 
his  proposition  that  “ Capital  is  a historical  category.”  An  account  in  English 
of  the  history  of  the  conception  will  be  found  in  Marshall,  i.  App.  E,  and  in 
Taussig,  Waffes  and  Capital  (N.  Y.  1896),  ch.  2.  Clark,  Distribution  of  Wealth 
(1902),  ch.  9,  distinguishes  between  “ Capital  ” and  “ Capital  Goods.”  Fisher, 
The  Nature  of  Capital  and  Income  (1906)^,  defines  Capital  as  “ a stock  of  wealth 
existing  at  a moment  of  time,” — which  would  seem  to  identify  Capital  with 
Wealth  generally ; while  Gibson,  Human  Economics  (1909),  defines  Capital 
from  the  business  point  of  view  as  ‘‘  everything  in  which  an  individual  or 
group  has  a legal  estate  and  for  which  there  is  a buyer’s  valuation.” 


F. — Fundamental  Propositions  on  Capital  (p.  90) 

For  destructive  criticism  of  these  propositions  see  Jevons,  Principles,  ch. 
xxiv. ; Sidgwick,  Principles,  bk.  i.  ch.  6,  note ; and  Nicholson,  Principles,  i, 
pp.  98  seq.  The  &st  and  fourth  of  them,  as  stated  by  Mill,  are  only  other  aspects 
of  his  Wages  Fund  doctrine,  and,  according  to  Marshall,  Principles,  i.  App.  J, 
“ express  his  meaning  badly.” 


G. — Division  and  Combination  of  Labour  (p.  131) 

This  subject,  when  further  examined,  widens  out  into  the  two  far  larger 
topics  of  economic  differentiation  and  co-operation,  which  are  themselves  to  a 
large  extent  but  different  aspects  of  the  same  process.  In  this  sense  it  is 
philosophically  treated  with  a great  command  of  the  results  of  recent  investi- 
gations, in  Schmoller,  Qrundriss,  i.  §§  113  seq.  (in  Fr.  trans.  Principes,  ii.  pp. 
248  seq.). 


H. — Large  and  Small  Farming  (p.  154) 

On  this  problem,  so  far  as  England  is  concerned,  it  has  to  be  remembered  : 
(1)  that  the  substitution  of  large  for  small  farming  in  the  eighteenth  and  early 
nineteenth  centuries  was  closely  associated  with  the  movement  for  the  en- 
closure of  the  “ open  ” or  intermixed  fields ; see  hereon.  Slater,  The  English 
Peasantry  and  the  Enclosure  of  Common  Fields  (1907),  and  Hasbaeh,  A History 
of  the  English  Agricultural  Labourer  (Eng.  trans.  1908);  and  (2)  that  the 
position  of  affairs  has  been  greatly  affected  since  Mill  wrote  by  the  shock  to 
“ cereal  farming  ” caused  by  the  infiux  of  cheap  American  grain  in  the  eighties  : 
hereon  see  Levy,  Entstehung  und  Ruckgang  des  landwirthschaftlichen  Gross- 
betriebes  in  England  (1904).  Materials  for  an  opinion  on  the  economic  prospects 
of  small  farming  in  England  are  to  be  found  in  Lawes  and  Gilbert,  Allotments 
and  Small  Holdings,  in  Journal  of  the  Royal  Agric.  Soc.,  vol.  iii.  3rd  series  (1892) : 
in  the  Report  of  a Departmental  Committee  on  Small  Holdings  (1906) ; and 
in  Jebb,  The  Small  Holdings  of  England  (1907).  They  are  evidently  bound  up  to 
some  extent  with  the  prospects  of  agricultural  co-operation  (in  the  purchase  of 
fertilisers,  the  sale  of  produce,  &c.),  of  which  an  account  is  given  in  Pratt,  The 
Organisation  of  Agriculture  (1905),  and  in  the  publications  of  the  Agricultural 
Organisation  Society.  A general  comparison  of  Large  and  Small  Farming 
following,  criticising,  and  supplementing  that  of  IMill  is  presented  by  Nicholson, 
Principles,  i.  (1893)  bk.  i.  ch.  9- 


BIBLIOGRAPHICAL  APPENDIX 


I. — Population  {p.  162) 

In  the  writings  of  no  contemporary  economist,  in  Great  Britain  or  abroadj 
does  the  idea  that  population  is  constantly  tending  to  press  upon  the 
means  of  subsistence  occupy  the  same  cons'picuous  and  primary  place  as  it 
does  with  Mill.  The  treatment  of  the  subject  by  Marshall,  Principles,  bk.  iv. 
chs.  4,  13,  and  bk.  vi.  ch.  13,  is  characteristic  of  the  general  present  attitude. 
Attention  is  coming  to  be  directed  more  and  more  to  those  defects  in  the 
present  industrial  organisation  which  create  a body  of  permanently  under- 
employed as  well  as  temporarily  unemployed,  even  where  the  growth  of  popu- 
lation is  evidently  not  outstripping  the  means  of  employment : hereon  see 
Beveridge,  Unemployment  (1909),  p.  6 and  passim.  The  understanding  of  the 
exact  teaching  of  Malthus,  and  of  the  differences  between  the  first  edition  of 
the  Essay  (1798)  and  the  second  (1803),  has  been  facilitated  by  the  pubUcation 
of  Parallel  Chapters  from  the  First  and  Second  Editions  of  an  Essay  on  the 
Principle  of  Population  (1895). 


J. — The  Law  op  Diminishing  Return  (p.  188) 

Careful  restatements  in  general  accord  with  Mill’s  teaching  are  to  be  found 
in  Marshall,  Principles,  i.  bk.  iv.  ch.  3 ; and  Nicholson,  Prhiciples,  bk.  i.  ch.  10. 
For  the  results  of  the  Rothamsted  experiments,  showing  that  “ beyond  a 
certain  point  the  increase  of  crop  is  not  in  proportion  to  the  increase  in  the 
amount  of  manure  applied,”  see  Lawes,  Is  Higher  Farming  a Remedy  for 
Lower  Prices  ? Lecture  (1879)  ; and  Hall,  The  Book  of  the  Rothamsted  Experiments 
(1905).  The  extent  to  which  the  formula  of  diminishing  returns  covers  the  facts  of 
agricultural  development  is  discussed  by  SchmoUer,  Grundriss,  ii.  § 233  {Prin- 
cipes,  iv.  pp.  427  seq.).  But  while  Mill  and  the  older  theoretic  writers  dis- 
tinguished between  the  law  of  diminishing  return  in  agriculture  and  the  fact 
(by  some  called  the  law)  of  increasing  return  in  manufacture  (cf.  Marshall, 
Principles,  bk.  iv.  ch.  13,  § 2),  and  writers  of  the  historical  school  tend  to  mini- 
mise the  effect  of  the  law  of  diminishing  return  even  in  agriculture,  some  more 
recent  theoretic  writers  go  in  the  other  direction  and  declare  that  the  law  of 
diminishing  return  is  universal  and  applies  to  production  of  all  kinds.  For 
the  sense  in  which  they  use  such  language,  see  Clark,  Distribution  of  Wealth, 
p.  208,  and  Seligman,  Principles,  § 88. 


K. — Mill’s  Earlier  and  Later  Writings  on  Socialism  {p,  204) 

Mill’s  account  in  the  Preface  to  the  3rd  edition  of  the  nature  of  the  altera- 
tions there  made,  scarcely  give  an  adequate  impression  of  the  change  of  tone 
on  his  part  between  1848  and  1852.  The  total  impression  produced  by  the 
argument  of  1848  is  that  “ Socialism  ” was  probably  undesirable  and  imprac- 
ticable. Thus  the  difficulty  of  apportioning  labour  among  the  members  of  the 
community,  which  was  met  in  1852  by  an  expression  of  the  hope  that  “human 
inteUigence  would  not  be  inadequate  ” to  deal  with  it,  had  called  forth  in  1848 
the  following  remarks : 

“ In  the  existing  system  of  industry  these  things  do  adjust  themselves 
with  some,  though  but  a distant,  approach  to  fairness.  If  one  kind  of 
work  is  harder  or  more  disagreeable  than  another,  or  requires  a longer 
practice,  it  is  better  paid,  simply  because  there  are  fewer  competitors  for 
it ; and  an  individual  generally  finds  that  he  can  earn  most  by  doing  the 
thing  which  he  is  fittest  for.  I admit  that  this  self-adjusting  machinery 


BIBLIOGRAPHICAL  APPENDIX 


985 


does  not  touch  some  of  the  grossest  of  the  existing  inequalities  of  remunera- 
tion, and  in  jparticular  the  unjust  advantage  possessed  by  almost  the 
commonest  mental  over  almost  the  hardest  and  most  disagreeable  bodily 
labour.  Employments  which  require  any  kind  of  technical  education, 
however  simple,  have  hitherto  been  the  subject  of  a real  monopoly  as 
against  the  mass.  But  as  popular  instruction  advances,  this  monopoly  is 
already  becoming  less  complete,  and  every  increase  of  prudence  and  foresight 
among  the  people  encroaches  upon  it  more  and  more.” 

And  the  argument  concluded  thus  ; 

“ I believe  that  the  condition  of  the  operatives  in  a well-regulated  manu- 
factory, with  a great  reduction  of  the  hours  of  labour  and  a considerable 
variety  of  the  kind  of  it,  is  very  like  what  the  condition  of  all  would  be  in  a 
Socialist  community.  I believe  that  the  majority  would  not  exert  them- 
selves for  any  thing  beyond  this,  and  that  unless  they  did,  nobody  else  would ; 
and  that  on  this  basis  human  life  would  settle  itself  into  one  invariable  round. 
But  to  maintain  even  this  state,  the  limitation  of  the  propagative  powers 
of  the  community  must  be  as  much  a matter  of  public  regulation  as  every- 
thing else  ; since  under  the  supposed  arrangements  prudential  restraint 
would  no  longer  exist.  Now,  if  we  suppose  an  equal  degree  of  regulation 
to  take  place  under  the  present  syscem,  either  compulsorily,  or,  what  would 
be  so  much  preferable,  voluntarily  ; a condition  at  least  equal  to  what  the 
Socialist  system  offers  to  all  would  fall  to  the  lot  of  the  least  fortunate,  by 
the  mere  action  of  the  competitive  principle.  Whatever  of  pecuniary 
means  or  freedom  of  action  any  one  obtained  beyond  this,  would  be  so 
much  to  be  counted  in  favour  of  the  competitive  system.” 

It  is  true  that,  in  the  next  section,  he  went  on  to  say  : 

“ These  arguments,  to  my  mind  conclusive  against  Communism,  are 
not  applicable  to  St.  Simonism  ...  St.  Simonism  does  not  contemplate 
an  equal,  but  an  unequal,  division  of  the  produce.” 

But  he  judged  the  assumption  on  which  it  rested  “ almost  too  chimerical 
to  be  reasoned  against  ” ; and  began  the  next  section  thus  : 

“ There  has  never  been  imagined  any  mode  of  distributing  the  produce 
of  industry,  so  well  adapted  to  the  requirements  of  human  nature  on  the 
whole,  as  that  of  letting  the  share  of  each  individual  (not  in  a state  of  bodily 
or  mental  incapacity)  depend  in  the  main  on  that  individual’s  own  energies 
and  exertions,  and  on  such  furtherance  as  may  be  obtained  from  the  volun- 
tary good  offices  of  others.  It  is  not  the  subversion  of  the  system  of 
individual  property  that  should  be  aimed  at,  but  the  improvement  of  it.” 
In  the  3rd  edition,  it  should  be  noted,  the  treatment  of  the  subject  is  affected 
not  only  by  a modification  of  personal  opinion,  but  also  by  the  insertion,  which 
had  taken  place  in  the  2nd  edition,  of  the  account  of  Fourierism. 

In  1869  IMill  formed  the  design  of  writing  a book  on  Socialism  ; and  after 
nis  death  the  first  rough  drafts  of  the  work  were  published  by  his  step-daughter. 
Miss  Helen  Taylor,  in  the  Fortnightly  Review  for  February,  March,  and  April 
1879.  These  articles  indicate  a reversion  on  Mill’s  part  to  an  attitude  re- 
sembling more  closely  perhaps  his  state  of  mind  in  1848  than  that  in  1852. 
It  must  be  remembered  that  his  criticisms  bore  primarily  upon  the  Sociahst 
literature  of  his  own  time  (1869).  His  treatment  of  the  subject  was  so  carefully 
balanced  that  there  is  a certain  risk  of  giving  an  unfair  impression  of  the 
general  effect  of  the  argument  by  the  selection  of  a few  passages.  The  follow- 
ing passages,  taken  in  conjunction  with  the  chapters  in  the  Principles,  will, 
however,  indicate  with  sufficient  clearness  his  general  point  of  view. 

After  an  Introduction  on  the  importance  of  the  subject,  Mill  begins  by 
setting  forth  at  length  the  Socialist  objections  to  the  present  order  of  society, 
and  by  recognising  the  large  element  of  truth  in  them. 

“ But  the  strongest  case  is  susceptible  of  exaggeration  ; and  it  will  have 


986 


BIBLIOGRAPHICAL  APPENDIX 


been  evident  to  many  readers,  even  from  the  passages  I have  quoted,  that 
such  exaggeration  is  not  wanting  in  the  representations  of  the  ablest  and 
most  candid  Socialists.  Though  much  of  their  allegations  is  unanswerable, 
not  a little  is  the  result  of  errors  in  political  economy ; by  which,  let  me  say 
once  for  all,  I do  not  mean  the  rejection  of  any  practical  rules  of  policy 
which  have  been  laid  down  by  political  economists : I mean  ignorance  of 
economic  facts,  and  of  the  causes  by  which  the  economic  phenomena  of 
society  as  it  is,  are  actually  determined. 

“ In  the  first  place,  it  is  unhappily  true  that  the  wages  of  ordinary  labour 
in  aU  the  countries  of  Europe  are  wretchedly  insufficient  to  supply  the 
physical  and  moral  necessities  of  the  population  in  any  tolerable  measure. 
But  when  it  is  further  alleged  that  even  this  insufficient  remuneration  has 
a tendency  to  diminish ; that  there  is,  in  the  words  of  M.  Louis  Blanc,  une 
baisse  continue  des  salaires  ; the  assertion  is  in  opposition  to  aU  accurate 
information,  and  to  many  notorious  facts.  It  has  yet  to  bo  proved  that 
there  is  any  country  in  the  civilised  world  where  the  ordinary  wages  of 
labour,  estimated  either  in  money  or  in  articles  of  consumption,  are  decl^ng; 
while  in  many  they  are,  on  the  whole,  on  the  increase;  and  an  increase 
which  is  becoming  not  slower,  but  more  rapid.” 

The  following  passage  supplements  the  chapter  in  the  Principles  on  the 
theory  of  Profit : 

“ Another  point  on  which  there  is  much  misapprehension  on  the  part  of 
Socialists,  as  weU  as  of  Trades  Unionists  and  other  partisans  of  Labour 
against  Capital,  relates  to  the  proportions  in  which  the  produce  of  the 
country  is  really  shared,  and  the  amount  of  what  is  actually  diverted  from 
those  who  produce  it,  to  enrich  other  persons.  . . . With  respect  to  capital 
employed  in  business,  there  is  in  the  popular  notions  a great  deal  of  illusion. 
When,  for  instance,  a capitalist  invests  £20,000  in  his  business  and  draws  from 
it  an  income  of  suppose  £2000  a year,  the  common  impression  is  as  if  he 
was  the  beneficial  owner  both  of  the  £20,000  and  the  £2000,  while  the  labourers 
own  nothing  but  their  wages.  The  truth,  however,  is  that  he  only  obtains 
the  two  thousand  pounds  on  condition  of  applying  no  part  of  the  £20,000 
to  his  own  use.  He  has  the  legal  control  over  it,  and  might  squander  it  if 
he  chose,  but  if  he  did  he  would  not  have  the  £2000  a year  also.  As  long 
as  he  derives  an  income  from  his  capital  he  has  not  the  option  of  with- 
holding it  from  the  use  of  others.  As  much  of  his  invested  capital  as 
consists  of  buildings,  machinery  and  other  instruments  of  production,  is 
applied  to  production  and  is  not  applicable  to  the  support  or  enjo5rment  of 
any  one.  What  is  so  applicable  (including  what  is  laid  out  in  keeping  up 
or  renewing  the  buildings  and  instruments)  is  paid  away  to  labourers, 
forming  their  remuneration  and  their  share  in  the  division  of  the  produce. 
For  all  personal  purposes  they  have  the  capital  and  he  has  but  the  profits, 
which  it  only  yields  to  him  on  condition  that  the  capital  itself  is  employed 
in  satisfying,  not  his  own  wants,  but  those  of  labourers.  The  proportion 
which  the  profits  of  capital  usually  bear  to  the  capital  itself  (or  rather  to 
the  circulating  portion  of  it)  is  the  ratio  which  the  capitalist’s  share  of  the 
produce  bears  to  the  aggregate  share  of  the  labourers.  Even  as  his  own 
share  a small  part  only  belongs  to  him  as  the  owner  of  capital.  The  portion 
of  the  produce  which  falls  to  capital  merely  as  capital  is  measured  by  the 
interest  of  money,  since  that  is  all  that  the  ovmer  of  capital  obtains  when 
he  contributes  nothing  to  production  except  the  capita  itself.  Now  the 
interest  of  capital  in  the  public  funds,  which  are  considered  to  be  the  best 
security,  is  at  the  present  prices  (which  have  not  varied  much  for  many 
years)  about  three  and  one-third  per  cent.  Even  in  this  investment  there 
is  some  little  risk — ^risk  of  repudiation,  risk  of  being  obliged  to  sell  out  at  a 
low  price  in  some  commercial  crisis. 

“ Estimating  these  risks  at  one-third  per  cent.,  the  remaining  three  per 


BIBLIOGRAPHICAL  APPENDIX! 


98’ 


cent,  may  be  considered  as  the  remuneration  of  capital,  apart  from  insurance 
against  loss.  On  the  security  of  a mortgage  four  per  cent,  is  generally 
obtained,  but  in  this  transaction  there  are  considerably  greater  risks — the 
uncertainty  of  titles  to  land  under  our  bad  system  of  law  ; the  chance  of 
having  to  realise  the  security  at  a great  cost  in  law  charges  ; and  liability 
to  delay  in  the  receipt  of  the  interest,  even  when  the  principal  is  safe. 
When  mere  money  independently  of  exertion  yields  a larger  income,  as  it 
sometimes  does,  for  example,  by  shares  in  railway  or  other  companies,  the 
surplus  is  hardly  ever  an  equivalent  for  the  risk  of  losing  the  whole,  or  part, 
of  the  capital  by  mismanagement,  as  in  the  case  of  the  Brighton  Railway, 
the  dividend  of  which,  after  having  been  six  per  cent,  per  annum,  sunk  to 
from  nothing  to  one  and  one-half  per  cent.,  and  shares  which  had  been 
bought  at  120  could  not  be  sold  for  more  than  43.  ...  Of  the  profits, 
therefore,  which  a manufacturer  or  other  person  in  business  obtains  from 
his  capital  no  more  than  about  three  per  cent,  can  be  set  down  to  the 
capital  itself.  If  he  were  able  and  willing  to  give  up  the  whole  of  this  to 
his  labourers,  who  already  share  among  them  the  whole  of  his  capital  as  it 
is  annually  reproduced  from  year  to  year,  the  addition  to  their  weekly 
wages  would  be  inconsiderable.  Of  what  he  obtains  beyond  three  per  cent, 
a great  part  is  insurance  against  the  manifold  losses  he  is  exposed  to,  and 
cannot  safely  be  applied  to  his  own  use,  but  requires  to  be  kept  in  reserve 
to  cover  those  losses  when  they  occur.  The  remainder  is  properly  the 
remuneration  of  his  skill  and  industry — the  wages  of  bis  labour  of  super- 
intendence. No  doubt  if  he  is  very  successful  in  business  these  wages  of 
his  are  extremely  liberal,  and  quite  out  of  proportion  to  what  the  same 
skill  and  industry  would  command  if  offered  for  hire.  But  on  the  other 
hand  he  runs  a worse  risk  than  that  of  being  out  of  employment ; that  of 
doing  the  work  without  earning  anything  by  it,  of  having  the  labour  and 
anxiety  without  the  wages.  I do  not  say  that  the  drawbacks  balance  the 
privileges,  or  that  he  derives  no  advantage  from  the  position  that  makes 
him  a capitalist  and  employer  of  labour,  instead  of  a skilled  superintendent 
letting  out  his  service  to  others  ; but  the  amount  of  his  advantage  must  not 
be  estimated  by  the  great  prizes  alone.  If  we  subtract  from  the  gains  of 
some  the  losses  of  others  and  deduct  from  the  balance  a fair  compensation 
for  the  anxiety,  skill  and  labour  of  both,  grounded  on  the  market  price  of 
skilled  superintendence,  what  remains  will  be,  no  doubt,  considerable,  but 
yet,  when  compared  to  the  entire  capital  of  the  country,  annually  reproduced 
and  dispensed  in  wages,  it  is  very  much  smaller  than  it  appears  to  the 
popular  imagination  ; and  were  the  whole  of  it  added  to  the  share  of  the 
labourers  it  would  make  a less  addition  to  their  share  than  would  be  made 
by  any  important  invention  in  machinery,  or  by  the  suppression  of  un- 
necessary distributers  and  other  ‘ parasites  of  industry.’  . . . 

“ It  seemed  desirable  to  begin  the  discussion  of  the  Socialist  question  by 
these  remarks  in  abatement  of  Socialist  exaggerations,  in  order  that  the 
true  issues  between  Socialism  and  the  existing  state  of  society  might  be 
correctly  conceived.  The  present  system  is  not,  as  many  Socialists  believe, 
hurrying  us  into  a state  of  general  indigence  and  slavery  from  which  only 
Socialism  can  save  us.  The  evils  and  injustices  suffered  under  the  present 
system  are  great,  but  they  are  not  increasing  ; on  the  contrary,  the  general 
tendency  is  toward  their  slow  diminution.” 

Mill  then  opens  his  statement  of  the  objections  to  Socialism  with  the  follow'ing 
classification,  which  illustrates  the  extent  to  which  Socialist  propaganda  has 
changed  its  character  since  1869  ; 

“ Among  those  who  call  themselves  Socialists,  two  kinds  of  persons  may 
be  distinguished.  There  are,  in  the  first  place,  those  whose  plans  for  a new 
order  of  society — in  which  private  property  and  individual  competition 
are  to  be  superseded  and  other  motives  to  action  substituted — are  on  the 


BIBLIOGRAPHICAL  APPENDIX 


988 

scale  of  a village  community  or  township,  and  would  be  applied  to  an  entire 
country  by  the  multiplication  of  such  self-acting  units  ; of  this  character 
are  the  systems  of  Owen  and  Fourier,  and  the  more  thoughtful  and  philo- 
sophic Socialists  generally.  The  other  class,  who  are  more  a product  of 
the  continent  than  of  Great  Britain  and  may  be  called  the  revolutionary 
Socialists,  propose  to'  themselves  a much  bolder  stroke.  Their  scheme  is 
the  management  of  the  whole  productive  resources  of  the  country  by  one 
central  authority,  the  general  government.” 

Remarking  that : 

“ the  peculiarities,  however,  of  the  revolutionary  form  of  Socialism  will  be 
most  conveniently  examined  after  the  considerations  common  to  both  the 
forms  have  been  duly  weighed,” 
he  begins  by  pointing  out  that : 

“ the  distinctive  feature  of  Socialism  is  not  that  all  things  are  in  common, 
' but  that  production  is  only  carried  on  upon  the  common  account,  and  that 
the  instruments  of  production  are  held  as  common  property.” 

Accordingly  : 

“ The  question  to  be  considered  is,  whether  this  joint  management  is 
likely  to  be  as  efficient  and  successful  as  the  managements  of  private  industry 
by  private  capital.  And  this  question  has  to  be  considered  in  a double 
aspect : the  efficiency  of  the  directing  mind,  or  minds,  and  that  of  the 
simple  workpeople.” 

He  discusses  this,  first  in  relation  to  the  form  of  Socialism  which  he  calls 

“ simple  communism,  i.e.  equal  division  of  the  produce  among  all  the 
sharers,  or,  according  to  M.  Louis  Blanc’s  still  higher  standard  of  justice, 
apportionment  of  it  according  to  difference  of  need,  but  without  making  any 
difference  of  reward  according  to  the  nature  of  the  duty  nor  according  to 
the  supposed  merits  or  services  of  the  individual,” 
with  the  conclusion  that  its  success  would  depend  upon  a moral  education  for 
which  mankind  could  only  be  effectually  trained  by  communistic  association  : 
“It  is  for  Communism,  then,  to  prove,  by  practical  experiment,  its 
power  of  giving  this  training.  Experiments  alone  can  show  whether  there 
is  as  yet  in  any  portion  of  the  population  a sufficiently  high  level  of  moral 
cultivation  to  make  Communism  succeed,  and  to  give  the  next  generation 
among  themselves  the  education  necessary  to  keep  up  that  high  level 
permanently.  If  Communist  associations  show  that  they  can  be  durable 
and  prosperous,  they  will  multiply,  and  will  probably  be  adopted  by 
successive  portions  of  thq  population  of  the  more  advanced  countries  as 
they  become  morally  fitted  for  that  mode  of  life.” 

And,  going  on  then  to  “ those  other  forms  of  Socialism  which  recognise  the 
difficulties  of  Communism  and  contrive  means  to  surmount  them,”  of  which  the 
principal  was  Fourierism,  he  gives  reasons  for  the  opinion  that,  for  them,  “ practi- 
cal trial  ” is  no  less  necessary.  He  then  goes  on  to  the  other  main  division  : 
“ The  various  schemes  for  managing  the  productive  resources  of  the 
country  by  public  instead  of  private  agency  , . . are  at  present  workable 
only  by  the  elite  of  mankind,  and  have  yet  to  prove  their  power  of  training 
mankind  at  large  to  the  state  of  improvement  which  they  presuppose. 
Far  more,  of  course,  may  this  be  said  of  the  more  ambitious  plan  which  aims 
at  taking  possession  of  the  whole  land  and  capital  of  the  country,  and 
beginning  at  once  to  administer  it  on  the  public  account.  Apart  from  all 
consideration  of  injustice  to  the  present  possessors,  the  very  idea  of  con- 
ducting the  whole  industry  of  a country  by  direction  from  a single  centre 
is  so  obviously  chimerical  that  nobody  ventures  to  propose  any  mode  in 
which  it  should  be  done.” 

Mill’s  argument  with  regard  to  the  second  or  “ revolutionary  ” type  of 
Socialism  is  accordingly  based  upon  the  difficulty  of  “ the  problem  of  manage- 
ment.” And  his  final  conclusion  is  thus  expressed : 


BIBLIOGRAPHICAL  APPENDIX 


989 


“ The  preceding  considerations  appear  sufficient  to  show  that  an 
entire  renovation  of  the  social  fabric,  such  as  is  contemplated  by  Socialism, 
establishing  the  economic  constitution  of  society  upon  an  entirely  new 
basis,  other  than  that  of  private  property  and  competition,  however  valu- 
able as  an  ideal,  and  even  as  a prophecy  of  ultimate  possibilities,  is  not 
available  as  a present  resource,  since  it  requires  from  those  who  are 
to  carry  on  the  new  order  of  things  qualities  both  moral  and  intellectual, 
which  require  to  be  tested  in  all,  and  to  be  created  in  most ; and  this  cannot 
be  done  by  an  Act  of  Parliament,  but  must  be,  on  the  most  favourable 
supposition,  a work  of  considerable  time.  For  a long  period  to  come  the 
principle  of  individual  property  will  be  in  possession  of  the  field  ; and 
even  if  in  any  country  a popular  movement  were  to  place  Socialists  at  the 
head  of  a revolutionary  government,  in  however  many  ways  they  may 
violate  private  property  the  institution  itself  would  survive,  and  would 
either  be  accepted  by  them  or  brought  back  by  their  expulsion,  for  the  plain 
reason  that  people  will  not  lose  their  hold  of  what  is  at  present  their  sole 
reliance  for  subsistence  and  security  until  a substitute  for  it  has  been  got 
into  working  order.  Even  those,  if  any,  who  have  shared  among  themselves 
what  was  the  property  of  others  would  desire  to  keep  what  they  had 
acquired,  and  to  give  back  to  property  in  the  new  hands  the  sacredness 
which  they  had  not  recognised  in  the  old. 

“ But  though,  for  these  reasons,  individual  property  has  presumably  a 
long  term  before  it,  if  only  of  provisional  existence,  we  ire  not,  therefore, 
to  conclude  that  it  must  exist  during  that  whole  term  unm-xlified,  Dr  that  all 
the  rights  now  regarded  as  appertaining  to  property  bslong  to  it  inherertly, 
and  must  endure  while  it  endures.  On  the  contrary,  it  is  both  the  duty 
and  the  interest  of  those  who  derive  the  most  direct  benefit  from  the  laws 
of  property  to  give  impartial  consideration  to  all  proposals  for  rendering 
those  laws  in  any  way  less  onerous  to  the  majority.  . . . 

“ One  of  the  mistakes  oftenest  committed,  and  which  are  the  source  of 
the  greatest  practical  errors  in  human  affairs,  is  that  of  supposing  that  the 
same  name  always  stands  for  the  same  aggregation  of  ideas.  No  word 
has  been  the  subject  of  more  of  this  kind  of  misunderstanding  than  the 
word  property.  It  denotes,  in  every  state  of  society  the  larg  st  power  of 
exclusive  use  or  exclusive  control  over  things  (and  sometimes,  unfortunately, 
over  persons)  which  the  law  accords,  or  which  custom  in  that  state  of  society 
recognises  ; but  these  powers  of  exclusive  use  and  controi  are  very  various 
and  differ  greatly  In  different  countries  and  in  different  states  of  society.” 
And,  after  some  historical  illustrations  of  this  proposition,  he  concludes  ; 

“When,  therefore,  it  is  maintained,  rightly  or  wrongly,  that  some  change 
or  modification  in  the  powers  exercised  over  things  by  the  persons  legally 
recognised  as  their  proprietors  would  be  beneficial  to  the  public  and  conducive 
to  the  general  improvement,  it  is  no  good  answer  to  this  merely  to  say 
that  the  supposed  change  conflicts  with  the  idea  of  property.  The  idea  of 
property  is  not  some  one  thing  identical  throughout  history  and  incapable  of 
alteration,  but  is  variable  like  all  other  creations  of  the  human  mind  ; at 
any  given  time  it  is  a brief  expression  denoting  the  rights  over  things 
conferred  by  the  law  or  custom  of  some  given  society  at  that  time  ; but 
neither  on  this  point  nor  on  any  other  has  the  law  and  custom  of  a given  time 
and  place  a claim  to  be  stereotyped  for  ever.  A proposed  reform  in  laws 
or  customs  is  not  necessarily  objectionable  because  its  adoption  would 
imply,  not  the  adaptation  of  all  human  affairs  to  the  existing  idea  of  pro- 
perty, but  the  adaptation  of  the  existing  ideas  of  property  to  the  growth 
and  improvement  of  human  affairs.  This  is  said  without  prejudice  to  the 
equitable  claim  of  proprietors  to  be  compensated  by  the  state  for  such 
legal  rights  of  a proprietary  nature  as  they  mav  be  dispossessed  of  for  the 
public  advantage.” 


990 


BIBLIOGRAPHICAL  APPENDIX 


L. — ^Thb  Later  History  op  Socialism  (p.  217) 

It  will  be  observed  that  the  socialistic  writings  commented  on  by  Mill 
were  all  of  French  origin  and  were  none  of  them  subsequent  to  1869,  the  date 
of  Mill’s  articles  on  Socialism  referred  to  under  Appendix  K.  The  Socialism 
which  has  been  of  most  influence  in  later  years  has  been  of  German  origin,  and 
must  be  studied  in  the  writings  of  its  chief  exponents,  Karl  Marx,  Ferdinand 
Lassalle,  Rodbertus,  and  Friedrich  Engels.  The  most  notable  in  this  connexion 
of  those  of  LassaUe  were  ArheiUr'programm  (1862  ; Eng.  trans.  as  The  Working 
Man's  Programme)^  and  Herr  Bastiat  Schulze  von  Delitzschy  der  okonomische 
Julian  (1864  : French  trans.  by  Malon  as  Capital  ei  Travail) ; of  Rodbertus, 
Zur  Beleuchtung  der  Sozialen  Frage  (1875 ; containing  a new  edition  of  Soziale 
Briefe  an  v.  Kirchmann^  1850),  and  Die  Handelskrisen  (1858 ; Eng.  trans.  as 
Overproduciion  and  Crises^  1898) ; and  of  Engels  (in  conjunction  with  Marx), 
Manifest  der  Kommunistischen  Partei  (1848  : Eng.  trans.  revised  by  Engels 
1888),  and,  alone.  Die  Entvnckelung  der  Sozialismus  von  der  Utopie  zur  Wissen- 
schaft  (1882  : Eng.  trans.  as  Socialism,  Utopian  and  Scientific),  and  Introduc- 
tions to  Marx’s  Capital.  But  of  most  importance  for  the  theoretic  formulation 
of  Socialism  have  been  the  writings  of  Marx  (1818-1883) : Zur  Kritik  der  poli- 
tischen  Oekonomie  (1859),  and,  above  all.  Das  Kapital  (i.  1867  : Eng.  trans. 
Capital,  1887  ; ii.  1893  ; iii.  1894.  An  English  abstract  of  the  1st  vol.  by 
Avehng  appeared  in  1891  as  The  Student's  Marx).  Fundamental  ideas  in  the 
writings  of  Marx  were  those  of  Surplus- Value,  of  Class  War,  of  the  Concentration 
of  Wealth,  and  of  the  Materialist  Interpretation  of  History.  The  extent  to 
which  these  particular  teachings  have  been  abandoned  by  those  younger 
German  socialists  known  as  “ Revisionists  ” may  be  gathered  from  Bernstein, 
Die  Voraussetzungen  der  Sozialismus  (1899 ; Eng.  trans.  as  Evolutionary 
Socialism,  1909). 

Among  useful  books  on  the  history  of  Socialism  in  general,  and  of  German 
socialism  in  particular,  may  be  mentioned  ; Laveleye,  Le  Socialisme  Con- 
temporain  (1881  : Eng.  trans.  1885) ; Ely,  French  and  German  Socialism 
(1885) ; Gonner,  The  Social  Philosophy  of  Rodbertus  (1900) ; Rae,  Contemporary 
Socialism  (3rd  ed.  1901);  Brooks,  The  Social  Unrest  (1903);  Kirkup,  A 
History  of  Socialism  (3rd  ed.  1906) ; Ensor,  Modern  Socialism  (2nd  ed.  1907), — 
a most  useful  collection  of  typical  documents  and  speeches  from  all  the 
leading  countries  of  Europe ; and  Herkner,  Die  Arbeiterfrage  (5th  ed.  1908). 

English  socialism  has  pursued  in  some  respects  a line  of  development  of  its 
own ; and  it  may  be  studied  in  Fabian  Essays  in  Socialism  (1889  : Reprint, 
with  a significant  preface,  1908) ; various  Fabian  Tracts,  especially  Shaw, 
The  Fabian  Society  (1892) ; Macdonald,  Socialism  and  Society  (1905) ; Wells,  New 
Wc/rlds  for  Old  (1908) ; and  Villiers,  The  Socialist  Movement  in  England  (1908). 

Two  popular  wor^  which  have  had  a very  large  circulation  are,  in  America, 
Bellamy,  Looking  Backward  (1890),  and  in  England,  Blatchford,  Merrie  Eng- 
land (ISd^). 

For  French  socialism  see  Jaures,  Studies  in  Socialism  (Eng.  trans.  1906) ; 
Lavy,  L' Oeuvre  de  Millerand  (1902);  and  Millerand,  Travail  et  Travailleurs 
(1908) ; for  the  recent  developments  of  “ Revolutionary  Syndicalism,” 
Gide  and  Rist,  Histoire  des  Doctrines  Pconomiques  (1909);  and  for  Belgian 
socialism,  Destree  and  Vandervelde,  Le  Socialisme  en  Belgique  (1903). 

Among  criticisms  of  socialism  in  various  forms  and  aspects  may  be  singled 
out  Herbert  Spencer,  The  Man  v.  The  State  (1884);  Courtney,  The  Difficulties 
of  Socialism,  in  Econ.  Journal,  L (1891);  Schaffle,  The  Impossibility  of 
Social  Democracy  (Eng.  trans.  1892);  Richter,  Pictures  of  the  Socialistic 
Future  (Eng.  trans.  1893);  Devas,  Political  Economy  (2nd  1901),  bk.  ii. 
ch.  7;  Strachey,  Problems  and  Perils  of  Socialism  (1908)  ;'^and  Mallock,  A 
Critic^  Examination  of  Socialism  (1909).  An  individualist  position  is  ably 


BIBLIOGRAPHICAL  APPENDIX 


maintained  ic  the  writings  of  Helen  Bosanquet,  especially  The  Strength  of  the 
People  (1902). 


M. — Indian  Tenures  (p.  328) 

The  whole  subject  must  now  be  studied  in  the  works  of  the  late  B.  H. 
Baden- Powell,  and  especially  in  the  three  massive  volumes  The  Land  Systems 
of  British  India  (1892),  and  the  brief  text-book  based  upon  that  work,  Land 
Revenue  in  British  India  (1894).  See  also  his  Indian  Village  Community  (1896), 
and  the  more  popular  Village  Communities  in  India  (1899) ; and  on  the 
special  subject  of  the  Origin  of  Zamindari  Estates  in  Bengal^  his  article  under 
that  title  in  the  (Harvard)  Quarterly  Journal  of  Economics,  xi.  (Oct.  1896). 


— Irish  Agrarian  Development  (p.  342) 

The  Irish  Land  Act  of  1870  marked  the  beginning  of  an  attempt  to  solve 
the  agrarian  problem  in  accordance  with  the  principle  popularly  described  as 
“ dual  ownership,”  by  giving  the  tenants  a right  to  “ compensation  for  disturb- 
ance.” The  great  Land  Act  of  1881  carried  the  process  much  further  by 
accepting  the  proposals  known  as  “ the  three  F’s  ” (fair  rents,  free  sale  of 
tenants’  interests,  and  fixed  tenure),  and  establishing  a Land  Court  to  fix 
“ judicial  rents  ” for  a term  of  years.  By  the  Land  Act  of  1903,  however,  a new 
departure  was  made ; and  machinery  was  provided  for  the  voluntary  trans- 
ference to  the  tenants  of  the  land  still  in  the  hands  of  the  landlords,  on  terms 
attractive  to  both  parties.  This  measure  and  the  subsequent  amending  and 
supplementary  Acts  will  probably,  in  no  long  time,  bring  about  the  establish- 
ment of  a system  of  peasant  proprietorship  over  a great  part  of  Ireland.  It 
should  be  added  that  there  has  of  recent  years  been  a rapid  growth  among  Irish 
farmers  of  various  forms  of  co-operation.  For  a brief  account  of  the  Act  of  1881 
and  of  its  relation  to  contemporary  Nationalism,  see  Low  and  Sanders,  Political 
History  of  England  during  the  reign  of  Victoria  (1907).  The  least  biassed  accounts 
of  Irish  agrarian  history  during  the  last  forty  years  are  perhaps  to  be  found  in 
a brief  work  by  a German  economist.  Dr.  Bonn,  Modern  Ireland  and  her  Agrarian 
Problem  (Eng.  trans.  1906),  and  in  Bastable’s  articles  in  the  (Harvard)  Quarterly 
Journal  of  Economics,  xviii.  (Nov.  1903),  and  in  the  Economic  Journal,  xix. 
(March  1909).  On  the  movement  towards  co-operation  among  farmers,  see 
Plunkett,  Ireland  in  the  New  Century  (1903),  part  ii.  The  details  of  the  history 
are  best  looked  for  in  the  reports  of  Royal  Commissions  and  similar  documents, 
such  as  the  Report  of  the  Royal  Commission  of  1880-1,  and  of  the  Royal  Commis- 
sion of  1886-7,  the  Report  of  the  Select  Committee  of  the  House  of  Commons  of 
1894  (“  Morley’s  Committee”),  and  the  Report  of  the  Royal  Commission  of 
1897-8  (“  Fry’s  Commission  ”),  together  with  a Report  by  Mr.  W.  F.  Bailey, 
Legal  Assistant-Commissioner,  of  an  Inquiry  into  the  Present  Condition  of  Tenant 
Purchasers  (1903),  the  Reports  of  the  Irish  Agricultural  Organisation  Society  (from 
1895),  and  of  the  Irish  Department  of  Agriculture  and  Technical  Instruction 
(from  1901).  See  also  Coyne,  Ireland,  Industrial  and  Commercial  (pub.  by 
Irish  Dep.  of  Agriculture,  1902),  and  for  the  text  of  the  Acts,  Cherry  and  Barton, 
Irish  Land  Law. 


O. — The  Wages  Fund  Doctrinb  {p.  344) 

This  doctrine  was  formally  abandoned  by  Mill  himself  in  the  course  of  a 
review  of  Thornton’s  Labour  in  the  Fortnightly  Review  for  May  1869,  reprinted 
in  his  Dissertations  and  Discussions,  iv.  The  central  passages  of  this  aiticle 
we  as  follows  {Dissertations,  iv.  pp.  42  seq.) : 


m 


BIBLIOGRAPHICAL  APPENDIX 


“ It  will  be  said  that  . . . supply  and  demand  do  entirely  govern  the 
price  obtained  for  labour.  The  demand  for  labour  consists  of  the  whole 
circulating  capital  of  the  country,  including  what  is  paid  in  wages  for 
unproductive  labour.  The  supply  is  the  whole  labouring  population.  If 
the  supply  is  in  excess  of  what  the  capital  can  at  present  employ,  wages 
must  fall.  If  the  labourers  are  all  employed,  and  there  is  a surplus  of 
capital  still  unused,  wages  will  rise.  This  series  of  deductions  is  generally 
received  as  incontrovertible.  They  are  found,  I presume,  in  every  syste- 
matic treatise  on  political  economy,  my  own  certainly  included.  I must 
plead  guilty  to  having,  along  with  the  world  in  general,  accepted  the  theory 
without  the  qualifications  and  limitations  necessary  to  make  it  admissible. 

“The  theory  rests  on  what  may  be  called  the  doctrine  of  the 
wages  fund.  There  is  supposed  to  be,  at  any  given  instant,  a sum  of 
wealth,  which  is  unconditionally  devoted  to  the  payment  of  wages  of 
labour.  This  sum  is  not  regarded  as  unalterable,  for  it  is  augmented  by 
saving,  and  increases  with  the  progress  of  wealth  ; but  it  is  reasoned  upon 
as  at  any  given  moment  a predetermined  amount.  More  than  that  amount 
it  is  assumed  that  the  wages-receiving  class  cannot  possibly  divide  among 
them ; that  amount,  and  no  less,  they  cannot  but  obtain.  So  that,  the 
sum  to  be  divided  being  fixed,  the  wages  of  each  depend  solely  on  the 
divisor,  the  number  of  participants.  . . . 

“ But  is  there  such  a thing  as  a wages-fund,  in  the  sense  here  implied  ? 
Exists  there  any  fixed  amount  which,  and  neither  more  nor  less  than  which, 
is  destined  to  be  expended  in  wages  ? 

“ Of  course  there  is  an  impassable  limit  to  the  amount  which  can  be  so 
expended  ; it  cannot  exceed  the  aggregate  means  of  the  employing  classes. 
It  cannot  come  up  to  those  means ; for  the  employers  have  also  to  main- 
tain themselves  and  their  families.  But,  short  of  this  limit,  it  is  not,  in 
any  sense  of  the  word,  a fixed  amount. 

“ In  the  common  theory,  the  order  of  ideas  is  this : The  capitalist’s 
pecuniary  means  consist  of  two  parts — his  capital,  and  his  profits  or  income. 
His  capital  is  what  he  starts  with  at  the  beginning  of  the  year,  or  when  he 
commences  some  round  of  business  operations;  his  income  he  does  nos 
receive  until  the  end  of  the  year,  or  until  the  round  of  operations  it 
completed.  His  capital,  except  such  part  as  is  fixed  in  buildings  and 
machinery,  or  laid  out  in  materials,  is  what  he  has  got  to  pay  wages  with. 
He  cannot  pay  them  out  of  his  income,  for  he  has  not  yet  received  it.  When 
he  does  receive  it,  he  may  lay  by  a portion  to  add  to  his  capital,  and  as  such 
it  will  become  part  of  next  year’s  wages-fund,  but  has  nothing  to  do  with 
this  year’s. 

“ This  distinction,  however,  between  the  relation  of  the  capitalist  to  his 
capital,  and  his  relation  to  his  income  is  wholly  imaginary.  He  starts  at 
the  commencement  with  the  whole  of  his  accumulated  means,  all  of  which 
is  potentially  capital ; and  out  of  this  he  advances  his  personal  and  family 
expenses,  exactly  as  he  advances  the  wages  of  his  labourers.  ...  If  we 
choose  to  call  the  whole  of  what  he  possesses  applicable  to  the  payment  of 
wages,  the  wages-fund,  that  fund  is  co-extensive  with  the  whole  proceeds  of 
his  business,  after  keeping  up  his  machinery,  buildings  and  materials,  and 
feeding  his  family  ; and  it  is  expended  jointly  upon  himself  and  his  labourers. 
The  less  he  expends  on  the  one,  the  more  may  be  expended  on  the  other,  and 
vice  versd.  The  price  of  labour,  instead  of  being  determined  by  the  division 
of  the  proceeds  between  the  employer  and  the  labourers,  determines  it.  If 
he  gets  his  labour  cheaper,  he  can  afford  to  spend  more  upon  himself.  If  he 
has  to  pay  more  for  labour,  the  additional  payment  comes  out  of  his  own 
income ; perhaps  from  the  part  which  he  would  have  saved  and  added  to 
capital,  thus  anticipating  his  voluntary  economy  by  a compulsory  one; 
perhaps  from  what  he  would  have  expended  on  his  private  wants  or  pleasures. 


BIBLIOGRAPHICAL  APPENDIX 


993 


There  is  no  law  of  nature  making  it  inherently  impossible  for  wages  to  rise 
to  the  point  of  absorbing  not  only  the  funds  which  he  had  intended  to 
devote  to  carrying  on  his  business,  but  the  whole  of  what  he  allows  for  his 
private  expenses,  beyond  the  necessaries  of  life.  The  real  limit  to  the  rise 
is  the  practical  consideration,  how  much  would  ruin  him  or  drive  him  to 
abandon  the  business  : not  the  inexorable  limits  of  the  wages-fund. 

“ In  short,  there  is  abstractedly  available  for  the  payment  of  wages, 
before  an  absolute  limit  is  reached,  not  only  the  employer’s  capital,  but 
the  whole  of  what  can  possibly  be  retrenched  from  his  personal  expenditme  ; 
and  the  law  of  wages,  on  the  side  of  demand,  amounts  only  to  the  obvious 
proposition,  that  the  employers  cannot  pay  away  in  wages  what  they  have 
not  got.  On  the  side  of  supply,  the  law  as  laid  down  by  economists 
remains  intact.  The  more  numerous  the  competitors  for  employment, 
the  lower,  ccBteris  paribus,  wiU  wages  be.  . . . 

“ But  though  the  population  principle  and  its  consequences  are  in  no 
way  touched  by  anything  that  Mr.  Thornton  has  advanced,  in  another  of 
its  bearings  the  labour  question,  considered  as  one  of  mere  economics, 
assumes  a materially  changed  aspect.  The  doctrine  hitherto  taught  by  all 
or  most  economists  (including  myself),  which  denied  it  to  be  possible 
that  trade  combinations  can  raise  wages,  or  which  limited  their  operations 
in  that  respect  to  the  somewhat  earlier  attainment  of  a rise  which  the 
competition  of  the  market  would  have  produced  without  them, — this  doctrine 
is  deprived  of  its  scientific  foundation,  and  must  be  thrown  aside^  The 
right  and  wrong  of  the  proceedings  of  Trade  Unions  becomes  a common 
question  of  prudence  and  social  duty,  not  one  which  is  peremptorily 
decided  by  unbending  necessities  of  political  economy.” 

In  spite  of  the  remonstrances  of  Cairnes,  and  his  attempt  to  restate  the 
Wages  Fund  doctrine  in  a more  satisfactory  form,  in  his  Leading  Principles, 
part  ii.  ch.  1,  it  may  be  said  to  be  abandoned  now  by  all  economists,  at  any  rate 
in  the  form  in  which  it  was  stated  by  Mill.  For  a criticism  of  Mill’s  retractation, 
and  a statement  of  a sense  in  which  it  may  stiU  be  allowable  to  speak  of  a 
Wages  Fund,  see  Taussig,  Wages  and  Capital,  an  Examination  of  the  Wages 
Fund  Doctrine  (N.  Y.  1896),  especially  part  ii.  ch.  11.  And  see  Sidgwick, 
Principles,  bk.  ii.  ch.  8,  § 2 ; Marshall,  Principles,  i.  App.  J : The  Doctrine  of 
(he  Wages  Fund  ; and  Nicholson,  Principles,  bk.  ii.  ch.  10,  § 8. 


P. — ^Thb  Movement  op  Population  (p,  360) 

The  rate  of  growth  of  the  population  of  the  several  parts  of  the  United 
Kingdom  is  shown  by  the  following  table : 


Population. 

Rates  of  decennial  increase 
or  decrease  on  preceding 
census. 

Year. 

T3 

Wales. 

(+) 

"a 

. 

England. 

Wales. 

Scotland. 

Ireland. 

m 

S'" 

QQ 

Irelan( 

(-) 

1851 

16,926,348 

1,001,261 

2,888,742 

6,552,385 

12-8 

10-5 

10*2 

19*8 

1861 

18,958,103 

1,108,121 

3,062,294 

5,798,967 

12-0 

10*7 

6-0 

11-5 

1871 

21,498,642 

1,213,624 

3,360,018 

5,412,377 

13*4 

9-5 

9-7 

6-7 

1881 

24,617,266 

1,357,173 

3,735,573 

5,174,836 

14-5 

11*8 

11*2 

4-4 

1891 

27,487,525 

1,515,000 

4,025,647 

4,704,750 

11-7 

11-6 

7*8 

9T 

1901 

30,811,420 

1,716,423 

4,472,103 

4,458,775 

12-1 

13-3 

1 

111 

5-2 

2 K 


994 


BIBLIOGRAPHICAL  APPENDIX 


The  factors  in  the  increase  of  population  are  evidently  (1)  migration, 
(2)  the  “ natural  increase  ” of  population,  i.e.  the  excess  of  births  over  deaths. 
The  annual  natural  increase  has  fallen  in  England  and  Wales  from  14*5  per 
1000  of  the  population  for  the  period  1876-1880,  to  12*1  in  1901-1905,  in 
consequence  of  the  fact  that  though  the  death-rate  feU  from  20*8  to  16 
per  thousand,  the  birth-rate  fell  from  35*3  to  28’1.  The  birth-rate  in 
England  and  Wales,  for  the  period  since  the  Civil  Registration  Act  of  1837, 
reached  its  maximum  in  the  period  1870-1876,  and  has  since  shown  a material 
decline. 

The  extent  of  this  decline  is  shown  in  the  next  table ; 


Birth-rates  (England  and  Wales). 


1 

Period. 

1 

Average  Annual  Crud6 
Birth-rate  per  1000  of 
Total  Population. 

Average  Annual  Corrected 
Birth-rate  per  1000  of 
Female  Population 
aged  15-^  years. 

1876-1880  .... 

35*3 

153*3 

1881-1885  .... 

33*5 

144*3 

1886-1890  .... 

31*4 

133*4 

1891-1895  .... 

30*5 

126*8 

1896-1900  .... 

29*3 

118*8 

1901-1905  .... 

28-1 

112*5 

1906  

27*1 

108*3 

1907  

26*3 

105*1 

As  regards  the  decline  in  the  birth-rate  generally,  the  Registrar-General 
observes  : 

“ There  are  sufficient  grounds  for  stating  that  during  the  past  30 
years  approximately  14  per  cent,  of  the  decline  in  the  birth-rate 
(based  on  the  proportion  of  births  to  the  female  population  aged  15-45 
years)  is  due  to  the  decrease  in  the  proportion  of  married  women  in  the 
female  population  of  conceptive  ages,  and  that  over  7 per  cent,  is  due  to 
the  decrease  of  illegitimacy.  With  regard  to  the  remaining  79  per  cent, 
of  the  decrease,  although  some  of  the  reduced  fertility  may  be  ascribed  to 
changes  in  the  age  constitution  of  married  women,  there  can  be  little  doubt 
that  much  of  it  is  due  to  deliberate  restriction  of  child-bearing.” 

The  decline  in  the  birth-rate,  whatever  may  be  its  cause,  is  a feature  common 
to  the  birth  statistics  of  most  European  countries.  The  statistics  may  be 
studied  in  the  General  Report  on  the  Census  of  1901,  and  in  the  Annual  Reports 
of  the  Registrar -General.  The  figures  are  conveniently  collected  in  the  Blue- 
book,  Public  Health  and  Social  Conditions^  prepared  by  the  Local  Government 
Board  (1909).  The  most  detailed  statistical  analysis  of  the  facts  is  to  be 
found  in  a paper  by  Newsholme  and  Stevenson,  and  another  by  Yule,  in  the 
Journal  of  the  Royal  Statistical  Society  (March  1906). 


Q.— Peomts  (p.  421) 

The  most  powerful  impulse  to  fresh  discussion  of  the  nature  of  profits  was 
given  by  the  late  General  Walker,  in  the  emphasis  laid  by  him  on  “ the  function 
of  the  entrepreneur,''^  and  his  view  that  “ profits  are  a species  of  the  same  genus 
as  rent,”  and  “ do  not  form  a part  of  the  price  of  manufactured  products  ” ; 


BIBLIOGRAPHICAL  APPENDIX 


995 


■ee  his  Wages  Question  (1876),  oh.  14,  and  Political  Economy  (1883).  In  this 
discussion  it  has  become  usual  to  distinguish  more  sharply  than  the  earlier 
writers  between  Interest  and  “ pure  ” or  “ net  ” Profits ; and  there  is  now  a 
large  literature  on  both  these  topics.  As  to  Interest,  much  influence  has  been 
exerted  by  the  doctrine  of  the  Austrian  writer,  Bohm-Bawerk,  which  explains 
interest  as  “ a premium  on  present  as  against  future  things  ” ; see  Bdhm- 
Bawerk,  Capital  and  Interest  (Eng.  trans.  1890),  and  Positive  Theory  of  Capital 
(Eng.  trans.  1891).  Of  the  writings  this  has  called  forth  it  may  be  sufficient 
to  refer  to  Pierson,  Principles  of  Economics  (Eng.  trans.  1902),  part  i.  ch.  4,  § 5, 
and  to  Cassel,  The  Nature  and  Necessity  of  Interest  (1903). 

On  Profit,  recent  writings  are  largely  influenced  by  the  conceptions  of 
(1)  a “ quasi-rent,”  (2)  “ the  marginal  entrepreneur,”  and  (3)  “ long  and  short 
periods.”  The  present  state  of  the  discussion  may  bo  seen  in  Marshall, 
Principles^  bk.  vi.  chs.  6-8 ; Clark,  Essentials  of  Economic  Theory  (1907),  pp. 
117  seq.;  Seager,  Introduction  to  Economics  (3rd  ed.  1906),  ch.  10;  and  in 
Conrad’s  Orundriss^  § 84,  and  Gide’s  Cours^  pp.  674  seq.  The  treatment  of  the 
subject  by  SchmoUer,  Orundriss,  §§  231-2  {Principes,  vol.  iv.),  will  be  found 
illuminating.  The  “ tendency  ” of  profits  and  wages  to  an  equality  has  been 
commented  upon  frequently  by  Cliffe  Leslie,  as  in  his  articles  on  The  Political 
Economy  of  Adam  Smith  and  On  the  Philosophical  Method  of  Political  Economy, 
reprinted  in  his  Essays  (1879). 


R. — Rent  (p.  434) 

Criticisms  of  the  Ricardian  doctrine  of  rent,  or  of  its  formulation,  are  to  bo 
found  in  Sidgwiok,  Principles,  bk.  ii.  ch.  8,  and  in  Nicholson,  Principles,  vol.  i. 
bk.  ii.  ch.  14 ; and  it  is  restated  in  Pierson,  Principles,  pt.  i.  ch.  2,  and  in 
Marshall,  Principles,  bk.  vi.  ch.  9. 


S. — The  Theory  of  Value  (p.  482) 

It  is  on  this  subject — ^as  to  which  Mill  remarked,  in  1848,  that  “ happily 
there  is  nothing  in  the  laws  of  value  which  remains  for  the  present  or  any 
future  writer  to  clear  up  ; the  theory  of  the  subject  is  complete  ” (p.  436) — that 
theoretic  discussion  has  mainly  turned  during  the  last  four  decades,  owing  chiefly 
to  the  writings  of  Jevons,  of  Monger  and  the  other  representatives  of  the  Austrian 
school,  and  of  Clark  and  his  American  followers.  The  characteristic  of  all 
these  writers  is  to  approach  the  problem  from  the  side  of  demand,  and  to  find 
the  key  to  value  in  Final  or  Marginal  Utility  {Chrenznutz).  The  best  intro- 
duction to  the  discussion  is  through  Jevons,  Theory  of  Political  Economy  (1871 ; 
2nd  ed.  revised,  1879),  chs.  3 and  4 ; and  through  Sonar’s  article  on  The  Austrian 
Economists  in  the  (Harvard)  Quarterly  Journal  of  Economics,  iii.  (Oct.  1888) ; 
and  Smart,  An  Introduction  to  the  Theory  of  Valve  on  the  lines  of  Menger,  Wieser 
and  Bohm-Bawerk  (1891).  Wieser’s  Natural  Value  (Eng.  trans.  1893)  attempts 
to  apply  the  doctrine  to  the  whole  problem  of  Distribution.  For  the  present 
state  of  the  discussion  see  Marshall,  Principles,  i.  bk.  v. ; Clark,  Essentials, 
chs.  6 and  7 ; and  SchmoUer,  Orundriss,  §§  171-2  (in  French,  Principes,  vol.  iii.). 

MiU’s  doctrine  of  Cost  of  Production  was  attacked  by  Caimes  in  his  Some 
Leading  Principles  of  Political  Economy  newly  expounded  (1874),  soon  after 
MiU’s  death.  See  hereon  MarshaU  in  Fortnightly  Review  (April  1876),  and 
Principles,  book  v.  ch.  3,  § 2.  Cairnes  contributed  an  important  consideration 
to  the  discussion  by  the  emphasis  which  he  laid  on  **  Non-competing  Groups.** 


996 


BIBLIOGRAPHICAL  APPENDIX 


T. — The  Vaetje  of  Money  (p.  506) 

For  other  expositions  of  “ the  Quantity  Theory  of  Prices,”  see  Walker, 
JfoTicy  (1878),  chs.  3-8 ; and  Nicholson,  Money  and  Monetary  Problems  (1888  ; 
4th  ed.  1897),  chs.  5-7.  For  a criticism,  see  Scott,  Money  and  Banking  (N.  Y. 
1903),  ch.  4.  An  attempt  to  test  the  doctrine  statistically  is  made  by  Kemmerer, 
Money  and  Credit  Instruments  in  their  relation  to  General  Prices  (N.  Y.  1907). 
For  the  sense  of  “ money  ” in  modem  business,  see  Withers,  The  Meaning  of 
Money  (1909). 


U. — Bimetallism  (p.  510) 

For  the  main  points  of  the  controversy  on  this  subject,  which  had  hardly 
begun  when  Mill  wrote  in  1848,  see  Jevons,  Money  (1875),  ch.  12  (with  his 
acceptance  of  the  view  of  the  “ compensatory  action  ” of  a double  standard 
system) ; Gibbs  and  Grenfell,  The  Bimetallic  Controversy  (1886), — a collection 
of  pamphlets,  speeches,  &c.,  on  both  sides ; Nicholson,  Money  and  Monetary 
Problems ; Walker,  Irdernational  Bimetallism  (1896) ; Darwin,  Bimetallism 
(1898) ; and  Carlile,  The  Evolution  of  Modern  Money  (1901).  An  extreme 
monometallist  position  is  represented  in  Giffen,  Case  against  Bimetallism 
(1892). 


^ V. — Intebnatiosal  Values  (p.  606) 

The  Ricardian  doctrine,  followed  and  carried  further  by  Mill,  has  hitherto 
remained  the  almost  exclusive  possession  of  English  economists.  It  has  been 
expounded  by  Caimes,  Leading  Prinjci'ples,  part  iii.  ch.  3,  and  by  Bastable, 
Theory  of  Intematiorud  Trade  (2nd  ed.  1897).  It  has  been  objected  to  from 
two  diametrically  opposite  points  of  view.  Transferability  of  capital  and 
labour,  it  has  been  argued,  is  true  of  international  trade  as  well  as  of  domestic, 
BO  that  no  separate  theory  is  necessary  for  the  determination  of  international 
values ; e.g.  Hobson,  International  Trade  (1904).  On  the  other  hand  it  has  been 
asserted  that  such  a transferability  is  true  neither  of  domestic  nor  of  inter- 
national trade,  and  that  therefore  it  is  necessary  to  reject  both  the  Ricardian 
doctrine  of  homo  values  and  the  Ricardian  doctrine  of  international  values ; 
e.g.  Cliffe  Leslie,  Essays  in  Political  and  Moral  Philosophy  (1879),  Preface. 
A different  theory  has  been  put  forward  by  Sidgwick,  Principles,  bk.  ii.  ch.  3. 
A mathematical  treatment  of  the  whole  subject,  with  a criticism  of  all  the 
leading  writers,  will  be  found  in  a series  of  articles  by  Edgeworth  on  The  Theory 
of  Interrvatiorud  Values  in  the  Economic  Journal,  vol.  iv.  (1894).  Bastable  and 
Edgeworth,  while  admiring  and  accepting  Mill’s  first  statement  of  the  theory 
(ch.  18,  §§  1-5),  agree  in  regarding  “ the  superstructure  of  later  date  ” (§§  6-8) 
as  “ laborious  and  confusing.” 


W. — ^The  Regulation  op  Currency  (p.  677) 

The  question  of  the  effect  of  the  Bank  Charter  Act  has  lost  much  of  its 
importance  in  consequence  of  the  growing  use  of  cheques.  These  cheques  are 
now  largely  drawn  not  against  actual  deposits  but  against  banking  credits; 
so  that  banks,  while  abandoning  more  and  more  the  issue  of  notes,  “ manu- 
facture money  ” on  a vast  scale  in  another  way.  Hereon  see  Withers,  Meaning 


BIBLIOGRAPHICAL  APPENDIX 


991 


of  Money,  chs.  3 and  6.  On  the  effect  of  an  increase  in  the  supply  of  gold,  see 
Walker,  Money,  pt.  i.  oh.  4,  and  Withers,  ch.  1. 


X. — Prices  in  the  Nineteenth  Century  (p.  704) 

The  actual  movement  of  prices  has  been  much  investigated  since  the  time 
of  Mill ; and  attempts,  in  large  measure  successful,  have  been  made  by  Jevons 
and  others  to  reduce  the  statement  of  it  to  precision  by  the  use  of  Index  Numbers. 
On  the  theory  and  practice  of  Index  Numbers,  see  article  by  Edgeworth,  a.  v., 
in  Palgrave’s  Dictionary  of  Political  Economy,  vol.  ii.  ; Fountain’s  Memorandum 
in  Report  on  Wholesale  and  Retail  Prices  (Board  of  Trade,  1903) ; and  the 
article  of  Flux  in  (Harvard)  Quarterly  Journal  of  Economics  (Aug.  1907). 

The  following  table,  taken  from  the  Blue-book  of  the  Local  Government 
Board  on  Public  Health  and  Social  Conditions  (1909),  presents  the  conclusions 
of  Sauerbeck  as  to  prices,  and  of  Bowley  as  to  wages,  in  a form  convenient  for 
comparison. 


Index  Numbers  showino  Course  op  Average  Wholesale  Prices  ani 
General  Money  Wages. 


[The  wages  and  prices  in  1850  being  taken  as  100  ; wages  and  prices  in  oths) 
years  in  percentages  of  1850  figures.] 


Tear. 

Index  Numbers  of 

Year. 

Index  Numbers  of 

Prices. 

Wages. 

Prices. 

Wages. 

1850 

100 

100 

1895 

80-5 

159-2 

1855 

131-2 

— 

1896 

79-2 

160-7 

1897 

80-5 

162-3 

1860 

128-6 

119-2 

1898 

83-1 

166-5 

1899 

88-3 

170-4 

1865 

131-2 

127-5 

1900 

97-4 

178-7 

1870 

124-7 

134-1 

1901 

90-9 

177-0 

1902 

89-6 

174-7 

1875 

124-7 

161-4 

1903 

89-6 

173-7 

1904 

90-9 

172-8 

1880 

114-3 

148-8 

1905 

93-5 

173-3 

1885 

93-5 

149-4 

1906 

100-0 

175-7 

1907 

103-9 

181-7 

1890 

93-5 

161-3 

Note. — The  Index  Numbers  here  given  have  been  calculated  as  regards 
Wages  for  the  years  to  1873  on  the  averages  ascertained  by  Mr.  Bowley — see 
the  Economic  Journal  (Dec.  1898)  and  the  Journal  of  the  Royal  StatisticM.1 
Society  (Dec.  1899) — and  for  later  years  on  the  percentages  in  the  \2th  Abstract 
of  Labour  Statistics  of  the  United  Kingdom  (190(>-7\  p.  54.  As  regards  Prices, 

2 K 2 


998 


BIBLIOGRAPHICAL  APPENDIX 


the  Numbers  are  based  on  the  Index  Numbers  calculated  by  Mr.  Sauerbeck — 
see  Report  on  Wholesale  and  Retail  Prices  (1903),  p.  451,  and  particulars  in  the 
Journal  of  the  Royal  Statistical  Society  (March  1908). 

With  this  may  be  compared  the  calculation  of  the  Board  of  Trade,  taking 
the  level  of  1900  as  100,  as  given  in  the  Twelfth  Abstract  of  Labour  Statistics  (1908), 

p.  80. 


Index  Numbers  of  Wholesale  Prices,  1871-1907.  1900  = 100. 


Tear. 

Index 

No. 

Tear. 

Index 

No. 

Tear. 

Index 

No. 

Tear. 

Index 

No. 

1871 

136-0 

1881 

127-3 

1891 

107-4 

1901 

96-9 

1872 

145-8 

1882 

128-4 

1892 

101-8 

1902 

96-5 

1873 

152-7 

1883 

126-8 

1893 

100-0 

1903 

96-9 

1874 

148-1 

1884 

114-7 

1894 

94-2 

1904 

98-3 

1875 

141-4 

1885 

107-7 

1895 

91-0 

1905 

97-6 

1876 

138-0 

1886 

101*6 

1896 

88-2 

1906 

100-5 

1877 

141-6 

1887 

99-6 

1897 

90-1 

1907 

105-7 

1878 

132-6 

1888 

102-7 

1898 

93-2 

1879 

126-6 

1889 

104-0 

1899 

92-3 

1880 

129-6 

1890 

104  0 

1900 

100-0 

Before  making  use  of  these  figures  it  must  be  remembered  that  they  indicate 
the  movement  of  wholesale  prices ; and  attention  would  need  also  to  be  paid 
to  the  selection  of  commodities  and  the  method  of  “ weighting.” 

To  the  Report  on  Wholesale  and  Retail  Prices  (1903)  and  to  the  “ First 
Fiscal  Blue-book  ” (British  and  Foreign  Trade  and  Industry ^ Memoranda^ 
&c.,  1903)  is  prefixed  as  Frontispiece  a chart  combining  the  Index  Numbers 
of  Jevons  for  1801-1846,  of  Sauerbeck  for  1846-1871,  and  of  the  Board  of 
Trade  itself  for  1871-1902  ; and  so  giving  in  one  view  the  course  of  prices,  so 
far  as  those  materials  indicate  it,  for  the  whole  period  1801-1902. 

As  to  Retail  Prices,  calculations  will  be  found  in  the  First  “ Fiscal  Blue-book,” 
p.  215,  and  in  the  Second  (British  and  Foreign  Trade  and  Industry,  Second 
Series,  1904),  as  to  changes  in  the  Average  Retail  Price  of  Workmen’s  Food  in 
large  towns  in  Great  Britain  during  recent  decades,  as  well  as  of  the  other 
principal  items  of  the  workman’s  budget,  viz.  rent,  clothing,  fuel,  and  light, 
during  a quarter  of  a century.  A considerable  fall  in  food  prices  and  a slight 
fall  in  the  price  of  clothing  since  1880  were  in  part  counterbalanced  by  a rise 
in  rents  and,  in  the  latter  years,  in  fuel ; with  the  result  indicated  below 
(Second  Series,  p.  32) ; 


Statement  showing  Estimated  Changes  in  Cost  of  Living  of  the  Working  Classes, 
based  on  Cost  of  Food,  Rent,  Clothing,  Fuel,  and  Light,  in  a series  of  averages 
for  quinquennial  periods.  (Cost  in  the  year  1900  = 100.) 


Period. 


Index  Ntunber  of 
Cost  of  Living. 


Average  of  quinquennial  period  of  which  middle  year  is  1880 
„ „ „ „ 1885 

„ „ „ „ 1890 

„ »»  » 1895 

..  „ » « 1900 


120-5 

108-2 

100-9 

95-5 

99-7 


BIBLIOGRAPHICAL  APPENDIX 


990 


Y. — Commercial  Cycles  (p.  709) 

In  England  there  has  been  no  “ commercial  crisis  ” since  18G6,  though  crises 
have  continued  to  make  their  appearance  in  the  United  States,  as  e.g.  in  18'J3 
and  1907.  But  the  alternations  of  commercial  prosperity  and  depression 
continue  ; and  the  cyclical  movement,  as  Jevons  first  showed,  seems  to  occupy 
about  ten  years.  The  study  of  the  subject  must  begin  with  Jevons’  papers 
(1875-1882)  on  the  Periodicity  of  Commercial  Crises,  printed  in  his  Investi- 
gations in  Currency  and  Finance  (1884).  A guide  to  the  history  and  literature 
of  the  subject  will  be  found  in  Herkner’s  article  Krisen  in  Conrad’s  Hand- 
wSrierbuch  der  Staatswissenschaften,  The  relation  between  Foreign  Trade,  Bank 
Rate,  Employment,  Marriage  Rate,  Pauperism,  &c.,  for  the  period  1856- 
1907  can  be  conveniently  observed  in  Table  IX,  and  Chart  II,  “ The  Pulse  of 
the  Nation,”  in  Beveridge,  Unemployment.  On  American  conditions  and  their 
connexion  with  currency  questions,  see  the  papers  of  Seligman  and  others  in 
The  Currency  Problem  and  the  Present  Financial  Situation  (N.  Y.  1908). 


Z. — Rents  in  the  Nineteenth  Century  (p.  724) 

According  to  an  estimate  of  Mr.  R.  J.  Thompson  printed  in  the  Journal  of 
the  Royal  Statistical  Society  (Dec.  1907)  the  rent  of  agricultural  land  in  England 
and  Wales  advanced  by  probably  40  per  cent,  in  the  first  twenty  years  of 
the  nineteenth  century.  After  1820  a period  of  depression  ensued,  followed 
in  1840  by  the  beginning  of  an  upward  movement  which  continued  with  little 
intermission  till  1878,  when  a serious  depression  again  set  in.  The  average 
rent  of  agricultural  land  in  1900  was  34  per  cent,  below  the  maximum  of  1877, 
and  13  per  cent,  below  the  figure  of  1846.  The  average  rent  of  farm  land  in 
1900  was  estimated  at  about  20^.  per  acre,  subject  to  charges  for  repairs,  &c., 
amounting  on  the  average  to  35  per  cent. ; so  that  the  net  rent  probably 
averaged  13s.  per  acre.  Estimating  expenditure  on  buildings,  fences,  drainage, 
&c.,  at  \2l.  per  acre,  3|  per  cent,  on  this  would  amount  to  85.  5d.,  leaving 
45.  Id.  per  acre  as  “ economic  rent,”  in  the  Ricardian  sense  of  payment  for  the 
use  of  the  “ original  and  indestructible  powers  of  the  soil.’* 


AA. — Wages  in  the  Nineteenth  Century  (p.  724) 

There  was  undoubtedly  a very  large  increase  both  in  nominal  or  money 
wages  and  in  real  wages  (*.c.  their  purchasing  power)  in  the  United  Kingdom 
during  the  course  of  the  century.  The  subject  may  be  studied  in  Giffen’s 
paper  on  The  Progress  of  the  Working  Classes  in  the  last  half-century,  reprinted 
in  Essays  in  Finance  (2nd  series,  1886  ; and  the  first  and  more  important  of 
them  more  recently  in  Economic  Inquiries  and  Studies,  vol.  i.);  Webb,  Labour 
in  the  Longest  Reign  (Fabian  Tract,  1897) ; Bowley,  Wages  in  the  United 
Kingdom  (1900),  National  Progress  (1904),  and  his  articles  in  the  Journal  of 
the  R.  Statistical  Society  ; and  Wood’s  article  on  Real  Wages  and  the  Standard 
of  Comfort  since  1850,  in  Jour.  R.  Stat.  Soc.  (March  1909). 

The  conclusions  arrived  at  by  the  last  two  statisticians  for  the  period  since 
1850  are  thus  summarised  in  the  article  last  quoted,  1900-1904  being  taken 
by  Bowley,  and  1900-1902  by  Wood,  as  basis,  and  called  100  : 


1000 


BIBLIOGRAPHICAL  APPENDIX 


Real  Wages,  1850-1902. 


1850-4 

1855-9 

1860-4 

1865-9 

1870-4 

1875-9 

Bowley  . . 

50 

50 

50 

55 

60 

65 

Wood 

56 

54 

59 

63 

69 

75 

1880-4 

1885-9 

1890-4 

1894-9 

1900- 

-2  or  4 

Bowley  , , 

65 

75 

85 

95 

100 

Wood 

76 

86 

92 

97 

100 

Compare  also  the  table  in  Appendix  X above. 

The  progress  in  real  wages  began  before  1850 ; thus,  Bowley’s  Index 
Numbers  for  1830  and  1840  are  45  and  50  respectevily  (see  National  Progress^ 
p.  33) ; and,  for  earlier  periods,  his  conclusions  are  that  while  during  1790-1810 
real  wages  were  falling  slowly,  during  1810-1830  they  were  rising  slowly  (see 
Appendix  (1908)  to  Palgrave’s  Dictionary  of  Political  Economy).  The  general 
result  would  seem  to  be  a large  rise  on  the  whole  between  1810  and  1900, 
though  between  1840  and  1860  and  again  between  1873  and  1879  wages  were 
almost  stationary. 

During  the  century  a progress  in  real  wages  of  substantially  the  same 
character  took  place  in  other  countries.  For  a comparison  by  Bowley  of  the 
United  Kingdom,  the  United  States  and  France  for  the  period  1844-1891,  see 
Econ.  Jour.  viii.  488;  and  for  France,  1806-1900,  see  Gide,  Economic  Sociale,^ 

p.  64. 

BB. — The  Importation  of  Food  [p.  738) 

The  following  figures  are  given  in  the  Report  of  the  Agricultural  Committee 
(1906)  of  the  Tariff  Commission  : 


Imports  op  Wheat  and  Flour. 


Period. 

Imports 
per  bead. 
Cwts. 

Percentage 
of  Popula- 
tion fed 
from  home- 
grown com. 

Period. 

Imports 
per  head. 
Owts. 

Percentage 
of  Population 
fed  from  home- 
grown corn. 

1831-1835 

•119 

96-0 

1871-1875 

1-56 

48-0 

1836-1840 

•267 

90-0 

1876-1880 

1-85 

37-2 

1841-1845 

•308 

89-55 

1881-1885 

2-17 

26-4 

1846-1850 

•644 

78-45 

1886-1890 

2-09 

29-0 

1851-1855 

•755 

74-4 

1891-1895 

2-51 

15-2 

1856-1860 

•837 

71-9 

1896-1900 

2-38 

19-1 

1861-1865 

1-196 

59-4 

1901-1905 

2-54 

10-6 

1866-1870 

1-224 

58-4 

BIBLIOGRAPHICAL  APPENDIX 


1001 


For  other  estimates,  and  for  sources  of  import,  see  “ First  Fiscal  Blue-book  ” 
{British  and  Foreign  Trade  and  Industry^  1903),  p.  108. 


CC. — The  TE^rDEisrcY  of  Profits  to  a Miitimum  (p.  739) 

Compare  Cliffe  Leslie’s  article  on  The  History  and  Future  of  Interest  and 
Profit  in  the  Fortnightly  Review  (Nov.  1881  : reprinted  in  Essays,  2nd  ed.) ; 
and  Leroy-Beaulieu,  Repartition  des  Richesses  (3rd  ed.  1888),  ch.  8 ; and  for  the 
history  of  the  rate  of  interest,  see  SchmoUer,  Grundriss,  § 101  {Principes,  vol.  iii). 


DD. — The  Subsequeitt  History  of  Co-operation  (p.  794) 

Since  Mill  wrote.  Industrial  Co-operation  in  England  has  taken  the 
direction  mainly  of  the  multiplication  of  retail  stores,  deriving  their  supplies  in 
great  measure  from  a great  Wholesale  Society  : this  “ Wholesale  ” producing 
some  of  its  goods  in  its  own  factories  and  purchasing  the  rest  in  the  open  market. 
It  has  not  taken  the  form  anticipated  by  him  of  self-governing  productive 
associations,  providing  their  own  capital.  The  history  of  the  various  move- 
ments grouped  under  the  name  of  Co-operation  may  be  examined  in  Schloss, 
Methods  of  Industrial  Remuneration  (3rd  ed.  1898),  chs.  22-24 ; Potter,  The 
Co-operative  Movement  (1891) ; Webb,  Industrial  Co-operation  (1904) ; Aves, 
Co-operative  Industry  (1907) ; and  Fay,  Co-operation  at  Home  and  Abroad 
(1908).  For  recent  developments  in  “ independent  ” productive  co-opea:ation, 
see  Ashley,  Surveys,  Historic  and  Economic  (1900),  p.  399. 

EE. — ^Thb  Subsequent  History  of  Income  Tax  (pp.  806,  817) 

For  developments  later  than  the  time  of  MiU,  reference  should  he  had  to 
Bastable,  Public  Finance  (3rd  ed.  1903),  bk.  iii.  ch.  3 and  bk.  iv.  ch.  4 ; Hill, 
The  English  Income  Tax  (Publications  of  the  American  Economic  Association, 
1889) ; Seligman,  Progressive  Taxation  (Am.  Econ.  Assoc.  Quarterly,  2nd  ed. 
1908) ; and  two  recent  Reports,  one  of  a Departmental  Committee  on  the  pre- 
sent working  of  the  income  tax  (1905),  and  one  of  a Select  Committee  on  Gradu- 
ation (1906).  In  the  Finance  BiU  now  (1909)  before  Parliament  it  is  proposed  to 
introduce  a super-tax  on  incomes  above  a certain  point,  and  give  an  abate- 
ment on  incomes  below  a certain  point  in  respect  of  every  child  (up  to  a specified 
number)  below  a certain  age. 


FF. — The  Taxation  of  Land  (p.  819) 

In  the  Finance  Bill  now  (1909)  before  Parliament  it  is  proposed  to  impose  a 
tax  (1)  of  20  per  cent,  on  the  future  Unearned  Increment  in  value  of  non- 
agricultural  land  ; (2)  of  in  the  pound  of  the  capital  value  of  “ undeveloped  ” 
land.  The  proposed  exemption  of  agricultural  land,  when  compared  with 
Mill’s  assumption  that  there  was  likely  to  be  a constant  increase  in  the  value  of 
agricultural  land  owing  to  a rise  in  the  price  of  food  due  to  the  growth  of  popula- 
tion, indicates  the  effect  upon  the  public  mind  of  the  agricultural  depression  of 
the  last  two  decades  of  the  nineteenth  century.  On  the  general  question  of  the 
assessment  and  special  taxation  of  land  values,  see  Report  of  the  Royal  Com- 
mission on  Local  Taxation  (1901)  ; Fox,  The  Rating  of  Land  Values  (1906)  ; and 
the  Blue-book  on  Taxation  of  Land  in  Foreign  Countries  (1909). 


1002 


BIBLIOGRAPHICAL  APPENDIX 


GG. — The  Incidence  of  Taxation  (p.  863) 

On  the  whole  subject  of  The  Shifting  and  Incidence  of  Taxation  recourse 
can  now  be  had  to  the  treatise  of  Seligman  bearing  that  title  (2nd  ed.  1899). 
For  the  incidence  of  Death  Duties,  Rates  on  Houses  and  Land,  Inhabited 
House  Duty,  Taxes  on  Trade  Profits  and  Taxes  on  Transfer  of  Property,  see  in 
particular  the  elaborate  replies  by  “ financial  and  economic  experts  ” in  the 
Blue-book,  Memoranda  relating  to  the  Glassification  and  Incidence  of  Imperial 
and  Local  Taxes  (1899) ; and  on  the  incidence  of  Import  and  Export  Duties, 
see  Edgeworth  in  Economic  Journal^  iv.  pp.  43  seq. 


HH. — Company  and  Partnership  Law  (p.  904)t 

Partnership  en  commandite,  as  it  is  called  abroad,  is  now  allowed  in  the 
United  Kingdom  by  the  Limited  Partnerships  Act  of  1907.  This  Act  makes  it 
possible  to  create  a “ limited  partnership,  wherein  one  or  more  persons,  called 
general  partners  . . . shall  be  liable  for  all  debts  and  obligations  of  the  firm,” 
and  “ one  or  more  persons,  to  be  called  limited  partners,  who  shall  at  the  time 
of  entering  into  such  partnership  contribute  thereto  a sum  as  capital  . . . shall 
not  be  liaWe  for  the  obligations  of  the  firm  beyond  the  amount  so  contributed.” 
A limited  partner  must  not  take  part  in  the  management  of  the  business. 

The  most  important  development  since  IVIill  wrote,  however,  has  been  tne 
growth  in  commercial  practice  of  what  came  to  be  known  in  business  language 
as  “ private  companies,”  though  organised  under  the  general  company  law. 
This  form  has  been  increasingly  adopted  by  businesses  which  wished  to  combine 
the  advantages  of  Limited  Liability  with  the  advantage  of  unity  and  privacy 
of  management  belonging  to  the  sole  trader  or  old-fashioned  firm.  The 
legality  of  such  arrangements,  which  were  certainly  not  contemplated  by  the 
legislature  when  it  introduced  Limited  Liability,  was  finally  settled  by  the 
decision  of  the  House  of  Lords  in  1896  in  the  case  of  Broderip  v.  Salamon.  See 
hereon  Palmer,  Private  Companies  and  Syndicates.  The  conception  of  a “ pri- 
vate company  ” was  finally  recognised  and  defined  by  the  Companies  Act  of 
1907.  According  to  this  Act  a private  company  “ means  a company  which 
by  its  articles  (a)  restricts  the  right  to  transfer  its  shares ; and  (b)  limits  the 
number  of  its  members  (exclusive  of  persons  who  are  in  the  employment  of  the 
company)  to  fifty ; and  (c)  prohibits  any  invitation  to  the  public  to  subscribe  for 
shares  or  debentures.”  For  the  formation  of  such  a company,  instead  of  the 
seven  members  formerly  required  by  the  Companies  Acts,  two  members  will  now 
suffice. 


II. — ^Protection  (p.  926) 

Mill’s  general  line  of  argument  has  been  further  pursued  and  applied  to 
contemporary  conditions  by  Cairnes,  Leading  Principles;  Fawcett,  Free  Trade 
and  Protection  (6th  ed.  1885) ; and  Farrer,  Free  Trade  and  Fair  Trade  (4th  ed. 
1887).  Criticisms  and  considerations  of  other  kinds  will  be  found  in  Sidgwick, 
Principles  of  Political  Economy,  ch.  v. ; Patten,  Economic  Basis  of  Protection 
(Philadelphia,  1890) ; Johnson,  Protection  and  Capital,  in  Political  Science 
Quarterly,  xxiii.  (N.  Y.  1908) ; Lexis,  Handel,  in  Schonberg’s  Eandbuch  der 
Politischen  Oekonomie  (4th  ed.  1898),  vol.  ii. ; and  Schmoller,  Qrundriss,  §§  253- 
271  (in  Fr.  trans.  : Principes  d' Economic  Politique,  vol.  v.). 

Mill’s  concession  in  favour  of  “ infant  industries  ” (bk.  v.  ch.  10,  § 1)  was 
much  quoted  subsequently  in  America,  Australia  and  Canada.  Writing  to  a 


BIBLIOGRAPHICAL  APPENDIX 


1003 


correspondent  in  1869  (see  Letters,  ed.  Elliot),  he  expressed  an  intention  to 
“ withdraw  ” the  opinion,  and  remarked ; “ Even  on  this  point  I continue  to 
think  my  opinion  was  well  grounded,  but  experience  has  shown  that  protec- 
tionism, once  introduced,  is  in  danger  of  perpetuating  itself  . . . and  I there- 
fore now  prefer  some  other  mode  of  public  aid  to  new  industries,  though  in 
itself  less  appropriate  ” ; but  in  preparing  the  edition  of  1871  he  contented 
himself  with  the  verbal  changes  indicated  on  p.  922  n.  1. 

Mill  makes  no  reference  in  his  Principles  to  the  writings  of  Friedrich  List, 
the  intellectual  founder  of  the  Zollverein,  whose  ideas  have  greatly  influenced 
the  subsequent  commercial  policy  as  well  as  the  economic  thought  of  Germany. 
Thereon  see  List’s  National  System  of  Political  Economy  (1840,  Eng.  trans.  by 
Lloyd  : new  ed.  with  Introduction  by  Nicholson,  1904),  and  Schmoller’s  article 
on  List  in  Zur  Litteraturgeschichte  der  Staats-  und  Sozialwissenschaften  (1884). 

A new  stage  in  the  discussion  was  opened  by  the  grant  of  Preference  to  im- 
ports from  England  by  the  Dominion  of  Canada  in  1897 — an  example  since 
followed  by  the  other  great  self-governing  Dominions  of  the  British  Empire ; and 
by  the  movement  in  favour  of  a policy  of  reciprocal  Preference  by  the  Mother 
Country,  initiated  by  Mr.  Joseph  Chamberlain,  then  Colonial  Secretary,  in  1903. 
The  most  important  collections  of  political  speeches  on  this  subject  are,  on  one 
side,  those  of  Chamberlain,  Imperial  Union  and  Tariff  Reform  (1903) ; Bonar 
Law,  I'he  Fiscal  Question  (1908) ; and  Milner,  Imperialism  and  Social  Reform 
(1908) ; and,  on  the  other,  Asquith,  Trade  and  the  Empire  (1903) ; Haldane, 
Army  Reform  and  Other  Addresses  (1907) ; and  Russell  Rea,  Insular  Free  Trade 
(1908).  See  also  Balfour,  Economic  Notes  on  Insular  Free  Trade  (1903). 

Among  the  writings  called  forth  by  the  controversy  may  be  mentioned,  of  those 
in  favour  of  some  modification  of  the  present  tariff  policy  : Caillard,  Imperial 
Fiscal  Reform  (1903) ; Ashley,  The  Tariff  Problem  (2nd  ed.  1904) ; Cunningham, 
The  Rise  and  Decline  of  the  Free  Trade  Movement  (1904)  and  The  Words  of  the 
Wise  (1906) ; Graham,  Free  Trade  and  the  Empire  (1904) ; Palgrave,  An  En- 
quiry into  the  Economic  Condition  of  the  Country  (1904) ; Price,  Economic  Theory 
and  Fiscal  Policy,  in  the  Economic  Journal,  xiv.  (Sept.  1904) ; Compatriots’  Club 
Lectures  (1905) ; Kirkup,  Progress  and  the  Fiscal  Problem  (1905) ; Welsford, 
The  Strength  of  Nations  (1907) ; Lethbridge,  India  and  Imperial  Preference 
(1907) ; and  Milner’s  article  on  Colonial  Policy  and  Vince’s  on  The  Tariff 
Reform  Movement  in  Palgrave,  Dictionary  of  Political  Economy,  Appendix 
(1908). 

Among  the  writings  in  favour  of  the  present  policy  may  be  mentioned  : 
Money,  Elements  of  the  Fiscal  Problem  (1903) ; Avebury,  Essays  and  Addresses 
(1903) ; British  Industries  under  Free  Trade,  ed.  Cox  (1903) ; Labour  and  Pro- 
tection, ed.  Massingham  (1903) ; Smart,  The  Return  to  Protection  (1904) ; Hob- 
son, International  Trade  (1904) ; Bowley,  National  Progress  (1904) ; various 
papers  by  Giffen  in  Economic  Enquiries  (1904) ; Brassey,  Sixty  Years  of  Pro- 
gress (new  ed.  1906) ; Pigou,  Protective  and  Preferential  Import  Duties  (1906) ; 
The  Colonial  Conference  (Cobden  Club,  1907) ; and  Marshall,  Memorandum  on 
the  Fiscal  Policy  of  International  Trade  (White  Paper,  1908). 

Materials,  statistical  and  political,  for  a judgment  will  be  found  in  the  two 
“ Fiscal  Blue-books  ” — British  and  Foreign  Trade  and  Industry,  Memoranda, 
d}C.,  1st  series,  1903  ; 2nd  series,  1904;  in  the  Proceedings  of  the  Colonial  Con- 
ferences ol  1887, 1894, 1897, 1902, 1907;  andiin  tlae  Reports  avd  Merrioranda  of  the 
Tariff  Commission,  since  1904.  Among  foreign  works  bearing  upon  the  problem 
may , be  particularly  mentioned : Fuchs,  The  Trade  Policy  of  Great  Britain  ( 1 893 : 
Eng.  trans.  1905) ; Wagner,  Agrar-  urid  Industriestaat  (2nd  ed.  1902) ; Schwab, 
Chamberlain's  Handelspolitik,  with  Preface  by  Wagner  (1905) ; and  Schulze- 
Gaevernitz,  Britischer  Imperialismus  (1906).  On  the  history  of  the  English 
Corn  Laws,  Nicholson’s  book  with  that  title  (1904)  should  be  consulted.  Free 
Trade  and  the  Manchester  School,  ed.  Hirst  (1903),  is  a convenient  collection  of 
speeches,  &c..  of  the  thirties  and  forties. 


1004 


BIBLIOGRAPHICAL  APPENDIX 


JJ. — ^UsTJEY  Laws  [p.  930) 

The  pretty  general  repeal  all  over  Europe  of  the  old  usury  laws  has  been 
followed  since  1878  by  a reaction,  and  a great  number  of  “ usury  laws  ” have 
been  passed  in  Germany,  Austria,  Hungary,  Switzerland,  and  other  countries ; 
as  well  as  for  the  possessions  of  the  Great  Powers  outside  Europe,  as  e.g.  for 
the  Punjaub,  the  Soudan,  Algiers,  &c.  For  an  account  and  estimate  of  this 
movement,  see  Schmoller,  Orundriss,  § 189  (Principes,  vol.  iii.).  As  to  the  English 
“ Money-lenders  Act  ” of  1900,  see  the  observations  from  a point  of  view 
identical  with  that  of  Mill  in  Dicey,  Law  and  Public  Opinion  in  England  (1905), 
pp.  33  and  45. 


KK. — The  Factoby  Acts  (p.  759) 

See,  on  the  whole  subject,  Hutchins  and.  Harrison,  A History  of  Factory 
Legislation  (1907).  The  legislature,  after  restricting  the  freedom  of  contract 
of  adult  men  in  various  other  ways,  began  very  tentatively  in  1893  to  regulate 
their  hours  of  labour  by  the  Act  of  that  year  giving  power  to  the  Board  of  Trade 
to  order  railway  companies  to  submit  revised  schedules  of  hours  of  duty  for 
their  servants  ; hereon  see  Bulletin  of  the  U.8.  Depaitment  of  Labour,  No.  20 
(1899).  Since  then,  by  the  ^Miners’  Eight  Hours  Act  (1908),  it  has  introduced  a 
normal  day  ” for  a large  number  of  adult  men. 


LL. — ^Thb  Poor  Law  (p.  969) 

The  Report  of  the  Royal  Commission  on  the  Poor  Law  (1909)  contains  copious 
and  systematically  arranged  treatises,  in  the  Majority  and  Minority  Reports, 
and  in  the  supplementary  volumes  of  Reports  of  special  inquiries,  on  all 
aspects  of  the  history  and  practice  of  the  Poor  Law  since  1834  ; and  will  doubt- 
less lead  to  considerable  legislative  changes. 


MM. — ^Thb  Provincb  of  Government  (p.  979) 

On  this  subject,  in  its  general  philosophical  aspects,  the  most  influential 
English  writings  since  the  time  of  Mill  have  perhaps  been  those  of  Sidgwick, 
Principles  of  Political  Economy  (1883),  bk.  iii.  chs.  3 and  4 ; and  Elements  of 
Politics  (1891) ; and  Green,  Lectures  on  the  Principles  of  Political  Obligation  in 
Works  (1886),  vol.  ii.  See  also  Ritchie,  Natural  Rights  (1895),  and,  with  regard 
to  certain  arguments  drawn  from  modem  biology,  his  Darwinism  and  Politics 
(1889). 


INDEX 


A 

Abstinence,  remuneration  for,  32, 36, 
729 

Agriculture,  natural  advantages,  102  ; 
much  division  of  labour  impos- 
sible in,  131;  grande  and  j)etite  cul- 
ture, 144-5  ; improvements  in,  183  ; 
British,  ih.  ; produce,  672-3 
Allotment  system,  368 
America,  Indians  in  North  A.,  104 ; 
work  in,  105  w.  ; Indian  villages, 
167-9  ; farming  in,  180  ; emigra- 
tion, 197  ; slavery  {q.v.),  251  ; 
tenure  in  North  A.,  258 ; popula- 
tion, 350,  353 ; cotton  trade, 
414 ; profits,  420 ; silver  mines, 
485,  607;  Spanish  A.,  655; 

cotton  failure,  665 ; wages,  681  ; 
cotton,  682  ; rates  of  profits,  731  ; 
wealth  and  population,  761,  892 
Arctic  whale  fisheries,  27 
Argo  vie,  population,  291 ; laws  of 
marriage,  355 

Arkwright,  invention  of,  96 ; its 
effect,  193,  350 

Asia,  economical  condition,  14  ; cause 
of  poverty  in,  113  ; population  in, 
159  ; high  rate  of  interest  in,  175  ; 
limits  of  production  in,  189 
Attwood,  on  currency,  550 
Australia,  wool-growers,  43  ; Western 
A.,  65  ; agriculture  in,  194  ; coloni- 
sation, 197  ; growth  of  population 
in,  350 ; gold  mines,  485 ; annual 
gold  produce,  673 ; wealth  and 
population,  761  ; colonisation,  973 
Austria,  serf  labour,  252 ; currency 
reform,  667 

B 

Babbage,  Mr.,  Economy  of  Machinery 
and  Manufacture,  107  ; instances  of 


frauds,  112  ; value  of  trust  in  busi- 
ness, ih.  ; on  division  of  labour, 
123,  125-6,  129 ; on  production  on 
a large  scale,  132  ; on  co-operation, 
765,  772  n. 

Bank  Charter  Act,  651 
Bank  notes,  519,  529 
Barham,  Dr.,  765 

Bastiat,  metayers,  305  n. ; on  property 
in  land,  430 

Bavaria,  farms,  298 ; laws  of  mar- 
riage, 354 

Beam,  small  farms  in,  279 
Bedford  Level,  the,  92,  182,  230,  430 
Bedfordshire,  lace- making,  311  ; agri- 
cultural labourers,  357 
Belgium,  cattle  in,  147  n. ; peasant 
proprietors,  239,  271  ; manufac- 
turing distress  (in  1849),  275  n.  ; 
population,  296 ; Poor  Colonies  of, 
424 ; peasant-class,  482 
Bengal,  land  tenure,  327 
Bentham,  223,  397,  806,  861,  885,  927 
Bequest,  226 
Berlin  Decrees,  the,  112 
Berne,  farms,  262  n.,  269 
Berwickshire,  farmers  in,  265 
Birmingham,  currency  school,  550 
Blacker,  Wilfiam,  146  n. 

Blackstone,  on  entails,  895 
Blanc,  Louis,  203,  773,  780  n. 

Bombay,  land  tenure,  327 
Brazil,  slavery  in,  255  ; bullion,  608 
Briggs,  Messrs.,  co-operation,  771 
Browne,  Mr., consul  at  Copenhagen,  292 
Buckinghamshire,  lace-making,  311 ; 
agricultural  labourers,  357 

C 

Cabet,  203 

Cairnes,  Prof.,  on  Ireland,  338  n. 

Cahf omia,  gold  mines,  485 ; gold  from, 
673 


1006 


INDEX 


Campagna  of  Rome,  agricultural  ten- 
ure, 240,  258  ; small  farms  in,  276  ». 
Campbell,  Lord,  886 
Campine,  the  sands  in,  271 
Canada,  emigration  to,  197  ; timber 
trade,  415 

Capital,  defined,  54 ; distinction  be- 
tween C.  and  not-C.,  56  ; wages  a 
part  of  C.,  57  ; further  examples  of 
use  of,  59  ; fundamental  proposi- 
tions respecting  C.,  63  ; distinction 
between  industry  and  C.,  64 ; C. 
may  perish  for  want  of  labour,  65  ; 
error  that  unproductive  expenditure 
of  C.  will  employ  the  poor,  66 ; 
C.  and  luxuries,  67-8  ; source  of, 
68  ; how  consumed,  70  ; perpetual 
consumption  and  reproduction  of 
C.,  74  ; C.  of  producer  pays  labour, 
79 ; circulating  C.  defined,  91 ; fixed 
C.  defined,  92  ; distinction  between 
circulating  C.  and  fixed  C. , 93,  99 ; 
a primary  requisite  of  production 
iq.v.),  101 ; law  of  increase  of,  163  ; 
net-produce  of,  164;  great  accumu- 
lation in  England,  173 ; transfer 
among  employments,  412  ; C.  and 
profits,  452,  639 ; waste  of,  731  ; 
sinking  of,  742 

Carey,  H.  C.,  population,  157  n., 
158  n.  ; on  law  of  agricultural  in- 
dustry, 181-2  ; on  rent,  430-2  ; on 
partnership,  902  n.  ; on  chartered 
companies,  907  ; on  protection, 
922-5 

Chalmers,  Dr.,  67  n.,  75,  77  ; on  land, 
424,  557,  562,  690,  727,  840 
Chancery,  Court  of,  885,  906 
Channel  Islands,  peasant  properties  in, 
276-7 

Charity,  969 
Charlevoix,  169 

Chateauvieux,  on  metayers,  303,  308, 
310,  311 

Cherbuliez,  777  w.,  780  n. 

Cheques,  and  prices,  536 
Chevalier,  on  co-operation,  769 
China,  105  n.,  170  ; stationary  state 
in,  172-3,  565 ; American  ships 
trading  to,  764 

Circulating  and  fixed  capital,  91 
Clement,  295  n. 

Colonisation,  Wakefield  on,  121 ; 
remedy  for  low  wages,  381  {see 
Wakefield) 

Commandite,  900 


Communism,  202  n.,  203;  examined, 
204-11 

Competition,  242 ; in  prices,  245 ; of 
different  countries  in  the  same 
market,  678-87  ; underselling, 
679-84  ; advantage  of,  793 
Co-operation,  increases  productive- 
ness of  labour,  116  ; in  agriculture 
(g.v.),  144;  growth  of,  698;  forms 
of,  764-94 ; English,  783-8 
Coquelin,  902,  904-5 
Corn,  laws,  186,  338 ; taxes,  840-7  ; 

laws  (again),  920 
Cornish  miners,  765 
Cost  of  production,  451-68,  566,  569 
Cottiers,  318-28  ; means  of  abolishing 
cottier  tenancy,  329-42 
Cotton  famine,  757 
Credit,  effect  on  profits,  413  ; as  a 
substitute  for  money  {q.v.),  511- 
22;  defined,  511;  credit  and 
commerce,  514 ; bills  of  exchange, 
515 ; cheques,  520 ; influence  on 
prices,  523-41  ; commercial  prices, 
527  ; bank  notes,  531-52  ; Bank  of 
England  notes,  539  ; an  inconver- 
tible paper  currency,  542-55 ; 
Bank  of  England  (1819),  552 
Crimean  War,  effect  on  currency,  665 
Crises,  641,  644,  651,  709,  734,  845 
Cuba,  slavery  in,  249,  255,  686 
Cumberland,  257 

Currency,  influence  of,  on  exchanges 
and  foreign  trade,  629-38 ; de- 
preciated, 646  ; on  the  regulation  of 
a convertible  C.,  656-7  n.  ; paper 
G.,  651-77;  Bank  Charter  Act 
(1844),  657-8  ; drains  on  Bank  re- 
serve, 612  n.  ; bank-note  C.,  674 
Custom,  242  ; defined,  243  ; in  prices, 
247 

D 

De  L’Islb  Brock,  on  Guernsey 
labouring  classes,  276-7 
Demand  for  commodities,  79  ; deter- 
mines direction  of  labour,  87 
Demand  and  supply,  and  value,  442  ; 
defined,  445 ; demand  exceeding 
supply,  446  ; monopolies,  449;  value 
of  labour  depends  upon,  450 ; real 
law  of,  455  ; recapitulation,  456 
Denmark,  239  n. ; abolition  of  slavery, 
255 ; population,  292 ; currency 
reform,  667 


INDEX 


1007 


Deposits,  bank,  648 
De  Quincey,  on  value,  436-7,  442, 
446,  449,  454 

Devon  Commission  on  Ireland,  323, 
337  n. 

Diminishing  Returns,  law  of,  177,  179, 
181,  183,  185,  188,  190,  427,  469 
Distributing  class,  defined,  39,  789 
Distribution,  laws  of,  21,  200 ; dis- 
tribution as  affected  by  exchange, 
688-94  ; influence  of  the  progress  of 
society  on  production  and  distribu- 
tion, 695 

Domestic  manufactures,  683 
Dorsetshire,  agricultural  labourers,  357 
Doubleday,  on  population,  157 
158  n. 

Dunning,  T.  J.,  939  n. 

Dunoyer,  on  extractive  industry,  33, 
950-2,  954  n. 


E 

Eixiott,  J.  H.,  911  n. 

Ellis,  William,  on  machinery,  728 
Emigration,  cause  of,  193  ; in  form 
of  colonisation,  197,  701 
Engadine,  peasant  proprietors,  261 
Engineers,  Society  of,  936,  938 
England,  agriculture,  31  ; reproduc- 
tion of  wealth  (g.v.)»  74  ; compared 
with  other  nations,  101  ; workmen 
in,  105  n.  ; law  and  police.  111  ; 
security,  115  ; increase  of  produc- 
tion on  a large  scale,  142  j sma31 
farms,  145 ; cattle,  147  n.  ; popu- 
lation, 160-1  ; accumulation  of 
capital  (q.v.),  173 ; land  cultiva- 
tion, 175,  182-5  ; Poor  Laws  {q.v.), 
187 ; population  progress,  192 ; 
wages  (q.v.),  220 ; bequest,  228-9  n. ; 
landed  property,  232  ; yeomen,  256 ; 
farmers,  265 ; peasants,  267  ; agri- 
culture, compared  with  the  Channel 
Islands  277  ; rate  of  popu- 

lation, 294  ; tenant  farmers,  306  ; 
wages  and  food,  347-8 ; agricul- 
tural population,  356  ; retail  profits, 
415-20;  land  in,  426-31;  gold 
standard,  509 ; high  prices,  610  ; 
currency,  633  ; banking,  677  ; agri- 
culture, 704  ; interest,  730-5  ; over- 
flow of  capital  abroad,  738  ; rail- 
ways, 743-5  ; co-operation,  783-8  ; 
land-tax,  819  ; tithes,  845  ; law  of 
inheritance,  890 


Escher,  Mr.,  of  Zurich,  109 
Europe,  2 ; ancient  agriculture  in, 
14 ; source  of  wealth  of  modem 
E.,  17 ; temperate  regions,  102 ; 
security,  113;  market  for  Indian 
goods,  122 ; population,  153,  159, 
161  ; effective  desire  of  accumu- 
lation, 170 ; cultivation,  179 ; 
property,  208  ; laws,  227  ; usage 
of  tenure,  245  ; custom  of  prices, 
247 ; farms,  270 ; hoarding,  554 ; 
profit  and  savings,  731 ; taxation 
of  land,  819 

Exchange,  the  operation  of,  88 ; bills 
of,  515,  529,  613 

Exports  and  Imports,  578,  611,  619  ; 
disturbances  of,  618,  624 ; undis- 
turbed, 625  ; taxes  on,  850-6 

F 

Fane,  Cecil,  898  w.,  905  n.,  914  n. 
Fawcett,  Prof.,  937 
Feugueray,  774,  780  n.,  781-2,  793 
Flanders,  18 ; security,  114 ; small 
farms  and  peasant-farming,  147-8  ; 
high  farming,  179  ; crops,  265,  271- 
6,  280 ; peasant  proprietors,  284  ; 
population,  291  ; free  cities,  882 
Flemish  Husbandry,  treatise  on,  147  w 
Florence,  metayers  near,  309-11 
Food,  importation  of,  193  ; exports  of, 
195 

Foreign  exchanges,  612-18 
Fourierism,  204,  212  ; examined,  213- 
16 

France,  agriculture,  31  ; railways, 
144 ; cattle,  148  n.  ; labour,  com- 
pared with  England,  150-2  ; popu- 
lation, 153,  161  ; cultivation,  182  ; 
Socialism,  204,  211  ; bequest,  227, 
229  n.  ; trades,  236  ; peasant  pro- 
prietors, 239  ; agricultural  tenure, 
240,  260  w.,  278  ; metayers,  306-7  ; 
food,  481  ; silver  standard,  509  n. ; 
credit,  522 ; assignats,  547  ; trade, 
575  ; bank  notes,  666  ; agriculture, 
704;  co-operation,  783;  taxes,  820; 
law  of  inheritance,  890 ; partner- 
ship laws,  900 ; manufactures, 
900-2 

Frankfort,  laws  of  marriage,  354 
French  Economistes,  on  rent,  26 
Fullarton,  on  currency,  498,  500  n., 
537  ; bank  circulation,  652-5,  668- 
70,  675 


1008 


O 

Germany,  medieval  free  towns,  18; 
wood-cutters,  34  ; peasant  proprie- 
tors, 239  ; northern  provinces,  252 ; 
cultivation  of  land,  260  n.,  264  w., 
267 ; population,  291 ; peasant 
class,  482  ; trade  with,  675;  inter- 
national values  with,  684-606 ; 
co-operation,  783 
Gisquet,  co-operation,  77  n. 
Gladstone,  income-tax,  806  n.  taxa- 
tion, 871 

Godley,  J.  R.,  179  n. 

Gold  and  silver,  as  money  {q.v.), 
484  ; as  commodities,  502,  607-11; 
their  distribution  in  commerce,  619- 
28  ; their  cost  of  production  varies, 
629 

Government,  its  functions,  795-801  ; 
revenues  from  taxation  {q.v.),  802 ; 
on  the  ordinary  functions  of,  con- 
sidered as  to  their  economical  effects, 
881-8 ; further  effects,  889-915  ; 
interference  of,  916-40;  protection, 
917-26  ; monopolies,  932 ; combin- 
ations of  workmen,  933-9 ; limits 
of  G.,  941-79 ; laissez-faire, 

950 

Graduated  taxation,  806,  808 
Gray,  John,  on  money,  549 
Great  Britain,  coal-fields,  103  ; farm- 
ing, 180  ; emigration,  197  ; landed 
proprietors,  231 ; workmen,  239  n. ; 
emigration  for  colonisation  {q.v.), 
384  ; land  value,  431  ; credit,  621  ; 
agriculture,  704 ; population,  704  ; 
tithes,  845 

Greece,  soldiers’  gains,  50  ; sculptures 
of,  74;  its  colonies,  114 
Greeks,  ancient,  48,  104 
Guernsey,  peasant  farms,  276 

E 

Hainault,  crops  in,  271 
Hanse  towns,  686,  882 
Hardenberg,  land  reforms,  334 
Hargreaves,  invention  of,  96 
Harlem,  Lake  of,  182 
Head,  Sir  George,  on  Guernsey,  276 
Holland,  cattle  in,  147  n.  ; low  rate 
of  interest,  173,  175  ; fens  of,  185  ; 
crops  in,  265  ; peasant  farms,  271 ; 
trade,  687  ; profits,  884 
Holyoake,  784-8 


Howitt,  W.,  266 

Hubbard,  on  income-tax,  816  u. 

Huber,  Prof.,  780  n. 

Hume,  on  money,  496,  550-1 
Hungary,  20  252  n.,  738 


I 

Income-tax,  806-17 ; graduated,  808- 
10 ; on  annuities,  811  ; savings, 
813-17  ; defined,  829-32 
Inconvertible  currency,  542-55,  634 
Increasing  returns,  703 
India,  13,  121  ; small  towns,  122 ; 
native  states,  173 ; tenure,  240 ; 
ryots,  243  ; customs  in  tenure,  244  ; 
land  tenure,  324-8 ; high  interest 
on  loans,  409 

Industry,  extractive,  defined,  33 ; 
limited  by  capital  {q.v.),  63  ; dis- 
tinction between  I.  and  capital, 
64 ; influence  of  the  progress  of  I. 
and  population  on  values  and  prices, 
700-9  ; influence  of  the  progress  of 
I.  and  population  on  rents,  profits, 
and  wages,  710-24 
Inglis,  260 
Inheritance,  221 
Inquisition,  the,  940 
Interest,  defined,  406 ; market  rate  of, 
411 ; on  the  rate  of,  639-50 ; and 
loans,  639  ; fluctuations,  641 ; war 
loans,  643  ; rate  depends  on  capital 
loaned,  647  ; value  and  price  of 
funds  determined  by,  649 ; low 
interest,  732-3 
International  trade,  574-606 
Ireland,  102 ; farms  small,  145-9, 
180 ; tenancy,  187 ; emigration, 
197;  landed  property,  232;  tenure, 
318  ; cottiers,  ib.  ; peasantry,  322- 
34 ; proposed  reforms  in  cottier 
tenancy,  331-7  ; low  wages,  419 ; 
low  profits,  420 ; emigration  for 
colonisation,  975 

Irish  peasantry,  56  ; landowners,  234 1 
cottier  tenants,  258 
Italy,  ancient,  16 ; towns  in  medi- 
eval L,  18;  security  in,  114; 
peasant  farming  in,  148,  239  ; agri- 
cultural tenure,  240,  258,  260  n.. ; 
crops  in,  280 ; peasant  farming, 
284;  metayers,  303,  307,  308,  311, 
316  ; peasant-class,  482 ; free  cities 
of,  882 


INDEX! 


1009 


Jacob,  L.  H.,  on  serf  labour,  252 
Jamaica,  negroes,  105 
Japan,  life  in,  105  n. 

Jersey,  farms,  277 
Johnson,  Dr.,  on  inheritance,  891 
Joint-stock  companies,  promote  pro- 
duction on  a large  scale,  137  ; dis- 
advantages of,  138-40 ; with 
limited  liability,  642,  903 
Jones,  Prof.  R.,  on  serf  labour,  252  ; 
population,  288 ; metayers,  307, 
310,  316 

K 

Kay,  Mr.,  263  n.,  209,  270  271  ; 

population,  291,  354 

L 

Labottr,  a requisite  of  production 
(q.v.),  22-9 ; various  kinds  of  pro- 
ductive, 33-41 ; unproductive,  44  ; 
three  classes  of,  47 ; productive 
L.  defined,  48;  unproductive  L. 
defined,  49  ; L.  depends  on  capital 
(g.v.),  79 ; is  a primary  requisite 
of  production,  101 ; division  of 
L.,  116-18;  of  women,  119;  limited 
by  markets,  130  ; law  of  increase  of 
L.,  155-62 ; the  produce  does  not 
increase  in  proportion  to  L.,  177  ; 
cost  of  L.,  420 ; value  of,  450 ; 
cost  of  (again),  681,  691-4 
Labourers,  20,  31 ; effect  on,  of  change 
of  circulating  capital  {q.v.)  into  fixed 
capital,  94-9 ; Italian,  French, 
English,  Swiss,  German,  Dutch, 
Saxon,  compared,  109-10  ; prob- 
able future  of  the  labouring 
classes,  752-94 
Labourers,  Statute  of,  934 
Lacedaemon,  iron  money,  485 
Laing  [d.  1868],  on  productiveness, 
106  n. ; on  peasant  proprietors, 
263-4,  289 ; English  farming,  298 
n. ; wages  on  the  Continent,  371 
Laing  [d.  1897],  on  Cornish  miners, 
765  71. 

Laisser  faire,  940,  950,  957 
Lancashire,  bills  of  exchange,  519 
Land,  26,  74,  93,  108,  145,  155 ; is 
a requisite  of  production,  156  ; law 
of  increase  of  production  from.  176  ; 


limited  quantity,  ib.  ; law  of  pro- 
duction from,  defined,  177  ; pro- 
perty in,  231 ; taxation  of,  818-21 
Latium,  258 

Lavergne,  L6once  de,  154  w.,  266  n., 
285,  294,  295  n.,  298 
Leatham,  on  bill-circulation,  536  n. 
Leclaire,  and  co-operation,  768-70 
Legoyt,  on  population,  293  n.,  294 
Limited  Liability,  899 
Limited  Partnership,  900,  903 
Limousin,  metayers,  307,  308 
Lincolnshire  Wolds,  rent  of,  430 
Liverpool,  population,  352 
Loans,  war,  77  n.  {see  Interest) 
Lombardy,  cattle  in,  147  n. ; peasant 
proprietors,  264  n. ; farming  in, 
265 ; metayers,  308 
London,  post  office,  134  ; population, 
352 ; wages,  387 ; the  Clearing 
House,  521 

Liibeck,  laws  of  marriage,  354 
Lyell,  Sir  Charles,  farming  in  America, 
279  n. ; bequest  in  America,  229  n. 

M 

McCulloch,  44  ; peasant  farms,  271  ; 
population,  288  ; metayers,  307  ; 
property,  747  ; income-tax,  816  n.  ; 
tax  on  cost  of  production,  837 
Machinery,  effects,  94,  742 
Madras,  land  tenure,  327 
Maine,  Ancient  Law,  222  n. 

Malthus,  67  w.,  156,  157  n.,  158  n., 
160,  165,  349  ».,  351-2,  359,  365, 
376  ; rediscovered  theory  of  rent, 
425  ; on  over-supply,  557,  562  ; on 
measure  of  value,  568  ; on  popula- 
tion, 747 

Manilla,  Chinese  co-operation,  771  n. 
Manufactures,  domestic,  64  n.  ; im- 
provements in,  108 
Margin  of  cultivation,  690,  716,  840 
Market  for  commodities  is  not  em- 
ployment of  labour  {q.v.),  120 
Massachusetts,  229  n.,  907 
Mecklenburg,  laws  of  marriage,  355 
Mercantile  system,  2,  677,  918 
Metayers,  302 ; defined,  303  ; Adam 
Smith  on,  305 ; Arthur  Young  on, 
306 

Michelet,  on  peasant  proprietors,  284 
n.,  300  n. 

Milan  decrees,  the,  112 
Milanese,  the,  metayers,  307 


1010 


INDEX 


Mill,  James,  on  over-supply,  562  ; on 
international  trade  (g.v.),  676 ; in- 
come-tax, 816  w. 

Mixter,  Prof.,  165  n. 

Money,  3,  54,  72;  defined,  483;  gold 
and  silver,  485  ; a commodity,  488  ; 
its  value  depends  on  demand  and 
supply,  490  ; M.  and  prices,  496  ; 
M.  and  cost  of  production  {q.v.), 
499-506 ; coining,  501 ; double 
standard,  507-10 ; credit  {q.v.), 
511 ; commercial  crisis,  561 ; as 
an  imported  commodity,  607-11  ; 
bills  of  exchange,  612-18 ; its 
distribution  in  commerce,  619-23  ; 
M.  and  laws  of  value  {q.v.),  626 ; 
loans,  645 
Monopoly,  410,  449 
Montesquieux,  482,  484 
Moravians,  the,  202 
Munich,  laws  of  marriage,  354 
Mushet,  Mr.,  on  Bai^  restriction, 
554 

N 

Naples,  tenure,  245 ; metayers, 
304  n. 

Napoleonic  wars,  77  n. 

National  Debt,  873-80 ; paying  off, 
876-80 

Natural  objects,  as  requisite  of  pro- 
duction {q.v.),  22,  101 
Nature,  man’s  power  over,  26 
Navigation  laws,  920 
New  England,  197,  229  n. 

New  York,  shipping,  908 
New  Zealand,  colonisation,  973 
Newmarch,  on  bill-circulation,  536  n. 
Newry,  tenant-right,  Ireland,  341 
Niebuhr,  on  peasant  farms,  276  n. 
Norway,  34 ; population,  160,  290 ; 
peasant  proprietors,  239,  263  ; laws 
of  marriage,  353 

O 

Olmsted,  on  slave  states,  251 
One-pound  notes,  656,  676 
Oriental  opulence,  belief  in,  12 ; 
famines  in  0.  countries,  19;  modern 
0.  society,  20 

Overstone,  Lord,  regulation  of  the 
currency,  656 

Owen,  Robert,  203,  773,  783 
Owenism,  202  n.,  210 


P 

Palatlstate,  the,  peasant  proprietors, 
266,  296  n. 

Paraguay,  Indians  in,  169,  212 
Parennin,  Father,  on  the  Chinese,  171 
Paris,  population,  153  n.  ; farms  near, 
285,  296 ; co-operation  in,  768 
Parliament,  railway  Acts,  98,  176 
Passy,  M.,  farms,  147  n.  ; large  and 
small  farms,  152 ; net  produce, 
153  n.  ; farming  in  France,  297  ; 
metayers,  307  n. 

Peasant  proprietors,  256 ; English, 
257  ; Swiss,  258-63  ; Norway,  263  ; 
Flanders,  265 ; Germany,  266-71  ; 
Belgium,  271-5  ; the  Channel  Is- 
lands, 276-7 ; France,  277-82 ; 
Arthur  Young  {q.v.),  283  ; of  the 
Continent,  286 

Peel,  Sir  Robert  (his  Act  of  1844), 
651 

Piedmont,  small  farms,  264  n.  ; me- 
tayers, 303  n.,  308,  309;  co-opera- 
tion, 783 

Plummer,  783  w.,  784  n. 

Poland,  population,  195 ; trade  with, 
576  ; capital  in,  738 
Politics,  science  of,  891 
Poor  Law,  the,  84 ; Report  (1840), 
109  ; English  poor  laws,  160  ; Irish 
poor  laws,  197  ; Swiss,  262 ; new 
English,  ib. ; Act  of  Elizabeth, 
365;  Poor  Law  (of  1834),  368; 
Act  of  Queen  Anne,  395 ; Poor  Laws, 
967 

Population,  12,  120-1 ; increase  of, 
153,  156-61 ; over-population,  191 ; 
peasantry  population,  288-96 ; 
table  of  various  nations’  popu- 
lation, 293  n. ; progress  of,  561 ; 
influence  of  the  progress  of  industry 
and  population  on  values  and 
prices,  700-9 ; influence  of  the 
progress  of  industry  and  population 
on  rents  and  profits  and  wages, 
710-24 

Possessions,  origin  of  inequality  of,  10 
Prescription,  220 

Prices,  245  ; retail  and  wholesale,  441; 
money  and,  524  ; influence  of  credit 
{q.v.),  523-41  ; general  rise,  551  ; 
influence  of  industrial  progress  on, 
700-9  ; speculators,  706-8  ; fluctua- 
tions from  supply,  709 
Production,  laws  of,  22-8  ; the  three 


INDEX 


1011 


requisites  of,  64,  101  ; on  a large 
and  on  a small  scale,  132,  134,  136- 
7 ; law  of  increase  of,  155 ; the 
three  requisites  (again),  156,  163  ; 
law  of  P.  from  land  (j.r.).  177  ; 
cost  of  P.,  183  ; laws  of  P.  from 
wealth  {q.v.),  199;  cost  of  P.  (again), 
451,  453,  457-68  ; progress  of,  661  ; 
joint  cost  of  P.,  670-3  ; cost  of  P. 
(again),  700  ; increase  of  P.,  capital 
and  population,  722  ; improvements 
in  P.,  735-6  ; tax  on  cost  of  P.,  837 

Productive  agents,  on  what  their 
degree  of  productiveness  depends, 
101 ; natural  advantages  of,  102  ; 
skilled  labour  in  using,  109 ; 
security,  113 

Productive  and  unproductive  labour, 
44-53 

Profit,  origin  of,  32 ; P.  of  stock  de- 
fined, 164  ; P.  of  capital,  462-4 ; 
extra  P.,  476 ; part  of  production, 
477 

Profits,  405 ; gross,  406  ; lowest  rate 
possible,  407 ; retail,  409 ; vary, 
412 ; custom  affects,  415  ; causes 
determining  amount  of,  416  ; -the 
rate  of  P.  depends  on  wages,  419 ; 
tax  on  P.,  824-7 

Progress  of  society,  summed  up,  723- 
4 

Progressive  taxation,  806,  808 

Property,  private,  201;  P.  and 
European  nations,  ib.  ; P.  defined, 
218-21  ; bequest  of,  222,  226 

Prussia,  serf  labour,  252 ; peasant 
farms,  271  ; landed  property  re- 
forms, 334  ; marriage  laws,  354  ; 
currency  reform,  667 


Quetelet,  293  n. 


R 

Rae,  John,  129  n.,  165  n.,  166,  169, 
170,  172,  870  n.,  922 
Railway  Board,  946 
Rau,  Prof.,  on  small  farms,  152,  269, 
270 

Registration  of  land,  886 
Reichensperger,  Herr,  263  to.,  270 
Rent,  of  land,  26 ; not  productive, 
57  ; cause  of,  422  ; theory  of,  425  ; 
some  agricultural  capital  pays  no 


R.,  427  ; R.  and  profits,  429  ; is 
not  part  of  cost  of  production, 
433,  468  ; R.  in  relation  to  value, 
469-71  ; law  of  R.,  472,  691  ; 
rents  rise,  712-14;  rents  fall,  717- 
20 ; tax  on  house  and  ground  R., 
823-36 

Revans,  Mr.,  on  Irish  peasantry,  322  ; 

on  income-tax,  831 
Rhine  province,  269 ; crops  in,  280, 
285  ; division  of  farms,  298 
Ricardo,  80  ; on  wages,  347  ; on  rent, 
425,  432 ; on  profits,  419 ; on 
value,  452,  458-9,  461  ; on  over- 
supply, 563 ; on  international  trade, 
676 ; on  gold  and  silver,  625 ; on 
interest,  638 ; on  taxes,  822 
Rickmansworth,  land  experiments  at, 
336  TO. 

Roads,  value  of,  184 
Robinson,  on  Irish  Waste  Land 
Society,  337  to. 

Rochdale  Pioneers,  the,  784-8 
Romans,  the,  16,  60,  104,  114,  167, 
485 

Russia,  emancipation  of  slaves  [1861], 
17  ; com  from,  30  ; state  of,  101, 
190,  195  ; serf  labour,  252  ; table 
of  various  populations,  293  w.  ; 
trade  with,  675  ; currency  reform, 
667  ; capital  in,  697,  738 
Ryots,  243,  324 

S 

St.  Simonism,  204;  examined,  212 
Saving,  defined,  70;  enriches  the  com- 
munity, 72,  728 
Savoy,  260  to. 

Saxony,  269 ; peasant  farms,  271  ; 

laws  of  marriage,  353 
Say,  44,  45,  59  ; on  demand  for  labour 
(q.v.),  80;  on  division  of  labour, 
123 ; Coura  d’Economie  Politique 
Pratique,  ib.  to.  ; on  demand  and 
supply,  446 ; on  over-supply, 
562 

Scotland,  farming,  95  to.,  102,  178, 
263  ; colliers,  387  ; banking,  677  ; 
agriculture,  704  ; co  - operation, 
783  TO. 

Senior,  on  Continental  marriage  laws, 
353  ; definition  of  profits,  405  ; on 
money,  505 ; on  imports,  605  ; on 
gold  and  silver  imports,  609  ; taxes, 
842-6 


1012 


INDEX 


Serfs,  origin  of,  17,  244 ; unproduc- 
tiveness of  their  labour,  252 ; 
gradual  extinction,  253 
Sismondi,  on  capital,  67  n. ; on 
property,  231  n.  ; on  peasant  pro- 
prietors, 258,  260  w.,  289 ; on  me- 
tayers, 303,  304  n.j  311,  315  n.,  316 
n. ; on  corporations,  355  n. ; on 
population,  375 ; on  over-supply, 
657,  561-2  ; on  usury,  926 
Slaney,  Mr.,  783,  906  n. 

Slavery,  249  ; unproductive  labour  of, 
251 ; in  America,  ib. ; compared 
with  free  labour,  253 ; negro 
S.  abolished  by  England,  Denmark, 
America,  the  Dutch  (by  1865), 
254  n. ; still  allowed  by  Spain  in 
Brazil  and  Cuba  (1865),  255 
Slaves,  are  not  wealth,  8 ; Roman, 
17 ; West  Indian  S.  ransomed 
[1834],  19  ; how  maintained,  69  ; 
property  in,  236 ; owned  by  the 
landowners,  239 
Sleswick-Holstein,  239  n. 

Smith,  Adam,  2,  26,  67, 122-8  ; joint- 
stock  companies,  140 ; Malthus, 
165 ; metayers,  305 ; workmen, 
356  n. ; on  difference  of  wages  in 
different  employments,  385-97  ; 
retail  profits,  410 ; value,  436-7, 
452,  666-8 ; foreign  trade,  679 ; 
paper  money,  632 ; interest,  638 ; 
capital,  726-7 ; on  a stationary 
state,  747 ; taxation,  802 ; tax 
on  wages,  828;  house-rent,  J832; 
usury,  926,  928-9 ; market-rate, 
937 

Socialism,  202  n.,  203 ; examined, 
209-17,  792 

Spain,  190,  255 ; trade  with,  583 ; 

capital  in,  738  ; state  of,  940 
Spice  Islands,  Dutch  monopoly  in, 
449 

Statics  and  Dynamics  of  political 
economy,  695 

Stationary  state,  the,  746-61 

Stein,  land  reforms,  334 

Supply,  defined,  445  ; excess,  556-63  ; 

a general  over-supply,  558-62 
Swan  River  Settlement,  65 
Sweden,  trade  with,  576 ; currency 
reform,  667 

Switzerland,  239 ; peasant  proprie- 
tors, 258,  265,  271 ; population, 
291 ; laws  of  marriage,  354 ; trade 
with,  675  ; co-operation,  783 


T 

Taille,  883 

Taxation,  fallacies  of,  89 ; general 
principles  of,  802-22 ; equality  in, 
804,  813,  817  ; of  land,  819 ; com- 
parison  between  direct  and  indirect 
T.,  864-72 

Taxes,  15,  57,  466 ; income-T.,  806- 
17 ; property  T.,  806-10 ; on 
profits,  savings,  and  land,  811-19  ; 
direct  T.,  823-36 ; defined,  823  ; 
on  rents,  832-6 ; on  commodities, 
837-56 ; indirect  T.  defined,  837 ; 
tithes,  841 ; duties,  847-50 ; on 
imports  and  exports,  850-56  ; mis- 
cellaneous T.,  857-63 
Thaer,  on  peasant  proprietors,  271 
Thornton,  on  peasant  proprietors, 
276  ; on  English  peasantry,  348  n.  ; 
on  allotments,  371  ; on  paper 
credit  (g.v.),  515,  519;  on  inter- 
national values,  596 
Thiirgau,  peasant-farms  in,  263 
Tithes,  incidence  of,  841;  see.  alsa 
Taxes 

Tooke,  on  com  prices,  447  n. ; on  the 
currency,  521  n. ; on  credit,  533-5  ; 
on  bills,  536  n.  ; on  prices,  554  ; on 
bank  credit,  648  ; on  bank  circula- 
tion, 652-5,  665  ; on  money- prices 
of  agricultural  produce,  704 
Torrens,  on  international  trade  [q.v.)y 
576  w.,  693  n.  ; regulation  of  the 
currency,  657 

Trade,  international,  574-82 ; de- 
fined, 574 ; fictitious  examples, 
674-8  ; theories  of,  compared,  578- 
82 ; international  values  in,  584- 
606 ; equation  of  international  de- 
mand, law  of,  592,  600 ; value  and 
cost  in,  604 ; money  in  international 
T.,  607-11 ; bills  of  exchange,  613; 
law  of  international  T.,  621,  629  ; 
free  T.,  701 

Turgot,  on  metayers,  307 
Tuscany,  farming  in,  179 ; agricultural 
tenure,  240  ; peasant  proprietors, 
264  n. ; metayers,  303,  304  n.,  311- 
16 

U 

Ulster,  tenant-right,  318,  320,  335  n. 
United  States,  the,  103,  152,  157  n., 
168  w.,  179,  194,  220,  229,  239,  313, 


INDEX 


1013 


430,  432,  656,  682,  721,  738,  907-8, 
921,  925 

Unsettled  Questions  of  Political  Eco- 
nomy, Essays  on  some,  48  n. 

Ural  Mountains,  gold  mines,  485 

Uri,  laws  of  marriage,  355 

Usury,  926-30 

Utility,  45,  442 

V 

Value,  27 ; defined,  437 ; V.  and 
price,  439-40 ; law  of  V.,  448 ; 
natural  V.,  452 ; market  V.,  453-9 ; 
law  of  (again),  471 ; theory  of  V., 
summary  of,  478-80 ; money  V., 
488-98 ; measure  of  V.,  564-8 ; 
peculiar  cases  of  V.,  569-73  ; inter- 
national V.,  683-606 ; law  of 
international  V.,  622-7 

Venice,  686 

Vexin,  farms,  297 

Villerm6,  on  French  labourers,  295  n. 

Villiaum^,  on  co-operation,  769, 777  n., 
778  n. 

Voluntary  system,  953,  977 
W 

Waes,  Pays  de,  147  n.,  230 

Wages,  57,  253,  343-6;  W.  and 
population,  349-60 ; popular  reme- 
dies for  low  W.,  361-2  ; allotment 
system,  368 ; Continental,  371 ; 
emigration,  384;  women’s  W.  in 
factories,  400;  fixed  by  custom, 
403 ; W.  depends  on  profits,  419, 
477  ; low  W.  and  underselling,  684 ; 
law  of  W.,  688-9 ; tax  on  W., 
827-9 

Wakefield,  on  co-operation,  116-17 ; 
on  colonisation,  121 ; on  agricul- 
ture, 144-52 ; his  system  of  emi- 
gration, 330,  382 ; on  capital,  727, 


735 ; on  protection,  926 ; on  land 
in  Colonies,  965 ; success  of  his 
colonisation  system,  972-4 
Walker,  G.,  on  currency,  673 
Warehousing  system,  867 
Watt,  inventor,  41  ; effect  of  his  in- 
ventions, 193,  350 

Wealth,  1,  6,  9,  19,  47,  48,  74,  108 ; 
distribution  of,  200 ; progressive 
state  of,  695-9  ; stationary  state  of, 
746-51 

West,  Sir  E.,  on  theory  of  rent, 
425 

West  Indies,  ransom  of  slaves  in 
[1834],  19 ; expenditure  in,  166 ; 
slaves  in,  240 ; slave  popidation, 
250,  253  ; Colonies,  685-6 
Westbury,  Lord,  887  n. 

Westmorland,  small  farmers,  257 
Wiltshire,  agricultural  labourers,  357 
Women,  work  of,  119 ; efficiency  of, 
128  ; wages  of,  400 ; employments 
for,  401,  759-60,  959 
Wordsworth,  on  English  peasantry, 
257  n. 

Wiirtemberg,  peasant  proprietors, 
239  n. ; laws  of  marriage,  353 

Y 

Young,  Arthur,  Travels  in  France 
(1787-9),  278-82 ; on  population, 
295  n. ; on  metayers,  303  n. ; on 
English  farmers,  306 ; against  me- 
tayers, 306,  307,  308,  310 

Z 

Zemindars,  325-7 

Zurich,  workmen  at,  109 ; peasant 
proprietors,  260,  262  n.,  269 ; 

weavers,  398 ; manufacturers  and 
agriculturists,  683 ; co-operation, 
783 


THE  END 


Print-’d  in  England  at  THE  BALLANTTNE  PRESS 
Spottiswoode,  Ballant^ne  & Co.  Ltd. 
Colchester,  London  & Eton 


iitekii'!:. 


■) 


